Analysis and discussion of the theoretical perspectives

In addition to the recognition that firms employ several kinds of market knowl-edge for export expansion purposes, another important insight from the theory review is that knowledge and strategic resources critical to export expansion exist externally and internally to the firm. Secondly, external knowledge needs to be internalized through a firm’s internal processes and coordination mechanisms.

Extending this further for the purpose of the theoretical framework of the study, first of all, it is assumed that an efficient and smooth interaction between external and internal knowledge acquisition mechanisms can explain the link between knowledge acquisition and capability development. Because knowledge can only act as a source of capabilities once it is internalized and used within the firm.

Therefore how smoothly interaction between knowledge acquisition processes and the market knowledge goes on may influence market knowledge competence of firms. Then, the factors that facilitate or hinder the acquisition and use of mar-ket knowledge at the firm and marmar-ket levels shall be included. This assumption has also been supported in the review of theories.

– Kinds of knowledge that constitutes market knowledge competence The knowledge of the resources and the knowledge of the organizational proc-esses of a firm are emphasized by the RBV and the KBV as critical to export ex-pansion. The intangible resource that both of these views relate to export expan-sion is the ability of the firm to identify its core processes, procedures and strate-gic resources of the firm which can be used to transform external as well as inter-nal resources and knowledge into capabilities for expanding exports. Through focusing on the processes the resource- and knowledge-based views, emphasize and analyze firm-level coordination mechanisms for integrating, acquiring and creating knowledge. The experiential knowledge in the RBV is referred to as procedural and know-how – knowledge concerning accumulated skills that allow required tasks to be effectively and efficiently accomplished. However, it must be noted here that the RBV, the KBV and organizational learning do not present any specific kind of export-related knowledge as strategic assets per se, rather these views emphasize the processes (capabilities) of a firm that enable it to transform

market knowledge into a strategic resource. These organizational processes are referred to as the ‘capability’ of a firm. Further, the core competence and the dy-namic capability do not exist as individual theories, but rather, present a deeper clarification of the notion of firm resources and capabilities.

Knowledge of the customers’ needs: The market orientation perspective uses the term ‘market knowledge’ collectively to denote the knowledge of the customers’

needs and export information. Some studies use the term ‘export knowledge’

(Day 1994a; Porter 1985) and refer to it as a strategic resource of a firm that en-ables it to strengthen its market-sensing capabilities and achieve a positional ad-vantage over its competitors in the marketplace. Thus, the market orientation per-spective identifies key knowledge as the knowledge of the needs of customers and export information critical to export expansion.

The market orientation perspective emphasizes the acquisition of knowledge of the needs of customers in the foreign market and its transformation for commer-cial use by utilizing the firm-level coordination mechanisms of knowledge trans-fer and sharing. According to this perspective, a lack of knowledge of the cus-tomers’ needs acts as a major barrier to entering new markets and/or expanding export operations (Diamantopoulos and Souchon 1999; Cavusgil and Naor 1987;

Katsikeas 1994; Leonidou 1995; Leonidou and Theodosiou 2004). Knowledge of export information: The market orientation perspective also considers a lack of export information as a barrier limiting export expansion. Morgan and Katsikeas (1998) explain that involvement in exporting is largely a function of an organiza-tional learning process requiring firms to acquire, analyze and evaluate informa-tion from pertinent environmental sources. They suggest that firms which acquire and use market information regarding overseas buyers, competitors, market be-haviours and associated issues, are at an advantage over other firms in displaying a greater propensity to enter new markets and develop formalized systems for acquiring and managing information within the firm.

Experiential knowledge: The Uppsala model emphasizes experiential knowledge as the intangible resource to export expansion (Cavusgil and Zou 1994; Reid 1984; Erramilli 1991). This form of knowledge is seen as collective firm-level learning and the increase in the knowledge of firms gained through experience of operations in foreign countries is linked to the commitment of resources in for-eign markets. In this way, the rationale for forfor-eign market resource commitment appears similar to the market orientation perspective.

– The link between knowledge and export expansion capabilities

While the link between knowledge and capabilities can be explained by knowldge utilization aspects at the firm level, the rationale behind knowledge utilization is explained by knowledge spillovers and the learning ability of the firm during the interaction process. The market orientation perspective and the knowledge- based view of the firm emphasize the use of market knowledge within the firm in order to internalize it. The use of market knowledge in fact leads a firm to develop ca-pabilities thereby causing an increase in market knowledge and positively affect-ing export expansion. Further, the use of market knowledge enables a firm to efficiently discover markets and to exploit available opportunities ahead of its competitors. Furthermore, the market orientation perspective and the knowledge- based view consider organizational processes and the learning orientation of the firm as the factors that may limit or facilitate capability development.

Luo (2001) mentions three stages which are involved in the conversion of knowl-edge into a capability of a firm: a) knowlknowl-edge acquisition (through learning from competitors or from the inherent resources of the firm), b) knowledge sharing across units and c) knowledge utilization (to produce products/services). Thus, organizational learning drives the conversion of knowledge into a capability of a firm. This is confirmed by Vorhies (1998) who states that a firm’s market infor-mation processing capability have a positive impact on export capabilities devel-opment. Morgan et al. (2003) further emphasize that in order to encourage export success the market-based knowledge of a firm related to exports must be con-verted into organizational-level capabilities that should allow the exporting firm to successfully respond to new opportunities in foreign markets (Kogut and Zander 1992; Nonaka 1994).

– To analyze factors at the firm and market levels those facilitate and hin-der the internalization of market knowledge competence

Even though it has been set as the limitation of the study how interaction between organizational processes and the market knowledge occurs, an explanation of the factors that facilitate or hinder the interaction is nonetheless given. The facilitat-ing and the hinderfacilitat-ing factors will be termed as the contextual factors in common.

As the interaction between market knowledge and the organizational processes is found to be driven by the learning ability of firms, the learning orientation of the firm can be considered as a factor facilitating capability development from the knowledge. Cohen and Levinthal (1990) examined the specific factors that affect the ability of a firm to learn from the external and internal sources of knowledge.

They argue that the absorptive capacity of a firm is a crucial competence that may

lead to the development of innovative capabilities. When firms match the external information with the prior related knowledge existing at the firm level, they are able to identify the value of new and external information and apply it to com-mercial ends. In so doing, firms may develop key capabilities.

However, as Prahalad and Hamel (1990) also mention, it is not just sufficient to simply have the ability to identify strategic resources. Building on those strategic resources is important for success. Therefore the behavioural and market-related factors that inhibit market knowledge development must also be analyzed. When market knowledge and organizational processes interact, knowledge spills over the organizational boundaries deliberately (movement of experienced personnel, shared knowledge) or non-deliberately (tacit learning). Firms with a greater abil-ity to learn may benefit from knowledge spillovers (Eisenstein and Hutchinson 2006; Slater and Narver 1995).

Furthermore, export-related capability development may depend on the existing knowledge base and the learning ability of a firm to take advantage of the spill-overs for its own purposes. Because the organizational processes and the knowl-edge of its strategic resources limit a firm’s ability to recognize and respond to new knowledge, knowledge- based and organizational learning studies emphasize the ability of the firm to understand these processes and the ability to identify strategic resources. Thus, capabilities in several areas may develop as a result of identifying knowledge and then building on it (Morgan et al. 2003).

Preliminary theoretical framework

Figure 8 presents the preliminary theoretical framework of the study. In this fig-ure, the market knowledge competence is shown to consist of the organizational and the market knowledge. As organizational knowledge also consists of the knowledge of the coordination mechanisms of the firm, the interaction between market knowledge and organizational processes is shown by a two way arrow on these two kinds of knowledge. The arrow from the intangible resource block to-wards the capability block indicates that intangible resources act as the source of capabilities. The contextual factor of learning orientation which plays a critical role in the conversion of knowledge into capability of a firm is shown by the ar-row from the contextual factor’s block towards the capability block. Finally, the arrow from the capability block is linked to the dependent variable of the study.

The background concentration of dotted pattern in each block refers to the com-plexity of organizational knowledge that firms use in the transformation resources into capability and then firm competence.

Market knowledge will be analyzed from the viewpoint of knowledge of the cus-tomers’ needs, export information and experiential knowledge. However, only knowledge which turns out to be strategic in nature from the preliminary study will be emphasized in the main empirical analysis. Export capabilities are difficult to identify from the literature at this stage. Therefore specific export expansion capabilities will also be identified from the preliminary empirical study.

Figure 8. The preliminary theoretical framework of the study.

In sum, in this theoretical framework, market knowledge competence is seen as the result of the mobilization of organizational and market knowledge for the ac-quisition and integration of organizational and market knowledge. The acac-quisition and integration of this knowledge within the firm is linked to the development or identification of export expansion capabilities. On the basis of the theoretical framework it can be proposed;

Main empirical study Preliminary empirical study

The dark box shows the current focus of the theoreticaldiscussion.

Export expansion

Success Speed Market Knowledge

Competence

capability 4 capability

3 capability

2 capability

1

Intangible resource Market knowledge Organizational

knowledge Contextual

factors

P1: The interaction of organizational processes and market knowledge is posi-tively related to the market knowledge competence of an exporting firm.

P2: There is a positive relationship between market knowledge competence and the export expansion capabilities of an exporting firm.