Determinants of export performance across service

Determinants of export performance across service types: a conceptual model Vinh Q. La and Paul G. Patterson School of Marketing, The University of New South Wales, Sydney, Australia, and

Chris W. Styles University of Sydney, Sydney, Australia Abstract Purpose – To highlight the relative importance of service-specific export performance drivers that help successful exporting. Design/methodology/approach – A gap between the antecedents of manufacturing and service firms was identified via an extensive review on the export performance as well as services literature. Taking the resource-based view and the contingency approach, a series of research propositions relating to the determinants of export performance among service firms are developed. Findings – This paper suggests that traditional export performance models, developed for and tested with manufacturing firms, cannot be assumed to apply equally well in service settings. Further, service specific export theory needs to adopt a contingency approach which in turn provides insightful and value-added research for academics and practitioners in the services exporting sector. Originality value – The paper provides recognition of the relative importance of the different export performance and value drivers; value propositions can be more effectively designed in order to gain competitive advantage. Keywords International trade, International marketing, Exports, Contingency planning Paper type Conceptual paper

determinants of export performance in manufacturing industries (e.g. Madsen, 1989; Cavusgil and Zou, 1994; Styles and Ambler, 2000; Evans et al., 2000). Yet the services marketing literature has long argued that the nature of goods and services are not the same (Shostack, 1977; Berry, 1980; Zeithaml, 1981; Langford and Cosenza, 1998; Knight, 1999) and that services face a unique set of challenges when crossing international boundaries. Accordingly, it is reasonable to expect that export performance in service settings is likely to be driven by at least some service-specific factors. Despite this, little research attention has been given to the performance of the service firms in the international context (Knight, 1999). Even less recognized is a considerable variation within the service sector (Clemes et al., 2000; Ekeledo and Sivakumar, 1998; Patterson and Cicic, 1995). This paper addresses these issues by developing a series of research propositions that: . identify distinctive determinants of export performance for service firms; and . highlight differences in export performance drivers and their relative importance, across service types.

An executive summary for managers and executive readers can be found at the end of this article.

Introduction Whether in the form of professional services (e.g. engineering, project management, management consulting), experiential services (e.g. sport, tourism, theater) or services encased in a physical package (e.g. software), the global marketplace is being increasingly characterized by the speed and ease with which services are transcending national boundaries. In fact, world trade in services now represents around 25 percent of the total value of global trade (Kotabe et al., 1998), with growth in this sector being faster than the world trade in goods. This dramatic increase in the globalization of services has been attributed to the opening of previously closed markets, the result of the GATT (WTO) negotiations, the demand for services to match economic development, advances in information and communications technologies, and the acceptance of service outsourcing (Wymbs, 2000). However, theoretical developments have not kept pace with the rapid globalization of services (Cicic et al., 1999; Knight, 1999; Reardon et al., 1996). Most research in the export performance literature, for example, has focused on the

In doing so it makes contributions to both theory and practice by developing a contingency framework that can guide future research as well as export practice in the service sector. The paper is organized as follows. First, a brief overview of the export performance literature will be provided. This will then be followed by a discussion of the unique characteristics of services, service classification schemes and a review of the Patterson and Cicic’s (1995) typology of export types. Research propositions within the framework of this typology are then developed, drawing on the resource-based view of the

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Journal of Services Marketing 19/6 (2005) 379– 391 q Emerald Group Publishing Limited [ISSN 0887-6045] [DOI 10.1108/08876040510620157]

Authors’ names are listed alphabetically.

379

Determinants of export performance across service types

Journal of Services Marketing

Vinh Q. La, Paul G. Patterson and Chris W. Styles

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firm and contingency theory. Finally, theoretical and practical implications are discussed.

which relate to the specific characteristics of service firms. It is these service specific variables that are the focus of this paper.

Overview of export marketing strategy and performance

Overview of services marketing Several key differences between manufactured goods and services are now well accepted in the marketing literature. The differences have been classified into four generic types: simultaneity of production and consumption (inseparability), intangibility, heterogeneity (variability), and perishability of output (Knight, 1999; Langford and Cosenza, 1998; Zeithaml, 1981; Berry, 1980; Sasser et al., 1978). Two of these characteristics are especially relevant in an export context, namely, inseparability and intangibility. The inseparability nature of services means production and consumption often take place simultaneously. The provision of investment advice to an international client or advising on the technical aspects of an innovative waste water treatment plant in a developing country, for example, illustrate how the core service (customized, complex technical advice) is “consumed” by the client at the same time it is “manufactured” by the consultant. It also means a degree of frequent and intimate contact is required between the service provider (e.g. project manager, civil engineering consultant) and the client for the service to be “manufactured”. Such services are frequently referred to as high contact services. A high degree of provider-client contact often requires the service firm to have a local presence on foreign soil, and to deal first-hand with significant business and personal cultural issues (e.g. language, customs, communications symbols, bureaucratic hurdles). The second key characteristic, intangibility, refers to the fact that unlike manufactured goods which are physical objects, services are performances (management consulting project) or experiences (sport, tourism, concert), or some form of intellectual property encased in a physical package (software – online training programs). Furthermore, they may be equipment based (telecommunications) or people based (project management). In most cases, the service cannot be touched, physically transported or stockpiled in inventory. This “intangible/ ephemeral” nature of most services, combined with the complex technical/scientific nature of most professional services (engineering, IT, mining, consulting, project management, etc.), means many clients do not possess the technical/scientific “know-how” to confidently evaluate the quality of the advice they purchase. Thus clients in high contact services often evaluate quality and satisfaction based on tangible cues (i.e. surrogates) such as brand reputation, country of origin, relational skills exhibited by an individual service provider during the delivery of the service, and the degree of cultural sensitivity displayed. As Dahringer (1991, p. 6) pointed out:

Literature into the determinants of export performance can be traced back almost 30 years, with landmark review articles that collate the findings appearing approximately every ten years (Bilkey, 1978; Aaby and Slater, 1989; Zou and Stan, 1998). Cavusgil and Zou’s (1994) study epitomises the approach taken by most researchers. Their study among US manufacturers theorized that export marketing strategy is driven by both internal (e.g. firm and product characteristics) and external forces (e.g. industry and export market characteristics), with the impact of these variables mediated by export marketing strategy (e.g. marketing mix adaptation, price competitiveness). In addition to this dominant approach, two other theoretical perspectives have been applied to export performance research over the past decade. The first has been labelled the “behavioral perspective” by some (Leonidou et al., 2002), and the relational approach by others (Styles and Ambler, 1994, 2000). This perspective looks at the nature and impact of exporter-distributor relationships in particular. The second approach gaining increasing popularity is the resource-based view (RBV) of the firm (e.g. Piercy et al., 1998; Wolff and Pett, 2000). This view argues that firms gain competitive advantage by leveraging internal resources, and that firm factors explain performance more so than industry factors (Rumelt, 1991). In an export setting, Piercy et al. (1998), for example, found empirical evidence to support the importance of feasible skills in exporting and competitive resources. Regardless of the theoretical foundation, the majority of this export performance research has focused on manufacturing firms (Gronroos, 1999). For instance, in Coviello and McAuley’s (1999) review of 16 studies, only six were service industries. Consistent with research findings from manufacturing settings, the studies that focused on service firms found that firms’ marketing strategies and/or performance in an export venture are determined by both internal (e.g. firm and managerial characteristics) and external factors (e.g. trade barriers, cultural sensitivity, etc.) (Cicic et al., 1999; Lovelock and Yip, 1996). However, other variables relating to the unique characteristics of services (e.g. consistent process quality, impact of interpersonal communication, consistency of service quality, relational skills, managing tangible cues, etc.) were not investigated. This is despite the fact that there are likely to be distinctive factors that impact on export performance in service firms (Lovelock and Yip, 1996; Coviello et al., 1998; Chadee and Mattsson, 1998; Kotabe et al., 1998). Understanding these additional factors is critical for the development of theory in this emerging area. Thus, while there are some marketing and business fundamentals that apply to both manufactured goods and services, it is now accepted that services have a number of distinguishing characteristics (Dahringer, 1991; Patterson and Cicic, 1995; Lovelock and Yip, 1996). In an export context, therefore, we expect some of the findings of previous export performance studies to be replicated in a services setting. Equally, however, we would expect additional variables,

. . . service marketers are considerably challenged to manage these characteristics to allow services to be marketed successfully across national boundaries.

Classifying services Not only are there key differences between manufactured goods and services, there are also significant differences within the service sector. In recognition of this, a number of classification schemes have been developed that distinguish between service firms. These include as Shostack’s (1977) 380




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molecular model based on intangible-dominant entities, Lovelock’s (1983) classification scheme to serve common marketing strategies, Erramilli’s (1990) hard service/soft service scheme, Lovelock and Yip’s (1996) peopleprocessing, possession-processing and informationprocessing services scheme. In an international setting, Patterson and Cicic (1995) developed a classification scheme for internationally traded services which highlight different characteristics among services based on two key dimensions: degree of tangibility and degree of face-to-face contact required for service manufacture and delivery. The result is four cells typology of service types (refer to Figure 1): location-free professional services (Cell 1), location-bound customized projects (Cell 2), standardized service packages (Cell 3), and value-added customized services (Cell 4). A brief description of each service type follows.

orders and follow major clients into international markets for export opportunities (Patterson and Cicic, 1995). Location-bound customized projects Firms in Cell 2 seek major bid and tender projects (e.g. longer term engineering, project management, business consultancy project) where the service is highly customized to client needs and there is considerable personal interaction required between client and service provider over an extended period of time. They tend to be professional services requiring a high degree of executional latitude and situational adaptation. Because of the longer-term nature of these projects and the amount of face-to-face contact, these firms invariably are required to establish a permanent presence in the foreign market. Services in this cell are generally larger enterprises who see moderate benefits and risks of exporting, but have a higher than average commitment to continue. Following clients into international markets and the vision of key executives to expand internationally are also major drivers.

Location-free professional services These enterprises (Cell 1 in Figure 1), are location-free in the sense that the market entry strategy involves key personnel (civil engineer, project manager, environmental scientist) travelling to a foreign country for a relatively short period to complete a project and then returning home. A permanent presence (foreign direct investment) is not required on foreign soil. Such services are generally low-medium contact, less customized (e.g. short-term management or engineering consultancy assignments, off-the-shelf marketing research surveys, some financial services) as opposed to highly customized services. They typically rely on unsolicited

Standardized service packages These comprised services (Cell 3) embedded in physical goods such as software, compact disk, standardized distance education courses, or technical training courses. These are highly standardized services, so by being “bundled with a good” they would be exported in a more traditional manner, reducing both costs and risks. These firms tend to be small enterprises and their main motives for internationalizing are the vision of the CEO, the market opportunities for growth and potential profitability, and the saturation of the local

Figure 1 Organizational profile of international service firms

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market. Franchising, agency arrangements and direct representation are the major entry modes used.

environmental contexts (including industry/product types) in mind. In marketing, the contingency framework has been widely accepted and used in many conceptual and empirical studies (e.g Hambrick and Lei, 1985; Buzzel and Gale, 1987; Bharadwaj et al., 1993; Gardner et al., 2000), but as yet has not explicitly featured in export marketing research. This may be the result of the relatively homogeneous samples investigated so far i.e. manufacturing firms. However, the extension of theory into service settings in which considerable variety has already been recognised suggests a contingency approach is required.

Value-added customized projects Firms in Cell 4 require a high interaction with the customer for a successful service delivery. They are also more highly customized and viewed as more value-adding in as much as the service component adds considerable value to a physical goods component. They often follow clients into international markets to maintain a current relationship. This, plus unsolicited orders from abroad, act as powerful inducements to seek overseas markets more intently. Further, they are more readily conducive to internationalization, and due to experience, have effective distribution and informational networks for exporting. While the Patterson and Cicic’s (1995) study also reported on entry mode strategies, barriers to internationalization, characteristics of typical firms in each cell, and motivations for exporting, they neglected to analyze the determinants of service export performance. This paper redresses this gap in part, by developing a series of propositions concerning the key drivers of export performance in each cell.

Research propositions – determinants of export performance across service types Based on the degree of tangibility and degree of face-to-facecontact dimensions in the Patterson and Cicic’s (1995) framework, we now develop a set of propositions that specify: . internal resources and capabilities that are drivers of the export performance (RBV); and . the relative importance of these variables to performance across different service types (contingency theory).

Theoretical foundation

These propositions are summarized in Figure 3.

To develop a set of specific research propositions within the Patterson and Cicic (1995) framework, we draw on two theoretical perspectives: the resource-based view (RBV) of the firm and contingency theory. The essence of the RBV is that the firm uses internal resources and capabilities as the basic building blocks to create entry barriers and to obtain a sustainable competitive advantage (Wernerfelt, 1984; Barney, 1991; Ling-yee and Ogunmokun, 2001). A resource or capability is considered a greater source of competitive advantage to the extent that it possesses the following characteristics: valuable, rare, imperfectly imitable, nonsubstitutable (Barney, 1991). The usefulness of the RBV in marketing generally (e.g. Srivastava et al., 2001) and on export performance in particular (e.g. Piercy et al., 1998; Ling-yee and Ogunmokun, 2001) has recently captured marketing scholars’ attention. According to the RBV, the firm’s assets (be they tangible or intangible), management skills, organizational processes, information and knowledge, are all considered resources and capabilities that contribute to generating and sustaining customer value in the marketing field (Barney et al., 2001; Srivastava et al., 2001). In the context of this paper, it is argued that if a firm operates in a particular cell (i.e. type of service) and possesses a number of specific internal resources and/or capabilities to a greater extent, then competitive advantage will be enhanced and the export performance will be strengthened. Implicit in this line of thinking is that firms in different cells require a different set of capabilities and resources to effectively compete. That is, the internal assets that drive export performance are contingent on service type. Thus, we are drawing on the principles of contingency theory. This overall approach is depicted in Figure 2. The application of contingency theory in strategy and organization studies have been widespread (e.g. Hofer, 1975; Ginsberg and Venkatraman, 1985; Zeithaml et al., 1988). This perspective maintains that there is no universal set of strategies which is optimal for all businesses or firms, and therefore strategies need to be designed with specific

Technical facilitation Technical facilitation is the process of service delivery and the systems that facilitate it (Lovelock et al., 2001, p. 191). It is also the manner in which the service is “manufactured” and delivered (Dahringer, 1991). To manufacture and deliver a service, businesses use either electronic (e.g. CNN news broadcasts, telemedicine, computer diagnostic services), people (e.g. management consulting, legal services) or physical channels (e.g. Fedex) or the combination of these. In other words, a system that facilitates the service delivery process is needed. According to Lovelock and Yip’s (1996) study, services can be classified into three groups: 1 people-processing; 2 possession-processing; and 3 information-processing. For information-based services (e.g. finance and insurance, distance education course), it is essential to have electronic global channels. Technological advancements such as the Internet, satellite and digital TV, have provided opportunities for electronic channels of distribution internationally (Gronroos, 1999). Information technology and the internet have dominated those web-centric businesses or informationcentric services (Wymbs, 2000). Low-contact services involve little if any physical contact between the service provider and the customer. However, a highly sophisticated backstage technical facilitation system is required for a service to be manufactured and delivered. Contact often takes place remotely via the medium of physical distribution or electronic channels. Possession processing services for example, in which the problem can be subject to “remote fixes” (e.g. computer systems breakdown). Information processing services (e.g. insurance, investment banking) are also typically manufactured and delivered via electronic channels from a remote location. In contrast, high contact services require client and service provider to be in frequent, prolonged content (medical services, traditional education) for the service to be manufactured. 382




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Figure 2 Overview of resource-based view/contingency approach to modelling export performance

Figure 3 Determinants of export performance

Typical firms located in Cells 1 and 3 (see Figure 1) are likely to be those information-based services that depend on collecting, analyzing, interpreting, and transmitting information efficiently and effectively to create value for customers (Lovelock and Yip, 1996). To illustrate, in the situation of low contact between service personnel and customers, the online WCMA Cash Manager (Working

Capital Management Account – Cash Manager), for instance, the product (service) provided by Merrill Lynch & Co., Inc., relies heavily on the online system. Merrill Lynch tries to create value for their customers by offering different online tools such as automating the movement of funds from an external bank account to WCMA account, automating the collection of client receivables, information reporting on 383




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current and historical cash and portfolio balance and so forth. The above examples suggest that many service firms offering low contact services are likely to use their internal valuable resource – technical facilitation – to formulate and implement their service delivery strategies, which improve not only the firm’s efficiency and/or effectiveness but also customer value (Bharadwaj et al., 1993). Technical facilitation, therefore, corresponds to Barney’s (1991) “valuable” criterion in the RBV context. Thus, Proposition 1 is: P1. Technical facilitation is a relatively more important driver of export performance for services characterized by a low degree of face-to-face contact (Cells 1 and 3) than those characterized by high degree of contact (Cells 2 and 4).

built gradually. As Czepiel (1990) noted, each service encounter, no matter how brief, is an opportunity to further sow the seeds of a successful longer-term relationship. Phan et al. (2003) have added into the relationship marketing literature a new theoretical framework – international relational competence, via the enunciation of ten personal traits (e.g. assertiveness, dominance, altruism, interpersonal sensitivity) that were found enhance relationship performance in international joint ventures. Relational competence is defined as the “characteristics of the individual that facilitate the acquisition, development and maintenance of mutually satisfying relationships” (see Hansson et al., 1984, p. 273). Furthermore, studies of high contact services have shown clients often develop strong social bonds with individual service personnel to the extent that their loyalty is to the individual professional, not the corporate entity (Bove and Johnson, 2002). In sum, for high contact services the ability to communicate effectively, engender trust and develop rapport with clients represents the attributes that clients judge, as outcome quality is difficult to confidently assess. Further, given export relationships for professional services are by definition, across national and cultural boundaries, international relational competence skills (Phan et al., 2003) take on added importance. Such social bonds and strong relationships are likely to be established after a long period of interaction between the parties, and through some unique historical conditions. Thus, these relationships can also be considered imperfectly imitable resources according to the RBV. Therefore, Proposition 2 is: P2. (a) Consistent process quality and (b) relational competence have a greater effect on export performance for services characterized by a high degree of face-to-face contact (Cells 2 and 4) than for services with a low degree of contact (Cells 1 and 3).

Consistent process quality and relational competence Due to the fact that service outcomes are, by and large, intangible performances, especially for credence services (where attributes include the degree of service providers’ professionalism and knowledge) (Nayyar, 1993), their outcome quality (Zeithaml, 1981) and/or process quality (Ellis and Watterson, 2001, see Gronroos, 1984) is often more difficult to assess with confidence. Despite the fact that some firms attempt to minimize mistakes occurring in the service encounter via the use of advanced technology, contact personnel remain critical for most professional service firms (Paulin et al., 2000) as they both “manufacture” the service and simultaneously deal with clients. It is often the case in high contact services at least of “the person delivering the service is the service”. Some services such as medical services, legal services, management consulting, and higher education, usually require a high degree of face-to-face contact or interaction for the core service to be “manufactured”. This has several important export marketing implications. First, it often requires a firm to have a local presence in a foreign market (third party arrangements or direct investment, with the accompanying costs and risks). Second, high contact allows high customization to client needs, although this requires employees to be highly skilled and empowered to exercise judgment and discretion in producing the service. For example, the project engineer who oversees the construction of a bridge in Vietnam, or the consultant conducting an executive training course in Indonesia, must constantly meet the client face to face to “deliver” the service. In each case the engineer or consultant is both manufacturer and marketer of the service. This sometimes presents problems of quality control. It is difficult for firms to attempt to duplicate consistent process quality as it takes time to get the process correct and be reliable. A firm might have to go through a considerable process of learning (i.e. “learning-by-doing”), that takes time, requires certain steps to be taken, and is not clear-cut. This makes imitation difficult. Thus, consistent process quality can be considered an imperfectly imitable resource because of causal ambiguity and path dependence (Barney, 1991). A firm that processes such a resource will generate a competitive advantage and out-perform its rivals. Owing to the frequency of interaction between service personnel and customers in the high contact professional services, relationship strength, trust and commitment are

Cultural sensitivity As a result of the inseparable and intangible nature of professional services, buyers are forced to interact with the service personnel who are also the seller and producer on an intimate level, especially for services that fall into the intangible dominant end of the services-goods continuum (Langford and Cosenza, 1998). Thus, cultural sensitivity (i.e. “a general open-mindedness with respect to different cultures and the willingness to understand the ways in which cultures differ” (Harich and LaBahn, 1998, p. 87), has an impact on the perceived performance of the service personnel. Previous research also shows that cultural issues such as language barriers, socio-cultural differences, and differences in established business practices and customs, have drawn significant attention in the so-called pure service industries (e.g. consulting or legal services) in an international setting (Cicic et al., 1999; Reardon et al., 1996; Erramilli and Rao, 1993). While understanding national and/or societal culture, it is crucial because of the intensive interpersonal communications between clients and service provider (Cicic et al., 1999), understanding business culture is equally essential because of different business practices, negotiation styles, and management issues such as leadership, motivation, and teamwork (Keegan, 1999, p. 82). From the resource-based 384




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view, cultural sensitivity is one of the firm’s relational assets that help develop intimate relations with customers to the level that rivals cannot replicate (Srivastava et al., 2001). Again, this is difficult for rivals to imitate, and thus potentially a powerful source of competitive advantage. Therefore, Proposition 3 is: P3. The more sensitive key personnel are to the personal and business culture of the target country, the greater the export performance for services characterized by a low degree of tangibility (Cells 1 and 2), compared to those with a high degree of tangibility (Cells 3 and 4).

such as French wines and perfumes, Italian fashions, and Japanese consumer electronics. These kinds of associations are also relevant in the services field, especially when brand names are not well-known (Javalgi et al., 2001, see Ofir and Lehman, 1986). For example, the Australian golf course design company Graham Marsh Golf Design has gained a competitive advantage via the positive country of origin effect in the international market. Thus, clients who are unfamiliar with the brand (e.g. clients in Asia or Europe) are able and likely to associate this firm’s image with some of the famous Australian golfers such as Greg Norman, Karrie Webb, and Graham Marsh himself. However, since the globalization of services has been slower compared to tangible goods, service consumers are likely to have developed COO beliefs based on the number of firms from the same countries operating in the same service category in international markets. For instance, many of the large global consulting firms such as McKinsey & Co. and Accenture all based in, and originated from, the USA. Thus, unfamiliar brands in the professional services sector, and particularly in the consulting business, are able to achieve positive COO effect in overseas markets compared to rivals for example from Canada or France. Such an argument is also in line with Shostack’s (1977, p. 77) suggestion: “image is a method of differentiating and representing an entity to its target market”. Hence, professional firms attempt to build the blocks of quality and performance perceptions through the bridge of image or reputation. Unlike firms located in Cells 3 and 4 where services are bundled with goods, firms in the pure services field (Cells 1 and 2) face the challenge of not having intrinsic cues (i.e. physical cues and/or tangible products), hence product evaluation is based on extrinsic cues alone (Samiee, 1994). These firms are likely to enhance perception of their performance through extrinsic cues such as international image and/or reputation as well as positive country of origin effect. It seems reasonable therefore to contend that firms may use different resources or different paths that are equally good to achieve the same ultimate value, which in this case is the perception of superior performance. However, a firm’s international image and/or reputation via the country of origin effect are the non-substitutable resources to achieve such a value. Consequently, Proposition 4 is: P4. A positive country of origin effect enhances the firm’s image, which in turn strengthens perception of performance for services characterized by a low degree of tangibility (Cells 1 and 2), more so than for services characterized by a high degree of tangibility (Cells 3 and 4).

Country of origin Highly intangible services are mostly performances (management consultancy project, engineering services, mini-series for TV, environmental impact study), where it is difficult for the potential buyer (importer) to assess quality in advance of purchase, and sometimes even post-purchase. Since the buyer cannot inspect or sample the service before purchase, they are forced to rely on the exporter’s track record, country of origin image, reputation, word of mouth, and other communication messages to assess prospective quality. The management consultancy arm of Ernst & Young, for example, has won many overseas government consultancy contracts largely on the basis of its corporate image and track record in certain areas of consulting. With highly intangible services it is also much more difficult to achieve meaningful product differentiation. It is not as easy for Accenture or KMPG to differentiate themselves from Ernst & Young as it might be for IBM to distinguish itself from Honeywell where the potential buyer can compare not only their reputations, but technical specifications and performance characteristics. Many scholars have suggested that the country of origin (COO) effect is a salient factor in consumer product evaluation and one of the potential cues influencing product perceptions and purchase intentions (Peterson and Jolibert, 1995; Tse and Gorn, 1993; Roth and Romeo, 1992). However, of the 99 COO studies reviewed by Al-Sulaiti and Baker (1998), only seven focused on services. This is unfortunate as COO can serve as “a useful extrinsic cue and as a surrogate for difficult-to-evaluate intrinsic characteristics such as quality and performance” for services (see Han and Terpstra, 1988; Parameswaran and Pisharodi, 1994). Although Samiee (1994) pointed out that the influence of country stereotyping effect on a corporate performance has not been examined in the literature, in the current study, we argue that since credence services are often intrinsically difficult to evaluate, country of origin plays a significant role in providing a tangible cue to shape the service perception and to assess its quality in an international context. This quality perception is then a key antecedent for improved export performance. This contention is also based on the findings of Peterson and Jolibert’s (1995) study in which COO had a stronger impact on quality perception than on purchase intention. There are many factors such as product type, product attributes, market demand, brand familiarity and level of involvement in purchase decisions that influence the use of country of origin information when evaluating products in the global market (Samiee, 1994). In general, consumers do link some nations’ expertise in producing certain type of products,

Managing tangible cues Similarly, for those services that are high in credence properties, consumers endeavour to judge a service by its tangible cues (Lovelock et al., 2001), be it the servicescape, the physical appearance of the service personnel or the personality and behavior of individual professionals (Ellis and Watterson, 2001). Service marketers attempt to create abstract association and enhance “realities” by manipulating tangible cues (Berry, 1980) and then link these abstractions to physical items (Shostack, 1977). For services with a low degree of tangibility, a well managed servicescape (e.g. the professionalism exuded by the engineering consultancy office or the thoroughness of their technical drawings) and physical 385




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evidence will influence the client’s perceptions of the firm, which in turn will yield more positive perceptions of performance (Ellis and Watterson, 2001). Considering these firms are operating in an international market, they may need to provide adapted tangible cues (both service provider’s physical appearance and office exterior and/or interior design) that suit local preference in order to maximise effectiveness. While physical items such as service personnel’s appearance and office design might be easy to duplicate, servicescape and the individual professionals’ personality are not. Thus, under the RBV, important tangible cues can generally be considered non-imitable due to their uniqueness. As a result, Proposition 5 is as follows: P5. Tangible cues associated with services in Cells 1 and 2 will be a more significant determinant of export performance for services characterized by a low degree of tangibility than for those with a high degree of tangibility (Cells 3 and 4).

and inimitable climate generating a firm’s advantage is believed to be socially complex under Barney’s (1991) resource base theory. Hence, Proposition 6 is: P6. Where people are heavily involved in “manufacturing” and “delivering” the service (Cells 1 and 2), an organization’s service climate will be positively associated with clients’ perceptions of overall service quality, and thus export performance.

Product differentiability Services in both Cells 3 and 4, such as installation or testing of new hardware or equipment, software development, on-site training, software training and support, etc., force customers to maintain a continuous relationship with the service provider. In general, perceived risk or uncertainty is a key issue for consumers using these types of services. They require periodic training, education and promotional support. Also, it is more difficult for such professional firms to maintain competitive differentiation (Lovelock et al., 2001; Bloom, 1984). For instance, it is not easy for consumers to evaluate the performance and benefits delivered by MicroSnap and Net-Campus as both offer similar online training courses. Likewise, it is hard to evaluate the quality of two different accounting software packages, MYOB and Quicken, as each of them offers different bundle of benefits. In addition, the lack of patent protection for services allows competitors to easily copy a firm’s service process and its service culture (Clemes et al., 2000). Service firms in these two cells face more challenges in differentiating their products as a whole. In sum, the firm’s performance depends on its ability of differentiating its product from other competitors in terms of function, value, performance, and benefits (Bharadwaj et al., 1993). The greater the differentiability and the more unique the service, the greater is the source of competitive advantage (Barney, 1991). Hence, Proposition 7 is: P7. Product differentiability will be a more important determinant of export performance for services characterized by a high degree of tangibility (Cells 3 and 4) compared to services with a low degree of tangibility (Cells 1 and 2).

Service climate Services in Cells 1 and 2 are typically “professional services” that are by their very nature high in credence properties, technically complex, highly customized and highly intangible (i.e. what is being provided is intellectual capital). As a consequence, clients (especially those with little or no technical training) often have difficulty evaluating quality before, during or even after project completion. What clients can, and do, evaluate however is the manner in which key personnel deliver the service (rapport building, meeting deadlines, reliability, being readily accessible, communication and other interpersonal behaviors). Hence the perceived performance of individual service personnel becomes a proxy for a firm’s efficiency, effectiveness and quality of the core service. “How” they are perceived to perform by the client becomes a proxy for “what” is delivered. To support and ensure all the customer contact employees perform with a service mindset, the firm requires a service climate with an emphasis on “creating work conditions for the manifestation of the needs” (Schneider et al., 2000, p. 24). Climate for service is referred to “employee perceptions of the practices, procedures, and behaviours that get rewarded, supported, and expected with regard to customer service and customer service quality” (Schneider et al., 1998, p. 151). It is a multidimensional construct that encompasses training and reward systems, managing the servicescape, developing a customercentric organizational culture, emphasis on service quality and having processes for effective service recovery (Schneider et al., 2000). With a strong service climate in the exporting firm, service personnel in the location-free professional services category (Cell 1) can utilise and bring along the work facilitation supported by the home firm when performing a task overseas. Furthermore, a supportive service climate is known to positively effect service provider’s job satisfaction, which in turn motivates employee to provide high levels of service quality (Heskett et al., 1994). On the other hand, service providers in the location-bound customized projects category (Cell 2) can not only utilize the work facilitation, but also transfer a similar service climate (in terms of managerial practices, customer orientation and so forth) to the branch office located overseas. As a result, service climate serves as a moderator in delivering the task productively. This unique

Service personnel’s affective commitment Due to the high degree of interaction between the service personnel and clients for those firms offering customized projects (Cell 2 – generally professional services), relationships need to be gradually cultivated and strengthened over time. However, “sound relationships are built on the foundation of mutual commitment” (Morgan and Hunt, 1994, p. 23, see Berry and Parasuraman, 1991, p. 139). In this case, the mutual commitment is affective commitment, which is motivated by the “liking” and “enjoyment” factors between the two parties (Geyskens et al., 1996). To develop strong business relationships, key service personnel need to have the interpersonal and relationship building skills to attract and retain key clients and simultaneously they also need to show their affective commitment. Client firms in Cell 2 tend to generate one-off ad hoc projects. Hence, development of affective commitment is known to be linked to relationship establishment which is then linked to client 386




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loyalty (Patterson, 1995), which in turn is a key ingredient for long term international success. Again, such an ingredient is an example of a valuable relational asset as well as a potential source of competitive advantage. Accordingly, Proposition 8 is as follows: P8. For services characterized by a high degree of face-toface contact and a low degree of tangibility (Cell 2), service personnel’s affective commitment will have a greater effect on export performance than services characterized by either a low degree of face-to-face contact or high degree of tangibility, or both.

attention needs to be paid to having an appropriate servicescape (e.g. office layout, design, and even colors), highly professional reports, brochures and tender documents. Even the appearance of contact staff can project a sense of professionalism. Also, by recognizing the relative importance of the different value drivers, value propositions can be more effectively designed. For instance, executive training firms in Cell 1 and/ or engineering consulting firms in Cell 2 can deliver customer value to overseas clients by allocating expatriates, outsourcing staff or local staff who are highly cultural sensitivity to accommodate and work in the cross-cultural environment. Furthermore, firms in Cells 1 and 2 (i.e. highly intangible with medium-high face-to-face contact) could benefit from training all staff to be more culturally aware and sensitive to both business issues as well as understanding variation in personal culture. This is both important for clients and where a firm can gain competitive advantage over its rivals. In particular, firms that are new in the market and/or firms with unfamiliar brands can exploit some of the suggested export performance determinants to win business over local competitors. For example, firms exporting services that are almost entirely intangible and no physical product attached (e.g. environmental science consulting, project management, market research) can utilize the impact of their positive country of origin effect in their promotion strategy in overseas markets. These firms should then focus, improve and capitalize on its country of origin equity. This might be achieved by subtly highlighting COO in all promotion and corporate communications. Similarly, service exporters with tangible components such as software developing firms (Cell 3), on-site training firms and software training and supporting firms (Cell 4), may gain competitive advantage via their uniqueness in the tangible aspects (e.g. extra functions within the software as a differentiator). Finally, understanding what the drivers are for each type of services allow practitioners in allocating resources, be it financial or human resources, to support issues (antecedents) that contribute most to customer value and competitive advantage. In terms of a future research agenda, the first task is to provide empirical support for the propositions developed in the article. This will require variables to be measured across a variety of service types, investigating their link with export performance and assessing their relative impact across the service types. This can be achieved by collecting data with relating to firms representing all four service types and making multilateral comparisons. Alternatively, researchers could focus in the first instance on firms that vary on one of the dimensions of the Patterson and Cicic (1995) framework, i.e. high face-to-face contact firms vs. low face-to-face contact firms, or firms with highly tangible service elements versus firms characterized by low tangibility. The nature of the variables featured in the research propositions also has implications for sources of data collection. For example, the measurement of variables such as management commitment and technical facilitation needs to be done with data from the firms themselves. However, variables such as product/service differentiability and cultural sensitivity would be best investigated with data from the client/customer. This implies either dyadic studies (matched pairs of service providers and their customers), or selected

Managerial implications and future research directions This article is based on two premises. First, while there are some similarities between drivers of export performance in a manufacturing setting and those in a service setting, the distinguishing characteristics of service firms means that there are likely to be service-specific export performance drivers. Second, there are likely to be differences in export performance drivers, and their relative importance, across service types. The Patterson and Cicic (1995) framework classifies service types according to degree of tangibility and degree of face-to-face contact needed for service delivery and consumption. This framework identified four service types, which we argued differ in terms of the relative importance of service-specific export performance drivers. The most important implication of the framework developed here is the suggestion that service specific export theory needs to adopt a contingency approach. This has important ramifications for both export practice and future research. In terms of export practice, this article suggests new ways of boosting export performance that are service- and service-type specific. This suggests that export managers in service firms need to first identify where their firms are placed on the tangibility/face-to-face contact dimensions. They can then use the contingency approach developed here to identify what are likely to be the most important performance drivers. For service firms requiring high levels of face-to-face contact (Cells 2 and 4) for “manufacture” and delivery, for example, a number of “people” related factors are critical. These include relational competence of key front-line staff, and process quality (i.e. how the service is delivered by staff i.e. with courtesy, respect, assertiveness, professionalism). This recognizes that the performance of these firms is heavily reliant on the nature and quality of their service personnel, and suggests considerable resources need to be devoted to the selection, training and retention of key people. This is often particularly challenging when relying on local staff for actual service delivery in export markets. Service exporters in Cells 1 and 2, usually professional services (e.g. management consulting, engineering consulting, project management) are “pure” services (i.e. have very little, if any, tangible components) and high in credence properties (i.e. it is often difficult for clients, because of their lack of specific technical knowledge, to confidently assess the quality of what they received). Thus, tangible cues take on added significance for such services in projecting a professional image and even convincing clients after completion, that a quality assignment was delivered. Hence for these exporters, 387




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variables only are investigated with data from either the service provider or the customer.

firms”, Journal of Global Marketing, Vol. 12 No. 3, pp. 81-106. Clemes, M., Mollenkopf, D. and Burn, D. (2000), “An investigation of marketing problems across service typologies”, Journal of Services Marketing, Vol. 14 No. 7, pp. 573-94. Coviello, N. and McAuley, A. (1999), “Internationalisation and the smaller firm: a review of contemporary empirical research”, Management International Review, Vol. 39 No. 3, pp. 223-56. Coviello, N., Ghauri, P. and Martin, K. (1998), “International competitiveness: empirical findings from SME service firms”, Journal of International Marketing, Vol. 6 No. 2, pp. 8-27. Czepiel, J. (1990), “Service encounters and service relationships: implication for research”, Journal of Business Research, Vol. 20 No. 1, pp. 13-21. Dahringer, L. (1991), “Marketing services internally: barriers and management strategies”, Journal of Service Marketing, Vol. 5 No. 3, pp. 5-17. Ekeledo, I. and Sivakumar, K. (1998), “Foreign market entry mode choice of service firms: a contingency perspective”, Journal of the Academy of Marketing Science, Vol. 26 No. 4, pp. 274-92. Ellis, N. and Watterson, C. (2001), “Client perceptions of regional law firms and their implications for marketing management”, The Service Industries Journal, Vol. 21 No. 4, pp. 100-18. Erramilli, K. (1990), “Entry mode choice in service industries”, International Marketing Review, Vol. 7 No. 5, pp. 50-62. Erramilli, K. and Rao, C. (1993), “Service firms’ international entry-mode choice: a modified”, Journal of Marketing, Vol. 57 No. 3, pp. 19-38. Evans, J., Treadgold, A. and Mavondo, F. (2000), “Psychic distance and the performance of international retailers – a suggested theoretical framework”, International Marketing Review, Vol. 17 Nos 4/5, pp. 373-91. Gardner, D., Johnson, F., Lee, M. and Wilkinson, I. (2000), “A contingency approach to marketing high technology products”, European Journal of Marketing, Vol. 34 Nos 9/10, pp. 1053-77. Geyskens, I., Steenkamp, J-B., Scheer, L. and Kumar, N. (1996), “The effects of trust and interdependence on relationship commitment: a trans-atlantic study”, International Journal of Research in Marketing, Vol. 13 No. 4, pp. 303-17. Ginsberg, A. and Venkatraman, N. (1985), “Contingency perspectives of organisational strategy: a critical review of the empirical research”, Academy of Management Review, Vol. 10 No. 3, pp. 421-34. Gronroos, C. (1984), “A service quality model and its marketing implications”, European Journal of Marketing, Vol. 18 No. 4, pp. 277-85. Gronroos, C. (1999), “Internationalization strategies for services”, Journal of Services Marketing, Vol. 13 Nos 4/5, pp. 290-7. Hambrick, D. and Lei, D. (1985), “Toward an empirical prioritization of contingency variables for business strategy”, Academy of Management Journal, Vol. 28 No. 4, pp. 763-88.

Conclusion As services become an increasingly important sector in world trade, it is incumbent on academicians to develop and test theory that relates specifically to the internationalization of service firms. Intensive customer contact, extensive customization requirements, cultural adaptation and lack of tangibility are unique challenges faced by most of the international service providers (Knight, 1999). As such, traditional export performance models, developed for and tested with manufacturing firms, cannot be assumed to apply equally in service settings. This article represents an initial attempt at developing an export performance framework for service firms and will hopefully lead to further work in this area.

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degree of tangibility and degree of face-to-face contact needed to manufacture and deliver the service: 1 Location-free professional services. Key people involved in delivering these services go to the foreign country for a relatively short time to complete the project, and then return home. No permanent presence abroad is needed. Such services are generally low to medium-contact, less customized services. They typically rely on unsolicited orders and follow major clients into international markets for export opportunities. Examples are short-term management or engineering consultancy assignments, off-the-shelf marketing research surveys and some financial services. 2 Location-bound customized projects. Firms in this category seek major bid and tender projects where the service is highly customized to client needs and considerable personal interaction between client and service provider is required over a considerable period. The firms must establish a permanent presence in the foreign market because of the longer-term nature of the projects and the amount of face-to-face contact involved. Longer-term engineering, project management and business consultancy projects are examples. 3 Standardized service packages. These highly standardized services are embedded in physical goods such as software, compact disks, standardized distance education courses or technical training courses. They can be exported in a traditional manner (for example, through the post) thus reducing costs and risks. These services tend to involve small firms whose main motives for internationalizing are the chief executive’s vision, the market opportunities for growth and profitability, and the saturation of the local market. Franchising, agency arrangements and direct representation are the major entry modes used. 4 Value-added customized projects. These highly customized services require plenty of interaction with the customer. The service component adds considerable value to the physical goods component. Firms involved in these services often follow clients into international markets to maintain a relationship. This, plus unsolicited orders from abroad, acts as a powerful inducement to seek overseas markets more intently. The services tend to be conducive to internationalization.

Executive summary and implications for managers and executives This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefits of the material present.

International trade in services is growing Services today exist in a global marketplace that is increasingly characterized by the speed and ease with which services cross international boundaries. World trade in services is growing faster than that in manufactured goods and now represents around a quarter of the total value of global trade. La et al. seek to identify what determines export performance for service firms, and to highlight differences in export performance drivers and their relative importance, across service types. Services differ from manufactured goods in four main ways: inseparability (production and consumption of services often take place simultaneously); intangibility; heterogeneity (variability); and perishability of output.

The main propositions La et al. advance the following propositions: . Technical facilitation (the process of service delivery, the systems that facilitate it and the way in which the service is “manufactured” and delivered) is a relatively more important driver of export performance for services with low face-to-face contact (types 1 and 3) than those with a high degree of contact (types 2 and 4). . Relational competence (the characteristics of the individual that facilitate the acquisition, development and maintenance of mutually satisfying relationships) and consistent process quality have a greater effect on export performance for services with plenty of face-to-face contact than for those with a little such contact. . The more sensitive key personnel are to the personal and business culture of the target country, the greater the export performance for services characterized by a low degree of tangibility (types 1 and 2) compared to those with a high degree of tangibility (types 3 and 4).

A classification scheme for internationally traded services Not only are there key differences between manufactured goods and services, there are also significant differences within the service sector. One key classification scheme for internationally traded services highlights different characteristics among four groups of services based on the 390

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The firm’s image is enhanced where its country of origin has a positive effect. This, in turn, strengthens perception of performance for services characterized by a low degree of tangibility – more so than for services with a high degree of tangibility. Tangible cues such as the service-scape, the physical appearance of employees or their personality and behaviour will be a more significant determinant of export performance for services characterized by a low degree of tangibility than for those with a high degree of tangibility. In service types 1 and 2, where people are more heavily involved in “manufacturing” and “delivering” the service, an organization’s service climate will be positively associated with clients’ perceptions of overall service quality, and thus export performance. Product differentiability – the ability to differentiate the product from those of competitors in terms of function, value, performance and benefits – will be a more important determinant of export performance for services characterized by a high degree of tangibility than for those with a low degree of tangibility.

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Service personnel’s affective commitment will have a greater effect on export performance for type 2 services (those characterized by a high degree of face-to-face contact and a low degree of tangibility) than for services characterized by a low degree of face-to-face contact or a high degree of tangibility, or both.

The authors conclude that export managers in service firms need first to identify where their firms are placed on the tangibility/face-to-face contact dimensions. They can then identify what are likely to be the most important drivers of performance. By recognizing the relative importance of different value drivers, value propositions can be more effectively designed. Finally, understanding what the drivers are for each type of service will enable managers to allocate financial resources or personnel in a way that contributes most to customer value and competitive advantage. A pre´cis of the article “Determinants of export performance across service types: a conceptual model”. Supplied by Marketing Consultants for Emerald.)

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