Export Assistance, Price Adaptation to the Foreign Market, and Annual Export Performance Improvement: A Structural Model Examination

Export Assistance, Price Adaptation to the Foreign Market, and Annual Export Performance Improvement: A Structural Model Examination

By Luis Pilipe Lages, David Bruce Montgomery
2001Working Paper No. 1700

The increasing amount of export assistance provided to firms of rich and poor countries, shows the high priority given by national and international policy makers to the encouragement of international trade. Despite this, relatively few international business researchers have discussed the effectiveness of such export assistance. This paper provides an empirical foundation for simultaneously analyzing the effects of export assistance, together with management international experience/expertise and competition in the industry/commerce, on the decision to adapt or standardize the domestic pricing strategy to the main foreign market and ultimately improve a firms annual export performance. Surprisingly, the findings reveal that the total effects of export assistance on export performance are non-significant because exporters use the support they receive to develop inaccurate pricing strategies (i.e. although support has a direct positive impact on performance, there is a negative indirect impact of support on performance through pricing strategy). These and other surprising results have important implications for both public policy and marketing management decision-making, and suggest several potentially fruitful streams of research.