Keywords

Entrepreneurial Orientation, Export, Co-Integration, Innovativeness, Risk Taking.

Introduction

Export as a mode of international business is one of the most important ways of international business. Export not only provides a means of entering international market which reduces the risk of the business when compared to other modes like joint ventures or subsidiaries but also enterprises that have limited resources such as economic or human and capabilities (in the form of skills and technology) adopt export as an important activity to penetrate international market (Johanson & Vahlne, 1977). Export performance is considered important in the economic growth of any nation mainly among low income countries (Heiko, 2008). Dependency on export has risen sharply in low-income countries in recent past. Share of exports as the percentage of GDP of South Asian countries indicates that export dependency has been growing relatively large in last few decades (Table 1).

The underlying question is what drives the export performance in these nations? (Carlos M.P.Sousa, 2008) Concluded that considerable studies have been carried on the determinants of export performance but the theoretical framework is fragmented. This study is an attempt to provide empirical analysis to establish the relationship between entrepreneurial orientation and export performance of the nation and test the hypothesis that does entrepreneurial orientation have a long-term relationship with export performance in South Asian Nation.

Enterpreneurial Orientation

Entrepreneurial orientation was first conceived by Miller (Miller, 1987) and later on it was refined by (Covine & Selvin, 1991). It is the firm’s behavioural tendency and management philosophy that has evolved from single dimension to multidimensional concept. Innovativeness, proactiveness, and risk-taking (Wiklund, 1999) are the three components identified in entrepreneurial orientation. Several educations contend that each of the dimensions of entrepreneurial orientation impacts positively the performance of companies, to the extent that it enhances the commitment to innovation, leading to the creation of new products and services, the search of new opportunities and markets, among others (Lumpkin & Dess, 1996); (Alvarez & Barney, 2001).

Innovativeness is the practice of enterprise to adopt and support creative activities which leads to new products, new technologies, new services, new inventions, new tests, and so on. It can be facilitated by increasing research and development expenses within enterprises to improve technology related activities such as new technology acquisition, new product development, and so on (Table 2).

Proactiveness is the practice of enterprises to adopt novel marketing strategy to introduce new products, new services, new processes, and new technologies in order to have the competitive advantage. It plays an important role in identifying new market opportunities easily and then helps to better innovative performance of enterprises (Table 3).

Risk-taking is the tendency of enterprises to initiate bold actions in expectation of high reward. The risk-taking feature promotes firms dynamism in an industry as some enterprises fail while others succeed in the long term.

Export Performance

International Trade Centre indicates 22 indicators of export performance (International Trade Center, 2007). One of the indicator is export concentration or export diversification. Export concentration reflects the degree to which a country’s exports are concentrated on a small number of products or a small number of trading partners. A country that exports one product to only one trading partner has a perfectly concentrated export portfolio. Conversely, a country whose exports are comprised of a larger number of products and that trades with a larger number of trading partners has a lower export concentration ratio (ECR), i.e., has more diversified exports.

Dependence on a narrow range of exports gives rise to risks associated with the lack of diversification. It therefore, exposes a country to economic shocks. Export diversification leads to mitigating volatility risks, instability in export earnings etc. which has an adverse effect on growth, investment, employment, export capacity, foreign exchange reserves and other macroeconomic variables. (Samen, 2010) On the contrary, export diversification is the change in the composition of a country’s existing export product mix or export destination (Ali, Alwang, & Siegel, 1991).

Linkage of Entrepreneurial Orientation and Export Performance

Each component of entrepreneurial orientation has positive influence on export performance (Wilkund & Shephard, 2005). Hence, innovative companies that creates and introduces new products and technologies, generates higher export performance and are seen as engines of economic growth. This idea is in line with Schumpeter’s view that innovative enterprises have an outstanding performance and can be seen as drivers of the export performance for countries (Schumpeter, 1934). Moreover, proactive enterprises benefit from first mover advantage (Zahra & Covin, 1995). Proactive enterprises create first-movers advantage and reaches the international market better than its competitors. The link between risk and export performance is less obvious. (Zahra & Gravis, 2000) Argued that enterprises that are successful in the global market requires creativity, proactiveness and risk-taking. In the process of international business, firms need to learn and use different skills from those adopted in domestic markets, and it requires risk-taking. Thus, when firm decides to internationalise, EO becomes a competitive advantage not only in existing markets or in new markets.

Material & Methods

Studies conform the positive relationship between entrepreneurial orientation and export performance (Okpara, 2009).

As the aim of the study to examine the long run association of the entrepreneurial orientation on the export performance of South Asian Nations panel co-integration among variables were established. (Engle & Granger, 1987) Showed that co-integration can be empirically useful method to model the long-term relationships.

Export Concentrationit = β0 + β1 Innovation + β2 Proactiveness + β3 RiskTaking + μit

µ=error term for t=1…., T; i=1…, N.,

Where T refers to the number of observations over time & N refers to the number of individual countries within South Asian Region. To suit the study and its relevance, model was modified to accommodate only export concentration ratio as the exogenous variable and Innovation, proactiveness and Risk Taking as the independent variable to measure entrepreneurial orientation of the South Asian nations. Several tests have been proposed for panel-co-integration like (Pedroni, 1995), (Kao, 1999), (Fisher, 1932) after it has been examined for stationarity. Data when stationary means they have constant mean and variance. The panel data was collected for South Asian Nations (N=5) for a span of years (T=10) from 2007 to 2016. Due to data unavailability out of Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan & Sri Lanka only 5 nations namely Pakistan, India, Sri Lanka, Bangladesh & Nepal were chosen for this study.

Results & Discussion

Panel Unit Root Test

The first step was to examine the unit root properties of the data. The data should be I(1) stationary to proceed for panel co-integration. And for this study, common root method by Levin, lin, Chu (Levin, Lin, & Chu, 2002) & individual root by Im, Pesaran, Shin (Im, Pesaran, & Shin, 2003) was adopted.

The null hypothesis to test the stationarity of the panel data, according to LLC (Levin, Lin, & Chu, 2002) & Im, Pesaran, Shin (Im, Pesaran, & Shin, 2003) was given as:

H0: β = 1(not stationary)

H1: β < 1(stationary)

The result of the panel unit root is contained in the Table 4. We find that both the variables were non-stationary at level, but after their first order difference, we can reject null hypothesis of non-stationarity at 1% significance level. In all, the variables were I(1).

Panel Johansen Co-Integration Test

Given all the results are I(1), we test for the existence of a co-integrating relationship as the next step. It was done using Pedroni (Engle-Granger) Johansen co-integration test.

H0: β = 0(no co-integration)

H1: β ≠ 0(co-integration)

Pedroni proposes several tests for co-integration that allow for heterogeneous intercepts and trend coefficients across cross-sections (Pedroni, 1995). Out of 11 outcomes of the p values in no intercept & trend 6 outcomes show statistically significant values (refer Table 5). If the majority p values are significant then the long run association-ship is satisfied. Null hypothesis of no co-integration between the two variables can be rejected at 1% level of significance for all the states. Hence, the co-integration test result supports the existence of a panel co-integration between export performance and entrepreneurial orientation.

Fisher Panel Co-integration Test conducted (Tables 6 & 7), showed that the trace statistics is greater than the maximum Eigen value and this also implies the existence of at least 1 cointegration relationship between Export Concentration Ratio and the three dimensions of Entrepreneurship Concentration on higher education thereby rejecting the null hypothesis of no co-integration. It is important to state here that the presence of co-integration among the variables does not explain any long or short run relationship of the variables. In order to do this, the study went further to estimate the Vector Error Correction Model (VECM).

Long Run Relationship: Panel Granger Causality (VECM)

The Engle and Granger model (Engle & Granger, 1987) was used for the causality analysis. This entails a two-step procedure to investigate both the short run and long run dynamic relationships between Entrepreneurial Orientation and export performance. First an estimation of equation was done to capture the long run and then we define the lagged residuals obtained as the Error Correction Term (ECT).

The result obtained (Table 8) supports the long-term causality running from three dimensions of Entrepreneurship Orientation to Export Concentration in all the selected nations. This indicates that in the long-run Entrepreneurship Orientation has a significant impact on export performance.

ECT shows (-) sign and probability value significant at 1% level establishes a long-term association between the export performance and all three dimensions of EO at lag 2.

Short Run Relationship

The null hypothesis states that there is no short run causality running from entrepreneurial orientation to export performance. Wald Test was conducted between lagged values of the independent variable in the coefficient diagnostic.

H0: c(4) = c(5) = 0

H1: c(4) ≠ c(5) ≠ 0.

The result (Table 9) is statistically insignificant at 1% or 5% significance level. It shows that there is no short run causality between them.

Conclusion

The dependence on export in South Asian nations highlights the need for entrepreneurial orientation as an important enabler. For South Asian countries policy makers and entrepreneurs have to pay more attention to improving innovativeness, proactiveness and risk taking capabilities among entrepreneurs. The research confirms the long run dependency of export performance on three dimensions of entrepreneurial orientation. The result of this study suggests the need for South Asian Nations to diversify the mix of product and services exported or markets to quickly pace up, reduce their export concentration ration and to be at par with the other developed countries.

References

1. Ali, R., Alwang, J., & Siegel, P.B. (1991). Working Paper on : Is export diversification the best way to achieve export growth and stability? A look at three African countries. Washington: World Bank .
2. Alvarez, S., & Barney, J. (2001). How entrepreneurial firms can benefit from alliances with large partners. Academy of Management Executive, 15(1), 139-148.
3. Carlos M.P., & Sousa, E.A. (2008). The Determinants of Export Performance: A review of the research in the literature between 1998 and 2005. International Journal of Management Review, 10(4). doi:https://doi.org/10.1111/j.1468-2370.2008.00232.
4. Covine, J.G., & Selvin, D.P. (1991). A Conceptual Model of Enterpreneurship as Firm Behaviour. Enterpreneurship Theory and Practice, 7-25.
5. Engle, R.F., & Granger, C.W. (1987). Co-Integration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55( 2), 251-276.
6. Fisher, R. (1932). Statistical Methods for Research Workers. Edinburgh: Oliver & Boyd.
7. Heiko, H. (2008). Export Diversification and Economic Growth. Washington: Commission on Growth and Development.
8. Im, K.S., Pesaran, M., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115 (1), 53-74.
9. International Trade Center. (2007). The Trade Performance Index. International Trade Center.
10. Johanson, J., & Vahlne. (1977). The internationalization process of the firm- a model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 23-32.
11. Kao, C. (1999). Spurious regression and residual-based tests for cointegration in panel dat. Journal of Econometrics, 90 (1), 1-44
12. Levin, A., Lin, C.F., & Chu, C.S.J. (2002). Unit root tests in Panel data: Asymptotic and Finite-Sample Properties. Journal of Econometrics, 108, 1-24
13. Lumpkin, J., & Dess, G.G. (1996). Clarifying the Enterpreneurial Orientation Construct and Linking to Performance. Academy of Management Review, 21(1).
14. Miller, D. (1987). Strategy making and structure: Analysis and implications for performance. Academy of Management Journal, 30(1), 7-32.
15. Okpara, J. (2009). Enterpreneurial Orientation and Export Performance; Evience from an Emerging Economy. International Review Business Research, 6, 195-211.
16. Pedroni, P. (1995). Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests, with an Application to the PPP Hypothesis. Indiana University Working Papers in Economics, 95-103.
17. Samen, S. (2010). A Primer on Export Diversification: Key Concepts, Theoretical Underpinnings and Empirical Evidence. Growth and Crisis Unit. Modern Economy, 6(1).
18. Schumpeter. J. (1934). The Theory of Economic Development.
19. Wiklund, J. (1999). The Sustainability of the Enterpreneurial Orientation Performance Relationship. Entepreneurship: Theory and Practice, 24(1), 39-50.
20. Wilkund. J., & Shephard, D. (2005). Enterpreneurial Orientation and Small Business Performance: A Configration Approach. Journal of Business Venturing, 20(1), 71-91.
21. Zahra, S., & Covin, J. (1995). Contextual Influences on the Corporate Enterpreneurship- Performance RelationshipA Longitudnal Analysis. Journal of Business Venturing, 10(1), 43-58.
22. Zahra, S., & Gravis, D. (2000). International Corporate Enterpreneurship and Firm Performance. The Moderating Effect of International Environmental Hostiltiy. Journal of Business Venturing, 15, 469-492.