Journal of Global Marketing

ISSN: 0891-1762 (Print) 1528-6975 (Online) Journal homepage: https://www.tandfonline.com/loi/wglo20

International Performance Antecedents in

Emerging Market SMEs: Evidence from China

Man Zhang, Gary Knight & Patriya Tansuhaj

To cite this article: Man Zhang, Gary Knight & Patriya Tansuhaj (2014) International Performance
Antecedents in Emerging Market SMEs: Evidence from China, Journal of Global Marketing, 27:3,
161-177, DOI: 10.1080/08911762.2013.875242

To link to this article: https://doi.org/10.1080/08911762.2013.875242

Published online: 18 Jun 2014.

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Journal of Global Marketing, 27:161–177, 2014
Copyright c Taylor & Francis Group, LLC
ISSN: 0891-1762 print / 1528-6975 online
DOI: 10.1080/08911762.2013.875242

International Performance Antecedents in Emerging Market

SMEs: Evidence from China
Man Zhang
Gary Knight
Patriya Tansuhaj

ABSTRACT. Emerging market countries are characterized by weaknesses in institutions, infrastructure,

and other public resources to support business. Small and medium-sized enterprises (SMEs) typically
endure limited private resources. Despite such deficiencies, emerging-market SMEs are participating
increasingly in international business. The authors examine orientations and strategies that engender
superior international performance among SMEs from emerging markets. They develop and test a model
using a large dataset of Chinese SMEs to examine the antecedent roles of market culture, international
orientation, and international marketing strategy. Findings point to these constructs as significant drivers
of international performance. Implications for scholarship and practice are offered.

KEYWORDS. Emerging markets, international marketing, market culture, performance, SMEs

INTRODUCTION India, and Russia that are experiencing indus-

trialization, modernization, and rapid economic
Historically, most international business was growth (UNCTAD, 2007; World Bank, 2011).
conducted by large multinational enterprises Home to some 4 billion people, emerging mar-
(MNEs) based in the advanced economies, kets represent about two-thirds of world popula-
mainly in Europe, North America, and Japan. tion (World Bank, 2011). They possess numer-
In globalization’s wake, however, large num- ous advantages, including low-cost labor, skilled
bers of companies based in emerging markets workers, government incentives, and low-cost
have begun to participate actively in interna- capital (Hirt, Smit, & Yoo, 2013; UNCTAD,
tional business (Boston Consulting Group, 2009; 2007; World Bank, 2011). The countries pro-
UNCTAD, 2012a; World Bank, 2011). vide more than 40% of world gross domes-
Emerging markets refer to more than 30 less- tic product and one-third of the world’s to-
developed economies such as Brazil, China, tal exports (UNCTAD, 2012b). Simultaneously,

Man Zhang is associate professor of international business in the Department of Management, Col-
lege of Business Administration, Bowling Green State University, Bowling Green, Ohio. Gary Knight is
professor of global management and Jackson Chair in International Management at the Atkinson Graduate
School of Management, Willamette University, Salem, Oregon. Patriya Tansuhaj is professor of marketing
and an International Business Fellow in the Department of Marketing, College of Business, Washington State
University, Pullman, Washington.
Address correspondence to Man Zhang, Management Department, College of Business Adminis-
tration, Bowling Green State University, 1001 E Wooster St., Bowling Green, OH 43403, USA. E-mail:
mzhang@bgsu.edu

161
162 JOURNAL OF GLOBAL MARKETING

emerging markets are characterized by relatively lection of orientations and strategies that help
inferior government institutions and infrastruc- engender internationalization and effective par-
ture and by weaknesses in other systems that ticipation in global commerce (Singh, 2009).
can support business (Peng & Heath, 1996; Scholars have found evidence that market cul-
Meyer & Nguyen, 2005; World Bank, 2011, ture and international orientation are positively
2012). associated with firm performance in various
Despite deficiencies in emerging markets, less-developed economies, including Indone-
companies based in such countries are increas- sia (Arief, Thoyib, Sudiro, & Rohman 2013),
ingly active in global commerce (e.g., UNC- India (Javalgi, Todd, & Granot, 2011), and
TAD, 2007; World Bank, 2011). Such firms Thailand (Pongpearchan & Ussahawanitchakit,
leverage emerging-market advantages, such as 2011). Similarly, studies have found a positive
lower-cost labor, to succeed in foreign markets. association between marketing and international
Most prominent in this trend are firms from Asia. performance of firms in Hungary (Laukkanen,
China, India, and other Asian emerging mar- Nagy, Hirvonen, Reijonen, & Pasanen, 2013),
kets are giving birth to more MNEs active in Singapore (Keh, Nguyen, & Ng, 2007), and
global business (Hirt, Smit, & Yoo, 2013; World Turkey (Kocak & Abimbola, 2009).
Bank, 2011). Such businesses compete head-to- In this study, we examine the intersection of
head with MNEs from the advanced economies smaller firm internationalization and emerging-
(Boston Consulting Group, 2009; UNCTAD, market SMEs. We address this issue among
2007). internationalizing SMEs based in China, the
Emerging markets are also home to growing largest emerging market. Our study investi-
numbers of small- and medium-sized enterprises gates particular orientations and strategies likely
(SMEs; firms with 500 or fewer employees) that to engender international performance among
prosper in international business (e.g., Ketkar emerging-market SMEs. Specifically, we ex-
& Acs, 2013; Sandberg, 2013). SMEs consti- amine the roles of market culture, interna-
tute more than 90% of businesses worldwide, tional orientation, and international marketing
including emerging markets (UNCTAD, 2007). strategy as antecedents to international perfor-
By definition, SMEs are smaller and have rela- mance. Initially we provide theoretical back-
tively fewer organizational resources, yet many ground on antecedents to international perfor-
perform well in global commerce (Cavusgil & mance in emerging-market SMEs. We then
Knight, 2009; OECD, 2005; UNCTAD, 2007). develop a model and assess key hypotheses. We
While studies on emerging-market MNEs discuss these results and the normative implica-
have tended to emphasize larger firms, little tions for practice in the international activities
is known about the rise of smaller multina- of emerging-market firms.
tionals from emerging markets. It is likely that
emerging-market SMEs are especially resource-
constrained, given the paucity of infrastructure, THEORETICAL BACKGROUND
institutions and other business resources that
usually characterize less-developed economies. Hunt (2000) developed a general theory of
For example, emerging markets typically are competition that emphasizes the critical role
characterized by limited business infrastructure of organizational resources in the productiv-
and low-income consumers (UNCTAD, 2012b). ity and performance of the firm. The Austrian
It is likely that specific organizational cul- economics perspective views orientations, com-
ture and capabilities play key roles in the in- petences, and particular strategic approaches
ternationalization and international performance as important organizational resources (Hunt).
of SMEs from emerging markets. If such busi- Resources comprise human, organizational, in-
nesses are similar to SMEs from the advanced formational, and relational elements such as
economies (Cavusgil & Knight, 2009; Knight the skills and knowledge embedded in orga-
& Cavusgil, 2004; Peng, Wei, & Duan, 2013), nizational actors, as well as general corporate
they should be characterized by a particular col- culture and competences (Collis, 1991; Hunt;
 Zhang, Knight, and Tansuhaj 163

Prahalad & Hamel, 1990). Hunt’s perspec- substantial tangible, financial, or managerial re-
tive is consistent with the resource-based view sources.
which regards differential endowment of orga- Internationalizing businesses must assemble
nizational resources as an important determi- and leverage resources and capabilities to per-
nant of organizational strategy and performance form their operations and support adequate
(Naidu & Prasad, 1994; Porter, 1991; Prahalad performance in foreign markets. We conjec-
& Hamel; Wernerfelt, 1984). ture that emerging-market firms that undertake
The most valuable resources are heteroge- international business tend to embrace particular
neous and imperfectly mobile (Barney, 1991; organizational resources and capabilities. Such
Grant, 1991; Wernerfelt, 1984). Intangible re- firms likely employ specific strategies that drive
sources such as organizational culture, interna- superior international performance. Using the
tional orientation, and marketing strategy are interview protocol described later, we identified
typically instrumental to achieving desired cor- a collection of orientations and strategies that we
porate outcomes. Such resources can be viewed suggest are particularly important to the interna-
as organizational capabilities, which are embed- tional performance of SMEs from emerging mar-
ded in the firm’s culture and routines, and pro- kets. In particular, our early findings indicated
vide substantial competitive advantages (Col- that emerging-market SMEs that perform well
lis, 1991; Naidu & Prasad, 1994; Porter, 1991). in international markets are likely to embrace a
Because competition is disequilibrating, intan- market culture and an international orientation,
gible resources that are relatively unique con- and put much emphasis on international mar-
fer competitive advantages by enabling the firm keting strategy. We explain these constructs and
to produce value-added offerings, efficiently proposed linkages next.
and/or effectively, for given markets (Barney; Organizational culture is the pattern of shared
Grant; Hunt, 2000). In this sense, we regard spe- values and beliefs that help individuals un-
cific organizational orientations and strategies as derstand organizational functioning and thus
among the resources and capabilities that man- provide norms of organizational behavior (Desh-
agers develop and leverage to optimize organi- pande & Webster, 1989). A strong, support-
zational performance. ive organizational culture provides the means
Emerging markets play a vital and increas- for firms to integrate internal processes, adapt
ing role in global commerce (Harvard Busi- to conditions in their external environment
ness Review, 2011; Singh, 2009; UNCTAD, (Denison & Mishra, 1995; Wanto & Suryasa-
2007; World Bank, 2012). Such countries pro- putra, 2012; Tsui, Wang, & Xin, 2006), shape
duce growing numbers of firms successful the direction of the firm (Appiah-Adu & Blank-
in international business. However, emerging son, 1998), improve productivity, and encour-
markets are characterized by relatively weak age employees to subscribe to organizational
institutions, government bureaucracy, poor in- goals (Deal & Kennedy, 1982; Deshpande &
frastructure, and other challenges (Harvard Farley, 2004; Webster, 1993; Wilkins & Ouchi,
Business Review; Meyer & Nguyen, 2005; Peng 1983). Broadly, organizational culture provides
& Heath, 1996; UNCTAD; World Bank, 2011). the framework in the firm for enhancing orga-
The markets suffer from deficient regulatory pro- nizational strategy, improving effectiveness, and
tections, inadequate business and government encouraging operational and process efficiency
transparency, and shortages of managerial talent (Whitfield & Landeros, 2006). In these ways,
and valuable human resources (Harvard Busi- having a strong, supportive organizational cul-
ness Review; Sheth, 2011; World Bank, 2011, ture should be conducive to superior organiza-
2012). Such deficiencies engender challenges tional performance.
that can inhibit business activity and interna- One type of organizational culture is mar-
tional commerce (Harvard Business Review; ket culture, which is oriented towards the ex-
Khan, Muttakin, & Siddiqui, 2013; UNCTAD, ternal environment and focused on transactions
2007). The challenges are likely to especially af- with external constituencies including suppli-
fect smaller companies because they tend to lack ers, customers, contractors, licensees, unions,
164 JOURNAL OF GLOBAL MARKETING

regulators, and so forth (Kotter & Heskett, 1992; related activities such as planning, product de-
Spillman, 1999; Williamson, 1975). The ba- velopment, distribution, communications, and
sic assumption in a market culture is that the image development (Moon & Park, 2011;
external environment is not benign but hos- Tae & Sang, 2011). Skillful marketing is a
tile, consumers are demanding and interested “distinctive competence,” a term that traces to
in value, and the organization is in the busi- Selznick (1957) and Andrews (1971), and refers
ness of increasing its competitive position (e.g., to what a firm does particularly well, relative to
Deshpande & Farley, 1999; Appiah-Adu, competitors. Falkenberg (1996) included such
Kwaku, & Blankson, 1998). A market-driven competences within the “behavioral assets” of
culture places much priority on customer value the firm, resources that ultimately determine the
and effectiveness through responsiveness to the value of the firm. In marketing, strategy involves
external environment (Kotter & Heskett, 1992; construing appropriate market offerings, and de-
Williamson, 1975). Core values that characterize veloping appropriate resources to communicate
market-type organizations are competitiveness and promote the offerings (Hunt, 2000). Strate-
and productivity. The major task of management gies yield positions of competitive advantage
is to drive the organization towards productivity, and superior organizational performance when
results and profits (Kotter & Heskett; Spillman, they rely on those resources in which the firm
1999). For internationalizing firms, flexibility, is advantaged relative to rivals (Barney, 1986,
quicker response time, and less formality are 1991; Grant, 1991).
more conducive to market expansion and com- We conceptualize international performance
pany growth (Cavusgil & Zou, 1994). We argue as the extent to which short- and long-term cor-
that market cultural values are typical of suc- porate moneymaking objectives are achieved in
cessful international firms (Odean, 1997). emerging markets. In general, performance com-
International orientation reflects a firm’s ten- prises expectations about the achievement of
dency to undertake business in foreign markets. remunerative goals such as profitability, sales
Managers with an international orientation tend growth, and return on investment, as well as
to see the world as their firm’s marketplace, and longer-term strategic objectives (Cavusgil &
undertake active exploration of business oppor- Zou, 1994; Knight & Cavusgil, 2004).
tunities abroad (Curran & Thorpe, 2013; Javalgi
& Todd, 2011; Knight & Cavusgil, 2004; Knight
& Kim, 2009). Company internationalization is HYPOTHESES
facilitated by globalization and the emergence
of technologies like the Internet that render ven- In the model in Figure 1, we identify three
turing abroad more feasible for many types of dimensions within the firm: organizational cul-
firms. Companies may see internationalization ture, strategies, and performance, each of which
as a means to pursue new market opportuni- is developed and activated in the context of the
ties, lower business costs, increase profits, and preceding level (Varadarajan & Jayachandran,
achieve other goals (Cavusgil & Zou, 1994; 1999; Webster, 1992). We conceptualize market
Zhou & Wu, 2012; Zou, Taylor, & Osland, culture and international orientation at the orga-
1998). We argue that the presence of an inter- nizational culture level, and international mar-
national orientation is instrumental to develop- keting strategy as strategy.
ing appropriate international business strategies, Marketing is the conduit through which
and to achieving superior performance in foreign the firm interacts with and satisfies its cus-
markets. International orientation might be espe- tomers (Baker, Hunt, & Hawes, 1999; Burke,
cially salient to the international success of firms 1984). It is a source of sustainable compet-
from emerging markets because many such busi- itive advantage, especially to the extent the
nesses have limited international business expe- firm has marketing expertise that is difficult for
rience, or are relatively new to the approaches competitors to imitate (Deshpande & Webster,
related to expanding abroad. 1989; McKee et al.,1992). International market-
International marketing strategy represents ing strategy denotes the skill with which the
the firm’s skillfulness in performing marketing- firm performs its business activities that direct
 Zhang, Knight, and Tansuhaj 165

FIGURE 1. Hypothesized Relationships

Firm Size

Market Culture

H4
H3

International H1 International
Marketing Strategy Performance
H6

H2 H5

International
Orientation

the flow of goods and services to consumers Accordingly, international marketing strategy
located in foreign markets (Cavusgil & Zou, enables the firm to signal consumers about
1994; Katsikeas, Leonidou, & Morgan, 2000). market offerings and their specific features and
It is comprised here of market knowledge and benefits.
associated skill to position the firm in its for- The goal of international marketing strategy
eign markets through skillful conception and is to win the firm superior performance abroad,
management of the product, pricing, commu- a notion grounded in economic theory (Mc-
nications, and distribution variables. The main Kee et al., 1992; Tae & Sang, 2011). All firms
differences between international and domestic operate in environments fraught with market
marketing are that the marketing activities take imperfections arising, in part, from the hetero-
place in more than one country and the inter- geneity of competitive advantages and the imper-
national context imposes various uncontrollable fect mobility of these advantages among firms
constraints and challenges to the international (Porter, 1991; Yao, 1988). The essence of mar-
marketer that may not be present in the home keting strategy is the creation of imperfections
market (e.g., Douglas & Craig, 1983). in markets that give rise to above-average prof-
Hunt (2000) notes that consumers within its (Porter; Yao). Market imperfections provide a
market segments have imperfect information basis for competitive advantage in firms (McKee
about products that might match their needs and et al.). The role of marketing strategy is essen-
preferences. Moreover, the costs to consumers tially to create market imperfections in given
in effort, time, and money of identifying appro- market segments that allow the firm to achieve
priate products are often considerable (Cavusgil some degree of superiority relative to rivals.
& Zou, 1994; McKee et al., 1992). The use Numerous scholars have pointed to marketing
of advertising, distribution approaches, and strategy as providing a means to obtain superior
other such marketing activities reduce consumer performance in general (e.g., Burke, 1984; Pel-
search costs by signaling the attributes of market ham & Wilson, 1995) and in international mar-
offerings or making them more readily available kets (e.g., Cavusgil & Zou, 1994; Szymanski,
to the consumer (Hunt, 2000; McKee et al.). Bharadwaj, & Varadarajan, 1993).
166 JOURNAL OF GLOBAL MARKETING

Marketing strategy generally supports su- internationalize to confront foreign-based com-

perior performance in SMEs, including firms petitors more effectively or thwart the growth of
engaged in international marketing activities competition in the home market (Collis, 1991;
(e.g., Moen, 2000; OECD, 1997). More- OECD, 1997). We expect that international ori-
over, we would expect international marketing entation is associated with undertaking market-
strategy to positively influence the international ing activities in the firm’s internationalization
performance of firms based in emerging mar- efforts (Knight & Kim, 2009). Accordingly, we
kets (Singh, 2009; UNCTAD, 2007). Hence, we hypothesize that,
hypothesize that,
H2: Among internationalizing SMEs from
H1: Among internationalizing SMEs from emerging markets, international orienta-
emerging markets, international market- tion is a significant, positive antecedent
ing strategy is a significant, positive an- of international marketing strategy.
tecedent of international performance.
Organizational culture is important in com-
Management at firms with a strong interna- pany performance (Barney, 1986; Cameron &
tional orientation may be more inclined than Quinn, 1999; Denison & Mishra, 1995). Orga-
others to develop a strong international market- nizational culture in the firm gives rise to the
ing orientation, and devise appropriate strategies development of particular kinds of organiza-
accordingly (Knight & Cavusgil, 2004; Knight tional strategies (Baker, Hunt, & Hawes, 1999;
& Kim, 2009; Mort & Weerawardena, 2006). Cameron & Quinn, 1999; Deal & Kennedy,
SMEs with a strong international orientation 1982). For example, firms with a market-
tend to possess distinctive competences and out- oriented culture might seek to devise prod-
look (McDougall, Shane, & Oviatt, 1994; Mort ucts and associated marketing activities that re-
& Weerawardena, 2006). They tend to be char- spond to buyer needs and wants (Deshpande &
acterized by managerial vision and pro-active Farley, 1999). Organizational culture is associ-
organizational culture for developing particular ated with the development of international busi-
resources aimed at achieving company goals in ness strategies among internationalizing firms
foreign markets (e.g., Knight & Cavusgil). (Baker et al., 1999; Knight & Cavusgil, 2004).
Internationally oriented firms frequently seek Accordingly, and consistent with the received
opportunities for growth through diversification view (e.g., Varadarajan & Jayachandran, 1999;
into foreign markets (Mort & Weerawardena, Webster, 1992), we argue that organizational cul-
2006). Where this is true, the firm will lever- ture is a significant antecedent in the develop-
age marketing strategies to achieve intended ment of international marketing strategy and in
performance goals in the target markets. SMEs ultimate international performance of the firm.
internationalize in pursuit of better performance Our focus is the effect of a market culture on
through greater profitability (e.g., Kudina, strategy development and the firm’s international
Rugman, & Yip, 2009), which is engendered in performance. The firm that possesses a market
part through efforts to increase revenue through culture reasonably can be expected to under-
skillful marketing of the firm’s offerings. In ad- take deliberate efforts to enhance its competitive
dition, many firms that acquire an international position (e.g., Appiah-Adu, Kwaku, & Blank-
orientation pursue foreign expansion in order to son, 1998; Deshpande & Farley, 1999). Typi-
better serve business customers that have located cally, such businesses are characterized by an
abroad (e.g., Knight & Cavusgil, 2004; Knight emphasis on growing the firm, responding proac-
& Kim, 2009). In an effort to serve foreign cus- tively to opportunities in the external envi-
tomers, the internationally oriented SME will ronment, efforts to create customer value, and
typically devise superior strategies related to general competitiveness (Kotter & Heskett,
product development and adaptation, selling, 1992; Williamson, 1975). Thus, we argue that or-
and appropriate distribution approaches (Mort ganizations with a strong market culture should
& Weerawardena, 2006). In addition, firms may perform better than organizations that lack such
 Zhang, Knight, and Tansuhaj 167

a culture (e.g., Appiah-Adu, Kwaku, & Blank- H4: Among internationalizing SMEs from
son, 1998; Deshpande & Farley, 1999; Knight emerging markets, market culture is a
& Kim, 2009; Leisen, Lilly, & Winsor, 2002). significant, positive antecedent of inter-
Organizations that embrace growth and di- national performance.
versification as dominant organizational goals
are more inclined to undertake international Having an international orientation implies
business (Katsikeas et al., 2000). Possession of a active exploration of new business opportunities
strong market culture should give rise to superior abroad. Given the factors in emerging markets,
performance in international markets (Dosoglu- firms from such markets may need an especially
Guner, 2007; Leisen, Lilly, & Winsor, 2002; strong international posture in order to take the
Odean, 1997). We anticipate that possession of initiative to pursue new opportunities in com-
a market culture will be a factor that supports plex markets, typically fraught with uncertainty
the development of appropriate strategic initia- and risk (Mort & Weerawardena, 2006). An in-
tives among firms based in emerging markets, ternational orientation likely gives rise to cer-
including SMEs. Thus, we hypothesize that, tain processes, practices, and decision-making
activities associated with targeting new markets
H3: Among internationalizing SMEs from abroad (Mort & Weerawardena) and, thus, pos-
emerging markets, market culture is a sibly contributes to firm performance (Knight
significant, positive antecedent of inter- & Cavusgil, 2004). There is a substantial liter-
national marketing strategy. ature that suggests firms that are active in in-
ternational business are likely to enjoy superior
Research demonstrates the positive role of a performance (e.g., Cadogan, Diamantopoulos,
strong organizational culture on gaining and sus- & Siguaw, 2002; Kudina, Rugman, & Yip, 2009;
taining competitive advantages and superior or- Zahra, Ireland, & Hitt, 2000). Knight and Kim
ganizational performance (Barney, 1986; Desh- (2009) found a significant relationship between
pande, Farley, & Webster 1993; Dosoglu-Guner, having an international orientation and measures
2007; Ohmae, 1999). A strong organizational of firm performance. Thus, we hypothesize:
culture is thought to encourage entrepreneurial
behaviors, support firms in adapting to evolving H5: Among internationalizing SMEs from
environment circumstances, and help firms ex- emerging markets, international orienta-
ploit new opportunities (Dosoglu-Guner; Kotter tion is a significant, positive antecedent
& Heskett, 1992; Lim, 1995; Siehl & Martin, of international performance.
1990). Firms with a strong market culture fo-
cus on their external environment and develop Market culture emphasizes innovation and
a customer orientation, which has implications risk-taking (Williamson, 1975). Firms with a
for enhancing marketing performance (Appiah- strong market culture are relatively oriented to-
Adu, Kwaku, & Blankson, 1998; Baker, Hunt, wards the external environment and to mar-
& Hawes, 1999; Deshpande & Webster, 1993). ket expansion and company growth (Kotter &
Evidence also points to a positive relationship Heskett, 1992; Odean, 1997; Spillman, 1999).
between possession of an internal market culture Internationalizing SMEs tend to have proac-
and a market orientation (Deshpande & Farley, tive organizational culture for developing par-
1999; Leisen, Lilly, & Winsor, 2002). Market ticular resources aimed at achieving company
orientation is known to support company perfor- goals abroad (Knight & Kim, 2009). Having
mance in domestic (e.g., Hurley & Hult, 1998) an internal market culture is similar to pos-
and international markets (e.g., Cadogan, Dia- sessing a market orientation (Deshpande &
mantopoulos, & Siguaw, 2002; Knight & Kim, Farley, 1999; Leisen, Lilly, & Winsor, 2002).
2009). We believe that market culture might hold Market orientation is associated with superior
particular importance among firms in emerging organizational performance in international mar-
markets that aim to perform well in international kets (e.g., Cadogan, Diamantopoulos, & Siguaw,
business. Thus, we hypothesize that, 2002; Knight & Kim, 2009; Ge & Ding, 2005).
168 JOURNAL OF GLOBAL MARKETING

Market culture gives rise to certain processes, sued by the university) in person to the top man-
practices, and decision-making activities associ- agers of a collection of appropriate firms, chosen
ated with new opportunities abroad (Deshpande at random from available secondary sources in
et al., 1993). In addition, strongly international the target locations. We used the following crite-
firms typically are characterized by a customer ria for selecting the target companies: the target
focus and attentiveness to conditions in the for- firms had to (i) have been founded after 1980;
eign markets where they do business (Rialp, (ii) be in the manufacturing sector; (iii) be en-
Rialp, & Knight, 2005). In international markets, gaged in international business and generating
because the firm encounters diverse buyer needs at least 15% of total sales within 3 years of their
and tastes as well as multifaceted competitive founding. A total of 305 firms were targeted with
threats, we would expect possession of a mar- the survey. Interviewees were the company chief
ket culture to be associated with a strong inter- executive officer, general manager, and/or ex-
national orientation (Cavusgil & Knight, 2009). port manager, that is, managers best positioned
Thus, firms with limited tangible resources, such to know the firm’s organizational culture, activi-
as internationalizing, are likely to pursue for- ties, and international business. We directed the
eign markets with strong international orienta- students to spend substantial time building trust
tion. Based on these ideas, we hypothesize: with managers prior to conducting the survey.
The procedure resulted in the return of com-
H6: Among internationalizing SMEs from pleted surveys from 155 firms, an effective re-
emerging markets, market culture is a sponse rate of about 51%. Consistent with the
significant, positive antecedent of inter- method suggested by Peng and Luo (2000), we
national orientation. conducted a follow-up phone interview with a
random sample of 20 respondent firms to ver-
ify the validity of survey responses. We asked
METHOD the respondents to reply to a subset of questions
from the main survey. The post-survey reports
Data for the study were collected in China in were strongly consistent with responses from the
2007. Data collection focused on organizations main survey, confirming the validity of the main
located in and around Chengdu and Zhengzhou survey.
in Western and Central China respectively.1 The Nonresponse bias was assessed using the
country has produced many companies that excel method of Armstrong and Overton (1977).
in international business. For the study, we sur- Specifically, early and late respondents were
veyed a collection of export-focused firms that compared on key variables such as number of
market various consumer and industrial prod- employees, firm age, and total sales. No sig-
ucts abroad. Because previous studies highlight nificant differences were found (p < .05), and
the difficulties of collecting firm-level primary thus nonresponse bias is not expected to be
data in China, including low response rate, dis- a factor affecting study results (Armstrong &
trust, and reluctance to respond (e.g., Brouthers Overton, 1977). We also assessed common
& Xu, 2002; Peng & Luo, 2000), we used local method bias using Harman’s one-factor test
research assistants to conduct interview-based (Podsakoff & Organ, 1986). Results indicated
questionnaires with top managers. The question- that common method variance is not a signifi-
naire questions are given in Table 1. cant concern in the sample (p < .05).
A group of 29 senior level business stu- The average respondent firm had 211 employ-
dents from a well-respected local university were ees, with foreign sales accounting for about 57%
trained to conduct face-to-face field visits. The of total sales. The firms represent a range of in-
students each were given financial support to re- dustries that manufacture various products, such
turn to their hometowns and serve as local inter- as machinery, medical devices, home appliances,
viewers. We viewed this as an important means textiles, glass, and other goods.
of gaining respondent access. We instructed the All survey measures were adopted from es-
research assistants to take an official letter (is- tablished studies with minimal modification. In
 Zhang, Knight, and Tansuhaj 169

TABLE 1. Results of Confirmatory Factor Analysis of Key Constructs

International Orientation (α = .88) (7 = strongly agree, 1 = strongly disagree)

1. Top management tends to see the world as our firm’s marketplace 0.48
2. Prevailing organizational culture at our firm is conductive to active exploration of new business 0.91
opportunities abroad
3. Management continuously communicates its mission to succeed in international markets to firm 0.84
employees
4. Management develops human and other resources for achieving our goals in international markets 0.84
5. Our top management is experienced in international business 0.82
Market Culture (α = .68) (7 = strongly agree, 1 = strongly disagree)
1. My firm is very production oriented. The major concern is with getting the job done. 0.77
2. The glue that holds my organization together is an emphasis on tasks and goal accomplishment. 0.61
3. My firm emphasizes competitive actions and achievement. Measurable goals are important. 0.74
International Marketing Strategy (α = . 89) (7 = much better, 1 = much worse; relative to competitors)
1. Marketing planning process 0.80
2. Development or adaptation of the product 0.86
3. Advertising effectiveness 0.80
4. Effectiveness of distribution 0.75
5. Pricing effectiveness 0.84
6. Image of your firm 0.79

International Performance (α = .94) (7 = strongly agree, 1 = strongly disagree)

1. Has been very profitable 0.84
2. Has generated a high volume of sales 0.85
3. Has achieved rapid growth 0.82
4. Has improved our global competitiveness 0.86
5. Has strengthened our strategic position 0.84
6. Has significantly increased our global market share 0.82
7. The performance of this export venture has been very satisfactory 0.82
8. This export venture has been very successful 0.88
9. This export venture has fully met our expectations 0.88

Note. All factor loadings are significant at the .01 level.

preparing for data collection in China, the scales ative to competitors. For measuring interna-
were professionally translated to Chinese, with tional performance of firms, we drew on a scale
back-translation and refinements undertaken by developed by Zou, Taylor, and Osland (1998).
two independent bilinguals, to ensure conceptual The scale incorporates prior conceptualizations
equivalence (Douglas & Craig, 1983; Mullen, of export performance (e.g., financial and strate-
1995). Unless otherwise stated, items were mea- gic), and also considers the firm’s performance
sured on a scale of 1 (“strongly disagree”) to 7 relative to its competitors. Moreover, firm size
(“strongly agree”). is controlled in this study because larger firms
The measurement scales and questions used possess more resources, achieve higher levels
in the survey are shown in Table 1. The scale of scale economies, and tend to be associated
to measure market culture was adopted from with lower levels of perceived risk in interna-
Deshpande et al. (1993) and consists of 4 items. tional market activities (Kuivalainen, Sundqvist,
The scale for international orientation came & Servais, 2007).
from Knight and Cavusgil (2004) and based on
the scale devised by Khandwalla (1977) and
Covin and Slevin (1989). International mar- ANALYSIS AND RESULTS
keting strategy was assessed using Knight and
Cavusgil’s scale. This scale asks subjects about Initially, we purified the study measures in
their skillfulness in marketing functions such confirmatory factor analysis (CFA) (Gerbing
as marketing management, product adaptation, and Anderson, 1988; Mackenzie, Podsakoff, &
pricing, advertising, distribution, and others, rel- Jarvis, 2005; Mullen, 1995). We estimated the
170 JOURNAL OF GLOBAL MARKETING

TABLE 2. Construct Means, Standard Deviations, and Correlations among Latent Constructs

International International International Market

Construct Mean SD marketing strategy orientation performance culture

International marketing strategy 4.51 0.99 0.65

International orientation 5.31 1.08 0.44∗ 0.69
International performance 4.52 1.12 0.62∗ 0.58∗ 0.70
Market culture 5.13 0.91 0.37∗ 0.47∗ 0.44∗ 0.51
Firm size 211 168 −0.08 0.07 0.01 0.12
∗
Correlation is significant at the .01 level (two-tailed).
Note. The square root of average variance extracted (AVE) is shown in bold on the diagonal.

common latent construct using a CFA model, International orientation was found to posi-
and then assessed the item validities, including tively and significantly drive international per-
significance and magnitude of factor loadings. formance (p < .01), supporting H5. We also
We then estimated average variance explained, found support for the hypothesized relationship
construct reliability, and discriminant validity. of market culture as an antecedent to interna-
As shown in Table 1, all items loaded signifi- tional orientation (p < .01), supporting H6. No
cantly on their respective constructs, and nearly support was found for the proposed role of mar-
all had a loading above 0.70 (Gefen & Straub
2005; Hulland, 1999). All composite reliabilities
of each of the items were above 0.70 (Hulland, TABLE 3. Results of Analyses on Hypothesized
1999). Average variance extracted (AVEs) of all Relationships
constructs was above the recommended thresh-
old value of 0.50. In assessing discriminant va- Hypothesized Standardized
lidity, consistent with prior research (e.g., Gefen relationships coefficient Assessment
& Straub, 2005), we ensured that the square-root
H1. In emerging markets, 0.47∗ S
of the AVE of a construct exceeded all correla- international marketing
tions between that factor and any other construct strategy is a significant,
within the study. Table 2 displays the zero-order positive antecedent of
correlations among the key variables. international performance
H2. In emerging markets, 0.32∗ S
Next, we examined the significance and international orientation is a
strength of the hypothesized relationships. Re- significant, positive
sults of the tests to assess hypotheses are shown antecedent of international
in Table 3 and Figure 2. We used PLS regres- marketing strategy
H3. In emerging markets, 0.27∗ S
sion analysis in SmartPLS 2.0 to evaluate the market culture is a
data because of its ability to estimate complex significant, positive
predictive path models that have a large number antecedent of international
of indicators relative to sample size (Chin & marketing strategy
H4. market culture is a 0.09 NS
Newstead, 1999; Garthwaite, 1994; Ringle, significant, positive
Wende, & Will, 2005). antecedent of international
In the main model, results provide strong performance
evidence that international performance is sig- H5. International orientation is 0.33∗ S
nificantly (p < .01) a function of international a significant, positive
antecedent of international
marketing strategy, supporting H1. International performance
orientation is positively (p < .01) antecedent to H6. Market culture is a 0.51∗ S
international marketing strategy, supporting H2. significant, positive
antecedent of international
We also found a positive, significant role for orientation
market culture as antecedent to international
marketing strategy (p < .05), supporting H3. Significance level: ∗ p < .01.
 Zhang, Knight, and Tansuhaj 171

FIGURE 2. Results of Hypotheses Testing: Main Model

Firm Size
Market Culture

H4 0. 09
H3
0.02
0. 27**

International H1 International
Marketing Strategy Performance
0. 51** H6
0. 47**

0.32**
H2 H5
0. 33**
International
Orientation

Note. Significance level: ** p < .01.

ket culture as an antecedent to international per- and strategies that engender international per-
formance, H4. We also assessed the mediating formance among SMEs from emerging markets.
role of international marketing strategy by con- Findings provided evidence that international
ducting tests recommended in the appropriate marketing strategy positively influences the
literature (e.g., Baron & Kenny, 1986). The cen- international performance of emerging-market
tral idea behind mediation is that effects of a SMEs. We also found that having a market-
particular antecedent on a given outcome are in- ing culture and an international orientation are
fluenced by a transformation process internal to antecedents to international marketing strategy.
the organization (Asher, 1983; Baron &Kenny, Finally, we offered evidence that market cul-
1986; Venkatraman, 1989). A construct is said ture positively influences the firm’s interna-
to function as a mediator to the extent that it ac- tional orientation, and that international orien-
counts for the relationship between the predictor tation itself is a significant antecedent of inter-
and the criterion, in our case, international per- national performance. These findings expand ex-
formance. Specifically, we conducted a series of tant knowledge about the role of organizational
simple regression analyses controlling for both culture, international orientation, and marketing
market culture and international orientation in activities that are likely to increase the inter-
their direct and indirect links to international national performance of firms from emerging
performance. These tests significantly confirmed markets.
the role of international marketing strategy as a More broadly, findings contribute to the scant
mediator (p < .01). We next discuss the impli- research on the marketing-performance rela-
cations of these and other findings. tionship among emerging-market SMEs. Our
results suggest that internationalizing SMEs
DISCUSSION from emerging markets that apply significant
resources to devise superior international mar-
We examined the intersection of SME in- ket strategies will tend to attain better interna-
ternationalization and emerging markets. We tional business performance. Increasing interna-
investigated the roles of particular orientations tional involvement usually is accompanied by
172 JOURNAL OF GLOBAL MARKETING

specific improvements, including changes in the relatively stable organizational characteristics,

firm’s internal culture and managers’ attitudinal marketing strategy is amenable to short- and
characteristics. When internationalizing firms long-term modifications. Adjustments are best
undertake efforts to enhance their organiza- made in the firm’s marketing attributes and activ-
tional culture and international orientation with ities that the firm employs day-to-day in dealing
a strong foreign market focus, international per- with buyers. To use an analogy from soccer, mar-
formance is seen to improve. ket culture and international orientation might be
Organizational culture reflects a stable ethos viewed as a basic “set play” upon which man-
in the firm that tends to fluctuate relatively little. agers rely to successfully navigate the playing
The external business environment, by contrast, field. However, contingencies and other unex-
tends to evolve and vary considerably over time. pected conditions require managers to engage
Such variation can be particularly challenging in “free play” in order to make flexible, on-
when the firm is involved in numerous foreign the-ground changes in response to unforeseen
markets. Accordingly, where organizational cul- or evolving circumstances. In international busi-
ture varies little, management needs a lever to ness, free play is analogous to international mar-
effect rapid course changes to deal directly with keting strategy. International marketing strategy
evolving environmental contingencies. Our find- provides a degree of strategic or tactical flexibil-
ings suggest that, for SMEs from emerging mar- ity that augments or enhances the antecedent ef-
kets, international marketing strategy is a useful fects of market orientation on international per-
lever. formance. This finding is consistent with Grewal
Results also suggest that international market- and Tansuhaj (2001).
ing strategy mediates the relationship between In the study, the proposed direct relationship
market culture and international performance. between market culture and international perfor-
As a significant partial mediator, the finding mance was not supported. This outcome lends
suggests that market culture alone may be rel- additional support to the considerable impor-
atively ineffective as a performance antecedent. tance of market-focused strategy, such as inter-
The presence of a strong market culture must be national marketing strategy, for attaining inter-
supported to some degree by developing one or national organizational performance. A market
more appropriate international strategies. Simi- culture likely must be actualized through the me-
larly, having an international orientation on its diating effects of strategy, specific competencies,
own is insufficient to fully support the firm’s or other factors that directly drive performance.
international performance. The important role As international markets evolve, managers
of international orientation is also at least par- need to ensure an appropriate organizational cul-
tially mediated by one or more major strategic ture is in place that best enables adapting skill-
elements. fully to this change. The ability to build and
We also validated the mediating role of in- maintain a particular cultural type within the
ternational marketing strategy in the relation- organization supports responding to changing
ship between market culture and international environments and in reacting to competitive
performance, and between international orienta- pressures. Findings suggest a robust organiza-
tion and performance. The finding extends extant tional culture may be an important source of
empirical work on the role of mediator strate- strategic advantage that allows the firm to sub-
gies in performance relationships, with a focus stantially profit from international market oppor-
in the international context of business. These tunities.
results suggest that firms may be able to sub- Supportive environmental factors on their
stantially improve the impact of market culture own are insufficient to explain successful inter-
and of international orientation on international nationalization of SMEs from emerging markets.
performance by adjusting the extent and effi- Such companies also must possess specific in-
cacy of international marketing strategy in the ternal organizational resources and competences
foreign market context. In contrast to market that support internationalization and superior
culture and international orientation, which are performance in foreign markets. Managers first
 Zhang, Knight, and Tansuhaj 173

need to establish an appropriate organizational of financial, human, and tangible resources,

culture, and then devise suitable strategies that are no longer major impediments to substantial
reflect that culture and engender performance internationalization and success of emerging-
abroad. market SMEs in foreign markets. Smaller firms
SMEs in emerging markets that operate that possess the capabilities described in this
within a certain national culture (e.g., China) study can and do internationalize, and succeed
should focus their attention and resources on de- abroad.
veloping a market oriented culture, and on lever- Future research should aim at deepening our
aging it to develop appropriate marketing strat- understanding of SMEs and other types of orga-
egy. Market culture and international orientation nizations from emerging markets. For example,
may be especially important in emerging-market given that emerging markets often typify distinc-
SMEs because such companies frequently are tive conditions in firms’ external environments,
hindered by limited tangible resources and by there is a need to extend research to consider
weak supportive institutions and infrastructure factors specific to emerging markets, such as
in their external environments. institutions, political economy, business infras-
International marketing strategy itself was tructure, and general level of economic de-
seen to engender superior international per- velopment. If institutions play a critical role
formance among emerging-market SMEs. The in influencing the international performance of
tendency arose in multi-country contexts that emerging-market SMEs, future research should
often impose uncontrollable and unique chal- consider complementary views, such as insti-
lenges to managers from emerging markets. The tutional theory, to enhance explanations on the
international orientation, market culture, and in- international performance of emerging-market
ternational marketing strategies of such firms firms.
facilitate attentiveness to customers and to in- The phenomenon of emerging-market SMEs
ternational markets, product development and is inspiring because it implies that any firm,
adaptation, as well as manipulation of market- regardless of national origin and tangible re-
ing tactical elements to target foreign customers sources, can be an active participant in inter-
with their offerings. national business. While the negative aspects of
Compared with well-resourced larger firms, globalization often dominate popular press re-
SMEs typically must succeed relatively early in ports, the increasing role of emerging-market
international ventures. This arises because the SMEs is a positive trend. The emergence of such
smaller firm may run short of resources needed companies heralds a more diverse international
to sustain operations before market success is business system in which any firm can succeed
achieved. Due to limited tangible resources, internationally.
SMEs cannot afford to make the missteps that
might be sustained by other, larger firms. Thus,
leveraging appropriate strategies to attain supe- ACKNOWLEDGMENTS
rior international performance is relatively more
important for the resource-constrained SME. In- We gratefully acknowledge the helpful input
ternational performance and even company sur- provided by three anonymous reviewers at the
vival appear to hinge on an appropriate organiza- Annual Meeting of the Academy of International
tional culture and well-conceived set of strategic Business on an earlier version of the manuscript.
variables.
Emerging market SMEs are playing a greater
role in international trade than ever before. Ac- NOTE
cordingly, the traditional focus on large multi-
national firms from the advanced economies 1. China is a vast and diverse nation. As in the
present study, scholars in prior studies on Chinese firms
as the dominant international form is evolving. typically collected data from one or two regions in China
Among the firms examined here, smaller size (e.g., Christmann & Taylor 2001). While we acknowl-
and emerging-market origin, as well as paucity edge the potential limitations of such an approach, the
174 JOURNAL OF GLOBAL MARKETING

two regions used in this study are generally representa- nese exporters. Journal of International Business Stud-
tive of greater China. Moreover, with appropriate cau- ies, 33(4), 657–677.
tion, the results can be generalized to rapidly develop- Boston Consulting Group. (2009). The 2009 BCG 100 New
ing and developed regions in China. Chengdu, China’s Global Challengers. Boston, MA: Boston Consulting
fourth largest city, is the focal point of the Great West- Group.
ern Development Strategy, undertaken by the Chinese Burke, M. (1984). Strategic choice and marketing man-
government to economically develop the western and agers: An examination of business-level marketing ob-
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