Factors Hindering Export Development in Africa: Empirical Evidence ...

More documents

Recommendations

Info

CONCEPTUAL FRAMEWORKThe conceptual framework for this study is based on prior studies on export development. Thereare four basic factors that hinder export development [20]. The four factors include exportknowledge, internal resource constraints, procedural barriers and exogenous barriers [20]. First,‘export knowledge’ barriers refer to lack of information and knowledge about aspects related toexport activity. Lack of export knowledge has been established as an export barrier and mayconstitute an obstacle to increased commitment to international activity within a company [1].Export knowledge covers areas such as planning and general tactical principles of exportingregardless of the target market in question.Second, ‘internal resource constraints’ has been described as the need for a firm to possess aseries of resources in order for it to be able to initiate export activity. This type of barrier isrelevant, as it has been highlighted as one of the main reasons why many firms, particularlysmall or medium-sized ones, prefer to cling on to a domestically orientated strategy (4). Thefollowing aspects have been identified as the most important internal resource barriers: lack offinancial resources, and lack of personnel to devote time to export, and lack of productioncapacity [3; 4; 21].Third, are the procedural barriers, which have been described as an obstacles pertaining to theactivity itself and which could have their origins either in the firm’s domestic market or in theforeign markets [24]. Procedural barriers can be subdivided into two types: (a) controllable,those which can be easily solved given the right experience (e.g. documentation); and (b) notcontrollable, requiring case-by-case decisions, independent of the routine which has beenacquired through experience [20]. The following aspects of export activity can be considered asprocedural barriers: red tape and documentation, non-tariff barriers, import tariffs, transportationand distribution difficulties in foreign markets. Finally, exogenous barriers are described asobstacles that are externally imposed on the firms which are outside the control of the exportingcompany [20]. Factors such as the powerful competition faced in foreign markets, the risk ofvariation in exchange rates, political instability in foreign and domestic markets [3; 11; 13; 14].LITERATURE REVIEW AND HYPOTHESESKnowledge BarriersIn their seminal work, [24] identified four sources of export barriers that affect firms’ exportactivities. They include export knowledge, internal resource constraints, procedural barriers andexogenous variables. In the following paragraphs we will comment on each of these exportbarriers individually. First, export knowledge barriers refer to lack of information relating toexport activity. In his pioneer work, [1] asserted that lack of knowledge about foreign marketsconstitutes a barrier to increased commitment to international activity within a company. Inanother landmark study by [5] highlighted the dynamic nature of barriers to exporting. Theyfound that firms starting export activity face difficulties in identifying opportunities in exportmarkets. In a similar study conducted by [23], the following were identified as knowledgebarriers, lack of awareness of export assistance, lack of awareness of benefits of export markets,lack of knowledge of best potential markets, lack of qualified staff, and overall lack ofknowledge of how to enter the export market [23, p.409].
Resource BarriersSeveral studies have identified internal resources as an impediment that limits the ability of firmsto export [4; 23]. The following factors have been highlighted as internal resource barriers: lackof financial resources, regarding the difficulty of obtaining the necessary funds required toinitiate or finance export operations [3; 4; 14; 23]. For example, in his landmark study of exportbarriers using a sample of 569 firms in Cyprus, [17] found that one the barriers facing firms whowant to export is difficulties associated with obtaining the necessary fund to finance exportactivity. Other researchers have also identified additional barriers as internal constraints thathamper export activity. The need to use honoring letters of credit were found by [21]; lack ofpersonnel to devote time to export activities [21], Furthermore, a firm requires a number ofexternal support resources such as banks willing to support firms’ international activities (citedin [24] or local trading firms that enable indirect export operations of manufacture.Procedure BarriersA third factor that has been identified to limit export activities are factors pertaining toprocedure barriers. According to [23], any firm interested in exporting is faced with a number ofprocedural barriers. Procedural barriers relate to the activity itself, which could have their originseither in the firm’s domestic market or in the foreign markets (24). According to[20], proceduralbarriers can be subdivided into two types: (a) controllable, those which can be easily solvedgiven the right experience (for example, documentation); and (b) not controllable, requiring caseby-casedecisions, independent of the routine which has been acquired through experience (forexample, non-tariff barriers). A review of relevant export literature indicates that amongprocedural barriers in export include the following: red tape and documentation. For example,these researcher have identify red tape or beurecracy as an obstacle to export [13; 14]; importtariffs is also another factor that has been identified as stumbling block to exporters [3; 11], nontariffbarriers, such as the establishment of various quality control and safety standards [3; 21],which occasionally involve the need to adapt products to the requirements of the differentforeign markets [13; 14] transportation and distribution difficulties in foreign markets anddomestic markets have been found to limit the ability of exporters [13]; and the difficulty offinding a trustworthy distributor in the target country [12; 13; 21].Exogenous BarriersThe final factor identified in the literature that seems to affect a firm’s ability to export is refersto as exogenous barriers. According to [23], exogenous barriers have their origins in theuncertainty of international markets, largely due to the activities of other players in the market –such as competitors, foreign governments, supply and demand – meaning that this type ofvariables transcend the control of the exporting company [24]. Factors such as the powerfulcompetition faced in foreign markets have been cited in this context [3; 11; 13; 14] as havepolitical instability in foreign markets [12], the risk of variation in exchange rates [3; 11; 13; 14]and the risk of losing money [5]. For example, a landmark study by [5] highlighted the dynamicnature of barriers to exporting. They identified consistent variations in barrier perceptions byexport stage, they concluded that as firms advanced in their export business, the greater thepercentage of firms that perceived difficulties in understanding foreign business practices,conforming to foreign product standards/specifications, collecting money from foreign customersand obtaining adequate representation in foreign markets.
Page 1 and 2: Factors Hindering Export Developmen
Page 3: INTRODUCTIONExporting represents on
Page 7 and 8: of (3.76). It is important to point
Page 9 and 10: Suarez-Ortega and Alama-Vera, 2005)
Page 11 and 12: CONCLUSIONS AND IMPLICATIONSThis ex
Page 13: 13. Kedia, B. L. and Chhokar, J. (1

Factors Hindering Export Development in Africa: Empirical Evidence ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?