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Trade Fairs as an Export Marketing and Research Strategy: Results from a Study of Korean Advanced Machinery Firms RONALD V. KALAFSKY1* and DOUGLAS R. GRESS2 Department of Geography, University of Tennessee, Knoxville, TN 37996, USA. 2 Department of Geography Education, Seoul National University, Seoul 151-742, South Korea. *Corresponding author. Email: [email protected]

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Received 2 November 2012; Revised 8 April 2013; Accepted 26 April 2013

Abstract Manufacturers pursuing information on potential customers in distant, dynamic markets confront myriad obstacles. To address this, many firms attend international trade fairs in order to market their products, to meet with prospective customers, and to tap into buzz related to potential international opportunities. In many ways, moreover, such exhibitions can serve as short-term agglomerations of same-industry activity, particularly important for producer–user interface geared towards innovation. The goal of this paper is to explore how Korean machine tool manufacturers utilise a major global trade show in Seoul to minimise the difficulties associated with accessing a global customer base, inclusive of their activity at this show geared towards innovation. Evidence from firm-level surveys and interviews suggest that the amount of importance placed on trade fair attendance as part of a firm’s internationalisation strategies is related to export growth. Additionally, a new insight generated is that firms that participate in trade shows as part of their innovation process also demonstrate higher rates of export intensity. Finally, we may be witnessing newly discovered, technology-driven, symbiotic relationships between online portal sites, vendors, and potential customers at these trade fairs, where virtual services are nonetheless augmented by a need for a continued onsite presence at these exhibitions. KEY WORDS trade fairs; exports; export marketing; machine tools; innovation

Introduction Given the protracted slowdown in the once core industrial regions, the associated loss of traditional markets, and the concurrent rise of several emerging economies, firms have increasingly explored export opportunities in order to boost sales (Dicken, 2011). Accessing international customers is difficult, or at the very least more complicated, than pursuing buyers within domestic markets. Despite the criticality of viable international market research to export success, this process is more difficult than acquir304

ing the same types of information on potential domestic or regional customers (Cornish, 1997a; 1997b; Nicita and Olarraeaga, 2007; Miocevic and Crnjak-Karanovic, 2011). This challenge is exacerbated for firms with limited financial resources or a confined geographical scope. Recent evidence, moreover, confirms that distance provides an impediment for many manufacturers (Ellis, 2007), further complicating business strategies linked to the internationalisation process. Distance (in myriad forms) between exporters and importers increases the efforts and Geographical Research • August 2013 • 51(3):304–317 doi: 10.1111/1745-5871.12019

R.V. Kalafsky and D.R. Gress: Trade Fairs as an Export Marketing and Research Strategy

the costs that are needed to access a new customer base. One possible way by which exporters can access a large number of potential buyers is to participate in international trade fairs. From a manufacturer’s perspective, these exhibitions provide an opportunity to market their wares to a wider audience of prospective buyers while also potentially reducing the expenditures associated with discovering and visiting individual customers in widespread locations. They are also a venue in which a firm can gauge customer reactions to its products and, in turn, compare its offerings against those from competitors (Maskell et al., 2004). The physical presence of a firm’s products is important; for machine tool producers, the focus of this paper, potential clients from emerging markets prefer to see and sample machinery before committing to any purchases (Drake and Kalafsky, 2011). These shows also provide a setting where business relationships can be developed and nurtured. These are crucial tasks, as facilitating direct producer–user interactions is pivotal for many product and service lines, even more so for firms producing higher end industrial equipment (see Gertler, 1995). Trade show attendance, then, can address both parts of this relationship: developing a rapport between sellers and potential buyers and displaying the machinery for sale. In the case of international trade shows, exporters may take advantage of the temporary clusters described by Bathelt and Schuldt (2008), where interactions between different actors are facilitated. Just as importantly, such exhibitions are sites where international exchanges of information are facilitated within a face-to-face setting (Schuldt and Bathelt, 2011). Moreover, beyond being solely a place where these actors can meet, trade fairs succeed when they provide an all-encompassing experience for potential buyers, including social interaction and a locale in which they see and hear the products (Rinallo et al., 2010). They can also act, at least temporarily, as a spatially confined region of competitive advantage (e.g. Porter, 1990) given the depth of industrial linkages and exacting internal demand evidenced on the floor of any significant international trade show. The aim of this article is to analyse how exporters of advanced capital equipment utilise an international trade fair to moderate the difficulties associated with accessing an often-distant international customer base. Specifically, it

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presents the case of South Korean machine tool builders, a group that has moved largely beyond cost-based advantages to instead competing via innovation and precision in an increasingly contested global market. Furthermore, it will examine trade fair activities geared towards reducing the friction of distance with regard to accessing export intelligence and facilitating supplier–customer interaction inclusive of on-site innovative activity and associated impacts on trade performance. In other words, it will explore how these shows are a venue where manufacturers can promote themselves and their products to a wider geographical audience. The next section provides a brief background on the South Korean machine tool industry, whereas the ensuing section examines the literature on export intelligence and international trade fairs. Findings from a major recent global machine tool exhibition, the Seoul International Machine Tool Show (SIMTOS), are presented and discussed, followed by the concluding remarks. Background on the Korean machine tool industry Machine tools are normally defined as industrial machinery that cut or shape metal. Production of this machinery remains a core industrial sector in developed and emerging economies and central to most advanced manufacturing processes, particularly in industries such as electronics, household appliances, motor vehicles and shipbuilding – all key export-based manufacturing sectors for South Korea. Machine tool production is regarded as a measure of industrial prowess (Graham, 1993) given its emphasis on precision metal forming and its impacts on the above industries. Moreover, as Anderson et al. (2000, 241) suggest, ‘Many policy-makers seem to accept the premise that the machine tool industry is a strategic asset to any nation’. Not surprisingly, the machine tool sector has been pivotal to the success of South Korea’s manufacturing exports, both in terms of volume and, most recently, in terms of innovation.1 The importance of this industry and its potential for international success is further underscored by the fact that Korea’s economy is still largely geared towards trade. South Korea is one of only nine countries with more than USD one trillion in annual trade volume, and trade comprises over 90% of gross domestic product (Stangarone, 2011). Also supporting this is the fact that over 90% of its exports come from manufacturing (Sarkar, 2005). The overall importance of this industry and the

© 2013 The Authors Geographical Research © 2013 Institute of Australian Geographers

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Geographical Research • August 2013 • 51(3):304–317

relative trade intensity of South Korea underscore the rationale for choosing this particular sector for analysis. For the past few decades, Japan and Germany have been regarded as the world leaders in terms of overall machine tool production numbers, exports, and quality. South Korea, notably, has rapidly ascended the international ranks, and products from firms such as Doosan and Hyundai Wia are increasingly found on factory floors around the world. Just a decade ago, Korean firms had a cost advantage over many international competitors, yet this is no longer the case with basic machine tools now being produced in India, China, and other emerging economies. In order to remain viable, Korean firms have had to explore new export markets and, just as important, develop higher end machine tools with a focus on quality. Statistics reflect this growing propensity to export. For example, over the course of 20 years, exports in this sector rose to over USD 2 billion in 2010 from a mere USD 62 million in 1990, as seen in Figure 1. This rise in gross exporting activity has been accompanied by growing average sales from exports (export intensity), from single digits in the 1980s to roughly 40% by 2011. Export intelligence, knowledge exchange, and the use of trade fairs Exporting, market intelligence, and knowledge A number of factors can impede exporters, particularly in the early stages of international

activity. Distance is a primary impediment to a firm’s international activities, especially to those with little experience in exporting. Ghemawat (2001) categorises distance into four broad categories: geographic, cultural, administrative, and economic. Euclidean distance is the most obvious form, as spatial distance creates barriers in transportation and generates communication issues, especially in the early stages of business relationships. The costs of overcoming this type of distance can be an impediment to many firms, especially those new to global markets (Ellis, 2007). Many potential exporters, to their detriment, expect business practices elsewhere to be similar to those in their home markets, and therefore often neglect the role of culture in international business. Considering cultural distance, however abstract, highlights differences in important elements such as languages and business norms. These differences have a significant impact on perceptions between customers and clients (Trompenaars and Hampden-Turner, 1997; Hofstede et al., 2010). Dissimilarities in business and/or organisational cultural norms influence key producer–customer components such as timeframes, types of relationships (e.g. arms-length), and expectations. Administrative and economic distance, while no less important, may be viewed together. Differing systems of government and forms of market-based economies create myriad obstacles for firms long used to one business environment (see Peck, 2000; Amable, 2003). Problems concerning transparency and often-vague business regulations

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Figure 1 2012).

Export performance of South Korea’s machine tool industry (in USD billions). (Source: Gardner 2012; KOMMA



provide obstacles to firms not used to dealing in export markets, especially within emerging economies (World Bank, 2011). Geographically, then, firms are embedded in home cultures and influenced by home institutions and entrenched organisational practice. Moreover, as Gertler (2003b, 105) points out, ‘. . . the success with which firms can transpose a distinctive set of practices from one national space to another (i.e. learn) where the institutional environment is not as conducive or supportive of such practices will be limited at best’. Taking the above the obstacles into account, export market orientation is essential. Prospective exporters and even firms with previous international experience must devise strategies to orient their efforts to serving buyers in new markets (Nummela et al., 2004; Cadogan, et al., 2009). Not surprisingly, research has shown that the degree of export market orientation is related to success in the targeted market (Levy et al., 2007). The trouble is that obtaining information on potential partners in targeted markets is intrinsically difficult for many firms (Cornish, 1997a) and a particular problem for smaller firms with limited resources or those with no international experience. Moreover, in turn, this lack of experience in both initial market selection and in sought-after markets negatively impacts firms from becoming successfully embedded within sufficient international customer bases (Andersen, 2012). Given the above challenges inherent in export intelligence acquisition, knowledge of this sort, in most cases, will not be codified or standardised. As such, a significant portion of knowledge about international business opportunities could be categorised as tacit. Moreover, while it is imperative that exporters somehow secure this sort of information, there is a question about whether tacit knowledge can be acquired easily, given the apparent lack of awareness of the institutional and cultural environments in which such knowledge is exchanged (see Gertler, 2001; 2003a). The challenge is to ascertain how different actors interact with one another, whether or not knowledge acquisition is facilitated (and if so, how), and if spatial proximity matters for the transfer of knowledge. For the purposes of this research, this knowledge refers to international intelligence on potential customer and supplier firms and to innovative activities used to augment supplier–buyer interface. In the exchange of information between manufacturers and buyers, information is often difficult to transfer, and a

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location in which to meet and exchange information is therefore useful (von Hippel, 1994). In a setting characterised by rapid information exchange (e.g. markets for advanced industrial equipment), face-to-face contact remains important for basic information exchanges and, beyond that, endures as critical to the innovation process (Storper and Venables, 2004). Innovation and knowledge exchange in the advanced manufacturing equipment sector would tend to fall into one of the scenarios described by Storper and Venables (2004), particularly of a highly fluid environment where tacit knowledge is essential and ‘buzz’, general market or product specific information that is ‘out there’, is critical to success. Indeed, because Korean firms are now increasingly competing on quality and technology, and therefore seeking to service increasingly more exacting customers, innovative activity and supplier–buyer interface are important considerations. In this respect, the overly general tacit classification has been examined more specifically regarding location and firm activity via knowledge bases. Firms active in advanced manufacturing sectors may be generally characterised as having a synthetic knowledge base.2 These firms emphasise building upon existing knowledge and insights derived from customers and suppliers when approaching their incremental innovative efforts. They place importance on know-how, practical skills, and problem solving and applied engineering (Asheim et al., 2007, 661). Proximity is important, given the emphasis on face-to-face interaction with the end goal of knowledge sharing geared towards innovating. Solely in terms of innovation, ‘buzz’ (informal information exchange less occupied by specific innovation-based exchange) may be considered less important (Asheim and Vang, 2004; Asheim and Gertler, 2005; von Hippel, 2005; Vang and Overby, 2006). The present research seeks to unearth specificities regarding buzz and face-toface interaction at trade shows. On the one hand, buzz may be important in terms of general intelligence gathering on non-local opportunities but less so in terms of innovating activity. On the other hand, new advantages might be gained, as Korean firms aim to integrate face-to-face interaction with buzz-related information exchanges, all geared towards establishing their firms as major players in international markets. In both regards, the evidence would suggest, then, that some sort of in-person contact is necessary for machinery firms to prosper in increasingly competitive global markets.


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Trade fairs as an export marketing strategy Given the difficulty of obtaining international market data, particularly on potential buyers, and securing some sort of tacit knowledge about export markets, the role of trade shows has become increasingly important for firms, particularly with regard to facilitating relationships between buyers and sellers. However, there has been relatively little research looking at direct linkages between these exhibitions as an exportrelated strategy (Wilkinson and Brouthers, 2006). Participation in global trade fairs, in many ways, should be viewed as a barometer of a firm’s degree of investment in international activities and an integral part of its internationalisation strategies (Seringhaus and Rosson, 1994). Given that exporting is viewed as a first step in a firm’s internationalisation activities (Dicken, 2011), trade fairs serve dual but related purposes. They serve as a venue where different actors can acquire knowledge while also enabling sellers (or potential sellers) to improve upon dissemination of knowledge on product offerings (Rinallo and Golfetto, 2011). In this respect, they can serve as a temporary cluster of actors within the same industry in terms of exchanging knowledge (Torre, 2008), and just as critically, possibly enable firms to move beyond local business communities and link with wider global networks (Ramírez-Pasillas, 2010). A mistake that many firms make is to miscalculate the goals of a trade show, which then confuses their strategy for participation. For example, companies often staff their exhibits at these events with only salespeople, rather than taking a holistic strategy, incorporating a wide range of staff to meet the needs of potential customers. Moreover, many firms concentrate solely on attendees with buying power, rather than on all attendees, any number of which could develop into buyers (Blythe, 2010). However, recalling the previous discussion of cultural distance and associated implications for cultural norms and business behaviour, East Asian trade fair participation and staffing considerations may differ from those in the west. The tall management hierarchies that characterise Korean, Japanese, and Chinese firms, coupled with the importance placed on personal relationships in business dealings may lead to the prioritisation of senior management attendance. Trade fairs can serve as a space for the exchange of knowledge between producers, buyers, suppliers, and other actors. These exhibitions then can become the short-term economic

clusters explained by Bathelt and Schuldt (2008). Moreover, continued participation in these exhibitions can foster ongoing relationships and exchanges of knowledge (Power and Jansson, 2008). As previously described, prior research maintains that face-to-face contact is important for business interaction and innovation (see Bathelt and Schuldt, 2010). However, trade fairs can serve as a venue in which ‘buzz’ is created, which in turn is integral to tapping into major trends that may then necessitate innovation. These exhibitions can also become venues in which ‘buzz’ can be created and disseminated about not only new products and trends within industries but also about firms themselves as actors in global supply chains (Bathelt and Schuldt, 2008). Although permanent spatial proximity is not always necessary, Torre (2008) suggests that temporary proximity can often serve beneficial purposes by increasing knowledge exchanges, fostering the beginnings of innovative activity and encouraging collaboration. This is especially pivotal, given that customers are increasingly becoming part of the innovation process for manufacturers (Grabher et al., 2008). With regard to export intelligence gathering and the innovation that is increasingly key to the continued success of Korean machine tool manufacturers, the literature suggests that trade fairs are venues that would facilitate both linked strategies for these firms. Explorations of export strategies at SIMTOS Survey and data Conducting research at international trade expositions has become an accepted research method across numerous disciplines (see Bathelt and Schuldt, 2008; Blythe, 2010) as it allows an examination of dynamics between the parties described above. For example, attending trade shows enables researchers to ascertain dominant firms in a specific industry and which products are preferred by a global customer base. From a practical standpoint, it allows researchers to meet with and interview more companies than would be possible if one had to visit numerous locations. The following section presents findings from structured interviews and a survey of Korean machine tool manufacturers at SIMTOS, the Seoul International Machine Tool Show, held in Seoul, South Korea, from 16–22 April 2012. This trade fair has grown rapidly in the past decade, becoming one of the largest machine tool


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exhibitions in the world, along with others in Germany, Japan, United States, Taiwan, and China. Data were collected from 53 firms via a structured survey administered to company representatives at their respective displays during respites in show-related activities. The sample of surveyed firms (all firms agree to take part in the survey) was limited to Korea-based manufacturers of complete machine tools such as lathes and machining centres, not component manufacturers or service providers. This group (roughly one-third of all complete-machine producers from Korea) was statistically representative of the larger population of machinery manufacturers in terms of size and product lines. The survey instrument included 41 individual response possibilities regarding export activity, intensity, and countries of destination, attendance motivations, staffing, and general company information (e.g. size and annual sales). Twenty in-depth interviews (of approximately 15–30 minutes) were conducted with a representative sample of the surveyed firms. The interviewees, who were interviewed during breaks in their fair-related responsibilities, were selected based on their ability to discuss exporting. The rationale for this second stage of the research is supported by Yeung (1995), who suggested that qualitative methods are integral to understanding the sea changes that take place in international business. Basic descriptive statistics are provided in Table 1. The distribution of firms is relatively split between firms attending only SIMTOS (30.8%), firms attending two to three shows every 2 years (42.3%), and firms attending four or more shows every 2 years (26.9%). Nearly 55% of respondent firms indicated that they expect at least 10% export growth over the next 5 Table 1

years. These figures for export intensity are in line with the macro-industry statistics from Korea Machine Tool Manufacturers’ Association (KOMMA) reviewed earlier. In terms of size, firms range from 50 or fewer employees (52.8%), 51–300 employees (37.3%), 301–1000 employees (3.8%) to firms with over 1000 employees (5.7%). These size categories are utilised to classify firm size in Korea. Attending SIMTOS: motives and gathering export intelligence The literature described in previous sections suggests numerous motivations to participate in an international trade fair. In the case of these machine tool firms, why did they attend SIMTOS? Firms were presented with eight selections on the survey instrument, and the results are provided in Figure 2. Two objectives tied for first (collecting information on Korean customers and meeting with existing and potential suppliers), whereas just over half of the firms attended this trade fair in order to obtain information on export customers. The emphasis on meeting with existing and potential suppliers affirms that trade shows are not merely venues for final product manufacturers and their exportoriented business activity. This result reinforces the conceptualisation of trade shows as temporary clusters where deep supplier–buyer interfaces are created and maintained (Bathelt and Schuldt, 2008) and as a place where firms can attempt to become part of wider, global business networks (Ramírez-Pasillas, 2010). Moreover, this evidence shows that the potential buzz emerging from these exhibitions is not related to innovation. Instead, it is sometimes merely about getting the word out about a firm’s products or

Descriptive statistics for the sample.

Trade show attendance

Percentage of responding firms

Attend only SIMTOS Attend 2–3 trade fairs every 2 years Attend 4 + trade fairs every 2 years Export intensity and prospects Mean sales from exports Firms expecting export growth over 10% Firm size (by number of employees) Firms with 50 or fewer employees Firms with 51–300 employees Firms with 301–1000 employees Firms with greater than 1000 employees

30.8 42.3 26.9

Source: Authors’ survey.


25.3 54.9 52.8 37.7 3.8 5.7

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simply the fact the firm can indeed be a player on the world stage. The proximity afforded by trade fairs, along with this emphasis on supplier relationships, is also in line with firms deploying a synthetic knowledge base. These firms tend to build upon insights ventured by suppliers as well as customers as they engage in incremental innovative efforts vital to their market performance (Asheim et al., 2007). Specificities regarding innovative activity will be visited in a later portion of the article. Firm motivations to collect information on Korean customers and to obtain information on export customers deal more with downstream activity. An interview with an executive from a large manufacturer with an estimated 60–70% domestic market share and exports to some 30 destinations mirrors these overall results. The executive revealed that the company participates in trade shows for name exposure but also views these shows as an opportunity for overseas and domestic sales and engineering personnel to meet, again reinforcing the role of these exhibitions as a location for information exchange. Furthermore, they view trade shows as an opportunity to service existing companies while meeting potential customers. Additional firmlevel interviews, however, provided more nuance on this topic. These conversations revealed that most firms were interested in exporting but that they rely on Korean customers for these sales. Explained further, these producers are exporting but selling their products to large Korean manufacturers (e.g. Hyundai and Kia, among others) that are establishing (or have established) facto-

ries overseas. In essence, the larger manufacturers were acting as export customers for the Korean machine tools firms. As one manager of a small- to medium-sized firm noted, ‘We only export about ten percent, and that is to Korean companies overseas. We’re looking for our own partners in Shanghai now. We are concentrating on quality first, not cost’. Moreover, even a manager from a larger manufacturer with over 25 years in the machine tool industry offered, ‘Sometimes chaebol will take our machines with them and introduce us that way. It’s a problem of who’s going to use the machine where’. This manager was referring to the fact that the company does not have any dedicated export marketing strategy for certain countries or regions. As such, they have to remain constantly reflexive to extra-local demands for service requests in places of which they have no immediate knowledge or experience. This finding adds further nuance to previous findings (see Gertler, 2001; Andersen, 2012) concerning the inherent difficulties in understanding the particulars of foreign markets and potential failures that could result. Also related to export marketing strategies was the fourth-ranked motivation: meeting with overseas agents and distributors. Increasingly, many manufacturers are not selling directly to customers, largely due to expenses associated with maintaining a global sales network; instead, they rely upon agents to handle much of their sales and marketing tasks. One machine tool firm representative offered that at trade fairs such as SIMTOS, his firm did not expect to see many

Meet with existing and potential suppliers Obtain information on Korean customers Obtain information on export customers

Meet with overseas agents and distributors Discover industry trends Benchmark competitors Obtain information useful for innovation

Compare competitor price and quality 0

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30

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Figure 2 Reasons for trade fair attendance (by percentage of responding firms). (Source: Authors’ survey). Note: Firms could select more than one reason.



customers attending, especially from distant emerging markets. Over the course of several days on-site at SIMTOS, it appeared that these emerging global markets (as suggested by Ramírez-Pasillas, 2010) are facilitated in two ways. First, there are individual ‘country booths’ that offer export information and assistance to individual firms at the trade show but also that serve as a localised base for agent representatives from these countries. This allows for the face-toface interaction critical for promoting manufacturing and for nurturing longer term business relationships. Second, Internet portal-site developers maintain trade show and industry specific data, making them available to all interested parties in a number of languages. The representative of one such portal site was proud of the services his company offered, including an interface with information on all companies attending SIMTOS, an affiliated ‘market place’ site for machine tool firms with over 500 categories and connections to SIMTOS, and a related newsletter put out to registered users. The site, he went on to explain, can get up to 100 000 hits over the course of the show. In all, experience thus far suggests that SIMTOS is indeed set up to help companies overcome the difficulties associated with acquiring information on potential customers reviewed earlier while at the same time providing the temporary proximity (Torre, 2008) and a place helpful to supplier–buyer interface and information exchange (von Hippel, 1994). Reasons related to other firm-level strategies, such as benchmarking and ascertaining trends, fell further down this list. Part of the reason for the lack of emphasis on benchmarking may be associated with the fact that many attendees are domestic market leaders. When asked about benchmarking activities at SIMTOS, a senior manager with a large firm in business for over 60 years replied without hesitation, ‘Other companies benchmark us!’ The perception was that there is a pride in competing based on quality and innovation, particularly at the domestic level. Another large firm informant, for example, remarked, ‘We’re a market follower globally, but a leader in Korea’. This representative described the frustration that sometimes accompanies this shift from price-based to quality-based competition, stating, ‘Customers ask for Japanese or German quality, but they want a Chinese price, so we tell them that we can promise 95% of that level of quality. But not at a Chinese price. Can’t do it. So we tell them then to buy the Chinese one’. Several respondents inclined that they

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benchmark with more vigour at other large, international trade shows abroad, either in conjunction with directly participating, or by sending employees to assess the competition. One new avenue of exploration deployed in this research concerns the innovative activity of firms at trade fairs. It should be mentioned, therefore, that firms choosing innovation as one of the reasons for trade fair attendance exhibited significantly higher export intensity (t-test; P = 0.006) by a measure of 39.3 to 19.2%. An overwhelming majority of interviews suggest that firms are openly and actively engaging existing and potential customers when it comes to making incremental innovations to enhance sales potential. Interestingly, the knowledge bases literature, as previously mentioned, theorises that ‘buzz’ centred on innovative activity may be less important for such firms (Asheim and Vang, 2004; Vang and Overby, 2006) and this seems to be the case here. As Korean machine tool manufacturers have already established themselves to a large degree as competing based on quality, they can rely on creating market share by innovating incrementally in conjunction with buyers based on buyer needs and necessities. Face-to-face interactive opportunities created at trade shows, therefore, are working in tandem with buzz to create market opportunities. Buzz, however, is more geared towards Korean firms putting the word out about their products and capabilities rather than gathering information in geared towards playing ‘catch-up’ with other high-end competitors. Accordingly, more Korean firms should be taking advantage of spot-location strategies at trade fairs that emphasise their ability to work with potential buyers in satisfying productspecific needs. Therefore, beyond the motivations for trade fair attendance, it was also worth examining the types of personnel who attended these exhibitions. Recalling from a previous section, Blythe (2010) suggested that many firms staffed their exhibitions with only sales personnel and suggested that firms re-evaluate their strategies. As seen in Figure 3, sales and marketing staff were still the largest group (84.9%) representing manufacturers at this trade fair. Every other response was selected by less than half of the participating firms, although senior management was represented by roughly 45% of respondent firms. Again, this could be indicative of the tall management hierarchies and emphasis on personal relationships that characterise Korean firms and their business activities. This point was not


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thoroughly flushed out in the interviews, so the topic, while interesting, rests outside the scope of the present research. Given the aforementioned role of innovation in the recent export competitiveness of Korean machine tool firms, employing engineering staff at trade shows could be important given the demands of the international client base. Related to this point, it is interesting to note that a difference of means test showed a significant difference (P = 0.018) in export intensity between firms that did and did not staff their exhibitions with engineers, 36.9% versus 18.7%. This reinforces previous results pertaining to on-site faceto-face interaction impacts on export intensity. Also, this engineering–export relationship adds further evidence to earlier work pointing to the need for successful firms to move beyond just sales encounters and to create a complete experience for potential buyers (Rinallo et al., 2010). A number of participants employed technicians to demonstrate and explain the machines at the show, but this appeared to be limited mainly to larger firms. The importance of trade fairs: firm-level assessments If, as described by firms in this study, exporting is going to become an increasing part of sales and overall growth strategies, then it is important to gauge firm-level assessments of these

exhibitions. A series of Likert-scale questions about the importance of exports and about the criticality of trade shows were therefore presented to firms. On scales ranging from 1 (not important at all) to 7 (extremely important), firms were asked to rate (1) the importance of exports to their firm; (2) the importance of trade fairs like SIMTOS to their export marketing strategies; (3) the importance of trade fairs for potential customers to physically inspect products; and (4) the importance of trade fairs for new sales. Recall from Table 1 the data on the number of trade shows that these producers attend on a biannual basis.3 Table 2 presents the results of analysis of variance (ANOVA) tests comparing the Likert-scale measures across trade show attendance. Note that there is no significant difference among the three groups of firms with respect to the overall importance of trade fairs – the survey findings suggest that these manufacturers regard these shows with roughly the same amount of importance, regardless of the number of exhibitions in which they participate. Although not shown in Table 2, the lack of statistically significant differences also held across firm size – regardless of personnel levels at these manufacturers, there was no difference in the rating attached to trade fairs. There was, however, one noteworthy relationship with regard to the trade show importance metric vis-à-vis innovative activity. Manufactur-

Sales and marketing

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Figure 3 Personnel staffing trade fair booths (by percentage of responding firms). (Source: Authors’ survey). Note: Firms could select more than one option.


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ers who selected ‘to obtain information useful for innovation’ (from Figure 2) rated trade show importance significantly higher (5.33 to 4.21; P < 0.05) than those who did not. This, along with findings reviewed previously (e.g. concerning export intensity and staffing considerations) suggests that firms are cognizant of opportunities to capitalise on innovative efforts at these events. Customising products to fit local demand is a primary innovative consideration for international and internationalising firms, and firms that can mitigate the difficulties associated with this adaptation process are more apt to be successful (Gertler, 2003b). What we may be seeing here are the roots of extra-local innovative efforts, thus far unearthed as innovation has not been studied vis-à-vis trade fair activity. Longitudinal and case study analyses would surely help to ascertain the degree to which, if any, this initial type of supplier–customer coupling geared towards incremental innovation later smoothes the often difficult implementation and maintenance phases of industrial equipment international sales described by Gertler (1995). Likewise, given the concurrent and positive impact of technical staffing, it may be possible that interaction at trade fairs is helping to form the base for ‘relational proximity’ and ‘communities of practice’ (Amin, 2003) that enable firms to later engage in innovative activity across space rather than remain dependent on face-to-face proximate location. Three other comparisons, moreover, emerge as significant. Firms that attend shows beyond SIMTOS rate the importance of exports far higher than producers that attend just this show. It should also be mentioned that an ANOVA comparing export intensity across trade show attendance also indicates significance at P < 0.05 (14.0% to 27.2% to 36.2%). These findings confirm earlier work by Seringhaus and Rosson (1994) on trade show attendance as a measure of commitment to firm-level internationalisation Table 2

strategies. Additionally, it suggests that such firms are making more of a concerted effort to market themselves and their products to wider international audiences through the face-to-face contact fostered by these exhibitions. Continuing to explore these trade fair metrics, there were also significant differences with the final two measures. Machine tool producers attending more trade fairs tend to place a greater weight on the importance of a physical presence for their machinery at trade shows. These findings add to those of Gertler (1995), who unearthed the importance of a physical presence to the successful implementation of advanced machinery, and those of Drake and Kalafsky (2011), who noted that potential customers from emerging markets wanted to see and sample machine tool operations. In the case of Korean machine tool producers, it appears that displaying functioning machinery dovetails with the ‘creating an encounter’ experience recommended for successful trade shows (Rinallo et al., 2010). Finally, those manufacturers who participated in additional fairs also rated the importance of exhibitions much higher with regard to their role in generating new sales. Overall, the findings in Table 2 support much of the literature regarding the centrality of these international exhibitions to overall export strategy approaches, especially to the importance of face-to-face encounters and cultivating extralocal buzz about a company and its products. Given the discussions on the importance attached to trade fairs presented up to this point, additional analyses help to determine whether there are any relationships between these measures and export intensity. Table 3 presents the results of correlation tests between these metrics. The highly significant relationship between export intensity and the importance placed on exports is fairly straightforward, indicating a linkage between firm-level emphases on overseas markets and actual export performance.

Analysis of variance (ANOVA) tests for trade show attendance.

Measure

Attend only SIMTOS

Attend 2–3 trade fairs

Attend 4+ trade fairs

P

Importance of trade fairs Importance of exports to the firm Importance of trade fairs for physical inspection Importance of trade fairs for new sales

4.31 3.63 4.50 4.56

4.86 5.05 5.86 5.77

4.50 6.29 5.64 4.93

0.638 0.002 0.011 0.018

Source: Based on data from authors’ survey. Note: Ratings based on a seven-point scale, ranging from 1 (not important at all) to 7 (extremely important).


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However, it does raise a question about firms that are not already heavily engaged in international markets. Are greater commitments to exporting and, in turn, to participation in international trade fairs, necessary in order to achieve higher export intensities? Other correlations are therefore explored in relation to this finding. Export intensity, for example, is also positively correlated with both the importance placed on trade fairs and the importance of these exhibitions in establishing a physical presence of the machinery for customer inspection. Although it is difficult to suggest any causal relationships, the correlations do suggest links between trade fair strategies and export activity. Associated with these findings, the importance placed on exports by a machine tool manufacturer is correlated significantly with the importance of trade fairs, the physical presence metric and, in this case, the importance of trade shows as a venue for developing new sales, all of which fall under the objectives of such fairs as localised venues for face-to-face exchanges of information. Continuing along this line of inquiry, the weight attached to trade fair attendance is also significantly correlated with the physical presence and new sales measures. The former relationship is particularly interesting, given that information about the machines, including photographs and videos, are available on the web sites of many firms, yet a physical presence (for staff and products) is still deemed to be important by many firms, a point mentioned earlier in this article. This is further reinforced by the correlation between the new sales and the physical presence metrics, suggesting that if firms are aiming at new customers (rather than existing buyers), then the physical presence of machinery remains important. There may be evidence here of budding, technology-driven, symbiotic relationships. As was described previously, Table 3

these large international trade shows are quite tech savvy in that they are supported by a number of independent portal sites. The portal sites provide company and product information in any requested language for all vendors participating in the shows, along with a virtual market place. The portal sites need the vendors and the vendors need the portal sites. These allow potential customers and suppliers to ‘find each other’ with ever increasing efficiency. Still, the emphasis here on actually physically visiting the vendors and inspecting the machine tools suggests that a virtual market place does not provide enough satisfactory input to make the sale. As mentioned above, there was a significant difference in export intensity according to the number of trade shows attended. Moreover, as detailed throughout this article, one of the aims of international trade fair attendance is to grow export sales. Table 4 details ANOVA tests comparing the four Likert-based questions across three categories of export growth for the surveyed firms. The first, and most statistically significant finding, is understandable: firms with the highest rates of export growth would be among those who rate exporting as most important to their firms. The relatively low rating assigned to exporting by the declining/zero growth exporters, however, is noteworthy, as it suggests a gulf between the higher and lower export performers. Will these low-growth exporters later find it difficult to grow international sales when domestic markets mature given the difficulties discussed throughout this article? A similar pattern follows when comparing the ratings assigned to importance of trade fairs in export marketing. Again, the higher growth exporters ascribed a higher importance of trade fairs to their business operations. This finding confirms the aforementioned literature (e.g. Seringhaus and Rosson, 1994) pertaining to

Correlation tests (Spearman’s) between exporting and trade show metrics.

Measure

Export int

Export imp

Trade fair

Physical

New sales

Export intensity Importance of exports Importance of trade fairs Importance of physical presence Importance for new sales

1.000

0.693** 1.000

0.381** 0.413** 1.000

0.309* 0.490** 0.341* 1.000

0.096 0.345* 0.403** 0.667** 1.000

Source: Based on data from authors’ survey. *Significant at P < 0.05. **Significant at P < 0.01. Export int = export intensity; Export imp = importance of exports.


315


the goals of attending international trade shows, specifically with regard to using these exhibitions as a means to increasing export sales. Although the remaining ANOVA tests were not statistically significant, it is worth mentioning that there are no differences between the groups categorised by export growth with regard to either the importance of trade fairs for new sales or the importance of trade fairs for physical demonstrations of manufacturers’ machines. These findings indicate that regardless of export trajectory, firms assign roughly equal weight to the importance of trade shows to achieving these strategies. Conclusion This research explored the use of trade fairs as part of the export research and growth strategies by Korean machine tool manufacturers, adding to the relative lack of research looking at these exhibitions as export marketing platforms. The motivations for attending these shows confirmed many of the previous findings in the literature in that many producers were able to meet with customers, distributors, and suppliers, thus taking advantage of the temporary agglomerations these trade fairs represent, mainly with regard to the benefits that new face-to-face encounters can engender. The knowledge exchanged can be informal and subtle – the firm’s mere presence is important to show that it is a player. A new insight ventured from this research concerns the supplier–buyer interface geared towards incremental innovation taking place at trade firms. Firms that attended a trade show like SIMTOS as part of their innovation processes, for example, exhibited much greater export intensity than those that did not. In relation to this, the survey data also suggested that machine tool manufacturers that staffed their exhibits with engineers (rather than only sales and marketing personnel) were also demonstrably more export intensive. This provided tentative evidence that export-

Table 4

focused firms should take a more holistic approach to their international marketing activities, including the staffing of their exhibits with representatives beyond the immediate sales function. The relationship between engineer participation and exporting needs to be examined in-depth in future studies, especially as it pertains to the innovation-related aspects of these shows. The interviews also revealed a relationship that was somewhat unique to the Korean business environment: many machine tool manufacturers marketed to the chaebols, which then installed these machines in overseas factories. Regarding overall trade fair presence, firms that attended shows beyond SIMTOS also tended to place greater importance on the role of exports to their respective organisations and the importance of trade fairs to garnering news sales and using these exhibitions as physical displays of their machinery. With respect to export intensity, this metric correlated strongly with importance of trade fairs as an overall marketing strategy, again supporting earlier findings on the role of trade shows for firms. At first glance, this appears to be unique to the Korean situation, given its stage of advanced manufacturing development. Overall, the survey data and interviews from SIMTOS intimate that Korean machine tool manufacturers utilised this trade fair as an integral part of their export marketing and research strategies and that those firms with greater export intensity and growth place even greater weight on the importance of these exhibitions. This is especially important in the present, as many firms do not yet have wide exposure to international markets and potential export customers. Regarding the role of trade shows as temporary agglomerations, one future point to consider is whether or not the seller–buyer linkages are maintained after trade fairs like SIMTOS. This was suggested as trade shows may be providing the roots of extra-local implementation capabili-

Analysis of variance (ANOVA) tests for export growth.

Measure

Declining or zero growth

Increase 1–10%

Increase 11%+

P

Importance of exports to the firm Importance of trade fairs to export marketing strategies Importance of trade fairs for physical inspection Importance of trade fairs for new sales

1.90 2.90

5.46 4.54

5.93 5.14

0.000 0.002

4.50 4.90

5.46 5.15

5.61 5.21

0.116 0.829

Source: Based on data from authors’ survey. Note: Ratings based on a seven-point scale, ranging from 1 (not important at all) to 7 (extremely important).


316


ties on the one hand, or the platform upon which communities of practice are founded on the other. Future research, it was also suggested, could examine the impact of this consideration on incremental innovation taking place across spaces rather than dependent on proximity. According to some of the firms that we interviewed, for example, trade fairs were used to maintain longer term customer relationships. Finally, in the estimation of many firms, these exhibitions were effective for garnering new sales, yet there was not an immediate impact on export intensity. This raised the question of lag. Given the cost of attendance, how are firms justifying participation in these trade shows? Evidence points to the actual physical presence afforded by these venues. Tentative evidence also points to newly discovered, technology-driven, symbiotic relationships between online portal sites, vendors, and potential customers at these trade fairs. This would be an interesting topic for future research in and of itself. We should also address the limitations of the research. Although every effort was made to work from a representative sample, the database deployed was admittedly small. Likewise, a greater number of interviews would have aided in unearthing specificities related to firm activity at this show. As both a drawback to the present research and a challenge to future researchers, the data were representative of Korean firms at a Korean, albeit large, trade show. Future research would optimistically draw from data on firms from several countries and, if possible, their activity at more than one of the four major international trade shows for this industry. NOTES 1. For the purposes of this research, innovation, following MacPherson (1997, 128), ‘. . . is defined as the successful design, development and subsequent commercialisation of a new or substantially improved product’. 2. An exception would be the cutting-edge technologies associated with 3D or ‘additive’ manufacturing. These firms, or branches of these firms engaged in this type of product development, could be categorised as having an analytic knowledge base. It should be noted that the firms in the present research are not engaged in this type of product development. 3. This time period was selected as most of the international machinery exhibitions are held every 2 years. REFERENCES Amable, B., 2003: The Diversity of Modern Capitalism. Oxford University Press, Oxford, UK. Amin, A., 2003: Spaces of corporate learning. Chapter 7. In Peck, J. and Yeung, H.W.C. (eds) Remaking the Global Economy. Sage Publications, London, 114–129.

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