Driving a firmÕs export propensity and export intensity: the role of experience, innovation, and international marketing strategy

Moving from the hypothesis of firm heterogeneity, we analyze whether the firmÕs experience, product and process innovation as well as a clear international marketing strategy affect firmsÕ probabilities of entering export markets and their export intensities (sales achieved abroad). The paper provides further knowledge on the determinants of both the decision to address foreign markets (firm export propensity) and the degree of penetration in those foreign markets (export intensity), by integrating the three above-mentioned streams of research usually approached as distinctive ones. Even though there is a large set of studies dealing with an analysis of export determinants, there is still a lack of theoretical and empirical investigation on how firmÕs innovation (product to be developed, process improvement) and marketing strategy (commitment, marketing investments) interplay in the international business processes, taking into account any prior experience of the firm in general terms as well as in the international scenario. Specifically, the paper empirically investigates how experience, innovation and international marketing strategy influence export behavior at the firm level in order to explore how these determinants act as export drivers for a firm and the consequences measured in terms of export intensity. We carried out a quantitative analysis based on a dataset on 582 Italian manufacturing firms observed over the three-year periods 2001Ð2003 and 2004Ð2006. As far as export propensity is concerned, it emerges that the main drivers affecting the firmÕs decision to enter foreign markets are related to its internal productivity level, innovation capabilities in terms of product innovation as well as an explicit marketing strategy oriented to foreign markets (establishing collaborations with foreign firms or direct commercial investment abroad). Thus, experience can be interpreted as the capability of a firm to manage internal processes (managerial experience) efficiently rather than in terms of knowledge cumulated through years of economic activities (captured through the age variable) or transferred from other partners or foreign ownership. When considering export intensity, two main elements arise from the analysis. The first one is that the shift from product to process innovations affects exports. This result can be explained by the firmÕs capability to efficiently change its internal processes to face the demand arising from foreign clients. The second important element refers to the remarkable role of direct commercial investment in influencing export intensity. This result confirms that the firm gains in terms of value captured by controlling directly its distribution channel.