Industrial Marketing Management 78 (2019) 108–121

Contents lists available at ScienceDirect

Industrial Marketing Management

How marketing capabilities and current performance drive strategic intentions in international
markets
Anna Kaleka a,⁎, Neil A. Morgan b
a Cardiff Business School, Cardiff University, Cardiff CF10 3EU, UK
b Kelley School of Business, Indiana University, 1309 E 10th Street, Bloomington, IN 47405-1701, US

a rti cl e i n fo

Article history:
Received 14 April 2016
Received in revised form 27 January 2017
Accepted 1 February 2017
Available online 20 February 2017

Keywords:
Strategic intentions Marketing capabilities Market performance Cost efficiency
Differentiation Competitive intensity International marketing Performance feedback
Exporting

a b strac t

Drawing from two strategic views of the firm—the capability-based view and performance-
feedback theory—this study examines the role of both marketing capabilities and current market
performance as potential influencers of two key aspects of the intended future competitive
strategy of firms operating in international markets: effi- ciency and marketing differentiation.
Hypotheses are developed and tested in a survey of a sample of British exporting
manufacturers. The findings are supportive of a more prominent role of marketing capabilities
over re- cent market performance on future strategic intentions in export markets. Additional
analyses of firms with an already established market position reveal a clear effect of
informational capability on marketing differentiation and of product development capability
and current market performance on efficiency intentions. We also find that target international
market competitive intensity is a direct driver of efficiency-related but not differentia- tion-
related strategic intentions.
© 2017 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY-NC-
ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).

1. Introduction

Prior to their implementation, firms' strategic choices exist in the form of intentions in decision-
makers' individual and collective minds. We define strategic intentions as the firm's goals with regard to
different aspects of the strategic direction it aspires to follow in the future. At any point in time,
firms are likely to pursue a given strategy and simulta- neously nurture intentions regarding the
future strategy they would like to pursue. Intentions are not necessarily widely known before
their realization, yet they are directive of future choices and actions. Thus, strategic intentions set
the foundations—type, mode and thrust
—for firms' subsequent strategy choices and implementation actions, and therefore have
important resource allocation, path dependency and, ultimately, performance consequences
(Morgan, 2012; Varadarajan, 2010). Yet, despite the importance of strategic intentions, the
marketing strategy and international marketing literatures typically focus only on currently pursued
and realized strategies. This ignores the potential for the study of strategic intentions to provide
new insights into the emergence of strategy, strategic change and the development of firms'
resource endowments. In an effort to fill this lacuna, our
study examines how strategic intentions are shaped before they be- come formal strategic
choices and associated implementation actions.
While the management literature reveals a number of different per- spectives on strategic
intentions, the predominant conceptual approach views strategic intentions as a firm's direction
when deploying its re- sources and capabilities in response to (or pre-empting) market cues such
as competitive price moves or new product introductions (e.g., Grimm, Lee, & Smith, 2006; Kotha
& Vadlamani, 1995).1 Thus, shifting the focus of empirical study toward strategic intentions at the
SBU level should capture early trends in competing units' response to (or pre-empting) market
challenges (Smith, Ferrier, & Ndofor, 2001; Varadarajan, 2015). This is particularly relevant for
firms competing in international markets since these expose the firm to additional, well-
documented environmental uncertainties, costs, and opportunities making developing intended
strategy a more complex and challenging endeavor (Beleska-Spasova, Glaister, & Stride, 2012;
Boso, Cadogan, & Story, 2012; Cuervo-Cazurra, Maloney, & Manrakhan, 2007).
As a result, this study seeks to enhance understanding of the role of fundamental drivers of strategic
intentions in firms involved in interna- tional markets. While acknowledging that overseas market
institutions

⁎ Corresponding author.
E-mail addresses: KalekaA@cardiff.ac.uk (A. Kaleka), namorgan@indiana.edu
(N.A. Morgan).
Empirically, however, the few studies drawing on this conceptual approach have typ- ically
focused on the strategy currently pursued by companies with varied performance re- sults,
looking at identifying those that constitute the best fit in the respective environments
(Olson, Slater, & Hult, 2005. http://dx.doi.org/10.1016/j.indmarman.2017.02.001
0019-8501/© 2017 The Authors. Published by Elsevier Inc. This is an open access article under
the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
may also play role, the predominant conceptualization in management suggests that strategic
decisions are a response to what decision-makers view as relevant and important aspects of the
market situation faced (Grimm et al., 2006). This occurs mainly at the product-market level,
where strategy selection is continuously re-assessed and managers face a perennial tension of
focusing on cost efficiency versus marketing differentiation (Yarbrough, Morgan, & Vorhies, 2011).
Cost efficiency re- fers to a coherent set of actions, systems, procedures, and arrangements designed to
reduce costs of production and operation with the aim of eventually achieving lower cost of goods
sold relative to competition. Marketing differentiation refers to a set of firm-controlled purposive and
coherent actions mainly along market facing, value-creating com- ponents, aiming at convincing
channels and customers of the unique- ness of the firm's value offering vis-à-vis those of
competitors.
To explain the choice of strategy to be pursued in international mar- ket contexts, this study draws
on two established theories in strategic management—performance-feedback theory and the
capability view— and applies these at the export marketing strategy level. Performance- feedback
theory considers “current performance” i.e. the past year's product-market and financial
outcomes as a key influencer in forming managers' strategic intentions, particularly when framed in
terms of dif- ferent referents (Greve, 1998, 2010; Iyer & Miller, 2008). For example, sales indicators
relative to competition in the target market and like- for-like sales comparisons are two
continuous criteria commonly used by managers to assess the relative position of the firm vis-à-vis
compe- tition and adjust or review its strategy (Lages, Mata, & Griffith, 2013). In contrast, the
capability view focuses on the capabilities that allow mar- ket intelligence to develop, permeate and
interact with other idiosyn- cratic organizational assets and processes as the fundamental
mechanism shaping firms' strategic choices (Barreto, 2010; Krasnikov
& Jayachandran, 2008; Teece, Pisano, & Shuen, 1997). From this per- spective, path dependencies,
the economics of leveraging existing as- sets, and the desire to select more executable strategies
lead managers to develop strategic intentions that align with current capabilities (e.g., Morgan,
Katsikeas, & Vorhies, 2012; Teece, 2007).
Thus, the performance feedback and capability perspectives suggest different factors that may drive
collective managerial attention and de- termine strategic intent (i.e. the relative emphasis that
managers intend to place on the two main competitive strategy dimensions—cost effi- ciency and
marketing differentiation). We include both of these factors in our conceptual model to allow a
calibration of their relative impor- tance in influencing firms' strategic intentions. In testing key
relation- ships in our conceptual model (shown in Fig. 1), our study design allows us to
examine the business unit's intended strategic direction and simultaneously take into account its
current achieved market posi- tion. This enables us to also assess potential emergent changes. In
addi- tion, hypothesized relationships are examined in overseas market environments
characterized by different levels of competitive intensity. The focus is on ongoing ventures of
manufacturing firms, exporting their products via overseas distributors. Thus, we focus on
intended competitive strategy pursued at the business unit level of the firm in the firm's target
export markets.
Our study contributes to the literature in three ways. First, it sheds new light on the relative
predictive value of two important perspectives on strategy—the capabilities view and the theory of
learning from per- formance feedback—in explaining strategic intentions in firms' compet- itive
strategies in international markets. We find that while both approaches explain managerial and
collective firm decision-making in internationally involved SMEs, the capabilities view better
predicts stra- tegic intentions concerning both efficiency and differentiation in export markets.
Notably, we find that performance feedback only plays a role in shaping efficiency intentions.
Second, we provide new insights into progression and change pat- terns in competitive strategy in
international markets and identify likely drivers. Taking into consideration the current market
position of effi- ciency or differentiation and their combinations in conjunction with the
respective strategic intentions, strategic change patterns that emerge in our data suggest a
persistent drift toward efficiency. Con- versely, we also find that informational capabilities are the
strongest driver of shifts toward differentiation in business units' competitive strategy in export
markets. Third, our study also examines the role of target market competitive intensity in
influencing the thrust and direc- tion of relationships between capabilities and current
performance on firms' export market competitive strategy intentions concerning effi- ciency and
differentiation. We find that competitive intensity does not moderate these relationships, but that
there is a direct effect of compet- itive intensity in international markets on intentions concerning
cost efficiency.
In the subsequent sections, the development of the study's concep- tual model and hypothesized
relationships is followed by the descrip- tion of the methodology, including exploratory
interviews, survey design, measures and their properties. Next, the findings are presented and
discussed, and implications for theory and managers explored. The paper concludes with a
consideration of the study's limitations and im- plications for future research.

2. Conceptual model development

2.1. Domain and potential drivers of strategic intentions

At the product-market level, strategic intentions refer to one or both well-established competitive
strategy directions—cost efficiency and differentiation—and firms compose their idiosyncratic mix
of more de- tailed action choices designed to translate these strategic directions into plans
relevant to the specific firm and marketplace conditions (Yarbrough et al., 2011). In the export
venture context,2 decisions concerning the selection of competitive strategy are primarily based
on judgments of the assigned export manager (who may lead more than one export venture).
While such decisions may be influenced by factors such as the manager's relationship with
distributors or their in- centive pay (Chng, Shih, Rodgers, & Song, 2015), they are generally not
taken impulsively and the likelihood of high-risk strategy choices is re- duced by the presence of
distributors. In addition, significant changes in competitive strategy usually require new resources
and capabilities, which are generally costly, slow and consequential. Thus, export man- agers
would normally have to explain such strategy changes to their peers and seek approval from
more senior executives for required investments.
The international marketing literature reflects the broader strategy debate on competitive strategy.
Following a long-standing academic di- vide over the locus of strategic emphasis (strategic
positioning vs. re- source/capability endowments) recent literature adopts a more
conciliatory approach. This involves synthesizing the two views around creating superior customer
value positional advantages to enjoy above average rents from the resources deployed in
achieving this (Gao, Murray, Kotabe, & Lu, 2010; Leonidou, Palihawadana, & Theodosiou,
2011; Morgan et al., 2004). From this perspective, it is the combination of idiosyncratic firm-
controlled factors that are most likely to influence competitive strategy intentions and choice in
export markets (Blesa & Ripollés, 2008; Lu, Zhou, Bruton, & Li, 2010; Zou, Fang, & Zhao, 2003).
While the overseas institutional environment and technology shifts can play a role (Yang, Su, &
Fam, 2012), these are likely to be particularly relevant to specific types of ventures (e.g., exporting of
electronic equip- ment or to venture markets characterized by political instability). In contrast,
the intensity of competition in the overseas market will likely be a continuous input in the strategy-
making process across all types of ventures (Morgan et al., 2004).

2. Export ventures are strategic business units responsible for selling a set of products to a
particular export market, usually through one or more distributors (Morgan, Kaleka, &
Katsikeas, 2004)
Competitive Intensity H3a H3b H5a
Informational H4a H4b
Intended
H1a Cost
Efficiency
Product
development H1b
Capabilities

Customer H5b
relationship

Current H2a
Market
Performance
H2b

Fig. 1. The initial conceptual model with hypothesized paths.

We will first consider two key firm-related factors influencing ex- porters' strategic intentions:
the firm's marketing capabilities and re- cent performance results. Marketing capabilities are
complex co- ordinated patterns of skills, knowledge and activities by which firms transform
available resources into market-related value outputs (Morgan, 2012; Slotegraaf & Dickson,
2004). They involve both formal and informal processes, making their development and
assessment a challenging task (Luo, 2001; Vorhies & Morgan, 2005; Vorhies, Morgan, &
Autry, 2009). Further, they are difficult to isolate, as they are also linked to other organizational
and cross-functional activities. For example, a firm's market learning capability may draw on allied
ac- tivities in selling, brand development, new contract negotiating, cus- tomer response
activities, and even in governance choices (Day, 1994; Finkelstein, Hambrick, & Cannella, 2009).
While efforts to classify or cat- alog capabilities comprehensively at an organizational or functional-
level are sparse, one such effort (Morgan, 2012) has done so for market- ing capabilities. We use that
framework as the basis for selecting an as- sortment of firm controlled factors to focus upon
and assess its comprehensiveness in our export venture context.
In the manufacturer export marketing context, key marketing capa- bilities comprise the ability to
understand the target market and associ- ated institutional factors and effectively transfer the
developed knowledge home to inform, enrich or transform the product develop- ment process
(Dhanaraj, Lyles, Steensma, & Tihanyi, 2004; Zahra, Ireland, & Hitt, 2000). These key marketing
capabilities may interact with other functional (e.g., operations) capabilities and there may also be
higher-order cross-venture capabilities in knowledge sharing, ven- ture integration and people
management (Chen, Chen, & Zhou, 2014; Elango & Pattnaik, 2007; Zahra et al., 2000). However,
the effect of these at the venture-level is generally longer-term in comparison to these more
continuously used and revisited marketing capabilities. The literature suggests that in exporting
manufacturers, the essential supply-side capabilities are those in: developing relationships with
overseas customers—both distributors and end-users (customer rela- tionship capabilities); collecting
information and intelligence concerning the market, industry, and institutions of the target export
market (infor- mational capabilities); and, using these to guide the development of new products or
improvement/adaptation of existing products (product de- velopment capabilities) (Fang & Zou,
2009; Kaleka, 2011; Lisboa, Skarmeas, & Lages, 2011).3
The capability view suggests that the effective deployment of such valuable and idiosyncratic
capabilities leads to competitive advantage and superior performance in the target markets
(Lages, Silva, & Styles,
2009; Zhou, Brown, Dev, & Agarwal, 2007). However, while capabilities evolve over time they can
also become ingrained “rigidities” in the orga- nizational fabric, and are likely to resist abrupt
changes (Leonard- Barton, 1992). This may introduce additional uncertainty and/or inertia in the
development of intended strategies, as decision-makers sense that both the fluidity and pace of
their realization may be affected (e.g., Morgan et al., 2012).
Performance feedback. Performance is the outcome of any purposive
activity. In addition to being the outcome of the exploitation of existing processes and allied
deployment of resources (Augier & Teece, 2009; March, 1994), current market performance is an
indicator of the success of recent past (i.e., mainly preceding year) strategic efforts to capture
value in the export venture's market. It is the short-term outcome of the interplay of firm-
specific factors, environmental conditions and strategic decisions (Lages, Jap, & Griffith, 2008)
and is typically (albeit not exclusively) depicted in a variety of numeric indicators which are
relatively easily monitored and analyzed. In general, product-market performance is monitored in
a fairly continuous fashion and is expected to influence strategy design (Pauwels & Hanssens,
2007).
Notwithstanding its centrality in business discourse, the role of per- formance as an antecedent in
strategy making is relatively under- researched (notable exceptions are Ferrier, 2001 and
Lages et al.,
2013). Interestingly, a number of studies have adopted change under

3. These marketing activities are in the control of the exporter, while pricing, brand and
communications management are likely shared with (or even undertaken by) distributors
(Bello & Gilliland, 1997)

performance decline as the setting to study strategic decision-making in management (D'Aveni &
MacMillan, 1990; Ocasio, 1995), marketing (Chng et al., 2015) and international marketing (Lages
et al., 2013) con- texts. Although these studies focus on a common phenomenon, they adopt
different lenses, focusing either on the firm (e.g., Lages et al.,
2013) or the individual manager (e.g., D'Aveni & MacMillan, 1990). While firm-level findings are
inconclusive, at the managerial-level, re- search suggests that performance declines result in more
rigid (albeit more change-prone), risk laden, and short-term decision-making (Chng et al.,
2015).
This is in line with performance-feedback theory concerning the role of performance in shaping
strategic intentions. Decision makers evalu- ate each dimension of performance using an aspiration
level—a thresh- old between success and failure—for their set goals. Aspiration levels are the result of
the adoption of different referents, such as historical perfor- mance, other firms' performance, and
level of perceived opportunity (Greve, 1998; Park, 2007; Shinkle, 2012). Performance outcomes
are viewed as a success or failure depending on the degree to which they reach pre-set
aspirations' levels. This triggers different types of search
—institutionalized, slack driven, and problemistic— and responses— continuation, reinforcing or
corrective— which bear different levels of risk (Greve, 2003, 2010; Kaplan & Norton, 1996). In line
with prospect theory, risk-taking is likely to be higher in “failure” situations, when de- cision-
makers (and allied business units) have little to lose (Kahneman
& Tversky, 1979).
Nonetheless, it is likely that decision-makers use multiple referents simultaneously (Eisenhardt,
1999; Schwenk, 1988). These may include their firm's other products and ventures, market
competition, past per- formance, pre-set objectives and/or industry trends. They also often use a
time-frame that is different from the one year typically followed and recorded for accounting
purposes by the firm. Thus, decision-makers re- tain some flexibility in terms of framing relative to
aspiration levels and use their resulting judgments to develop an estimate of risk associated with
the continuation or change of strategic alternatives (March & Shapira, 1992).4 In international
markets, the prevailing referent is the performance of major rivals in the relevant overseas market
(Ling-yee
& Ogunmokun, 2001; Morgan et al., 2004; Navarro, Acedo, Losada, & Ruzo, 2011). The risk for the
strategic decision-maker is that an export venture fails to meet performance aspirations at a later
stage, having pursued a certain strategy.

2.2. Deciding on the intended competitive strategy

In facing the task of designing proximate competitive strategy (typ- ically the one to be pursued in
the following year), export managers are likely to consider the current state and potential of the
firms capabilities (Luo, 2002; Yiu, Lau, & Bruton, 2007) but also be influenced by their re- cent
export market performance results (Lages & Montgomery, 2004; Lages et al., 2013). The current
state of capabilities and competences has ongoing resource commitments associated with it,
while export market performance results are likely to have an event-like impact i.e. they are likely
to be discussed and compared to those of other export ventures, and to the firm's performance in
the domestic market. While both of these factors are likely to play an important role in determining
the level of emphasis placed on different intended strategy elements (Srivastava, Shervani, &
Fahey, 1998; Verhoef & Leeflang, 2009), they represent two distinct influences on strategic
intentions. Managers have a relatively clear appreciation of the value of the different types of
capabilities for their firm and the ventures they are involved in, in comparison to similar
capability arrangements possessed by competi- tors. They are also aware of the venture's recent
performance results and the two are not necessarily congruent. However, the relative impor- tance
of these two factors is unclear.

4. Risk has probability and amount components i.e. probability of loss occurring and the
amount of what is at stake.

The capability view considers environmental influences only indi- rectly (e.g., competition serves
as referent for capabilities and venture performance) or as moderating the main effect
relationships between capabilities and performance outcomes (i.e., they influence the strength and
direction of the established relationships rather than directly affect- ing outcomes). Manufacturers
exporting to various overseas markets may occasionally be surprised by certain institutional or
market events (e.g., legislative change, unexpected election result, natural or human- made
disaster), but these are mostly unpredictable and relatively rare. On a routine basis, managers are
preoccupied with market competition, considering each overseas market in aggregate when they
deliberate on particularly attractive markets.

2.3. Capabilities and intended strategies

While the role of various capabilities can be important, it is the firm's ability to sense market needs
and respond to them that sits at the core of strategy design (Day, 1994, 2011). From this perspective,
the ability to generate market intelligence and develop innovative and/or customized products or
adapt product features to meet or pre-empt market needs is likely to generate organizational
responsiveness (Hult, Ketchen, & Slater, 2005) and offer grounds for a more differentiated
marketing pro- gram (Im & Workman, 2004; Slater, Hult, & Olson, 2007, 2010). This is widely
supported by the market orientation literature where research shows that informational and
product development capabilities work- ing separately and in combination contribute to
improved and more successful products (Im, Hussain, & Sengupta, 2008; Narver, Slater, &
MacLachlan, 2004). Strong customer relationship development capabil- ity may also be an
important avenue for market-based learning for in- dustrial products, as it offers access to export
market-related information that is often difficult to be obtain through secondary data or via
managers' intermittent physical exposure to the overseas busi- ness environment (Leonidou et al.,
2011; Yen & Barnes, 2011).5
Market information acquisition processes are likely to positively in-
fluence the export venture's intended strategy, irrespective of whether this involves placing
emphasis on activities aiming at cost efficiency or marketing differentiation (Julien &
Ramangalahy, 2003; Reimann, Schilke, & Thomas, 2010; Vorhies et al., 2009). Having an
understanding of what overseas customers want and what competition can and does offer, the
exporter can adjust the amount of effort that will be placed on both the venture's efficiency-
enhancing processes and on innovative or differentiated marketing activities (Murray, Gao, &
Kotabe, 2011; Zhou, Wu, & Barnes, 2012).
Additionally, export venture market information flows are also di- rected into and update the
product development processes with the in- tent of creating more relevant products (Langerak,
2001; Veldhuizen, Hultink, & Griffin, 2006). Product development capability can also sup- port the
intention to compete on the basis of both cost efficiency and marketing differentiation (Grant,
2010). Designing and developing products that are easy to manufacture utilizing prior experience
bolsters efficiency. When (loosely) coupled with embedded flexibility (e.g., modularity and
component independence), it can lead to efficient alter- ations and, therefore, competitively priced
offerings (Eisenhardt, Furr, & Bingham, 2010; Ling-Yee & Ogunmokun, 2008; Sanchez & Mahoney,
1996).
Therefore, we expect that:

H1. a: Marketing (informational and product development) capabilities will be positively associated with strategic
intentions concerning cost effi- ciency in the export markets. b: Marketing (informational and product

5. The ability to establish and nurture customer relationships has been shown to facili- tate
market information acquisition in a number of studies (Calantone, Cavusgil, & Zhao,
2002; Park, 2010; Rindfleisch & Moorman, 2001), therefore we include this in our model
but do not formally hypothesize about it.
development) capabilities will be positively associated with strategic inten- tions concerning marketing differentiation in
the export markets.

2.4. Current market performance and intended strategies

Performance feedback theory views current performance compared to aspirations as the main
driver of firms' strategic intentions (Greve,
2010; Lant, Milliken, & Batra, 1992). Aspirations are influenced by the current performance of the
export venture in comparison to that of ri- vals in the overseas market. Low market performance
vis-à-vis rivals is viewed as an issue of concern for the firm that triggers problemistic search for
change with an emphasis on previously neglected areas, ex- perimentation, and relatively riskier
strategic decisions (Chng et al.,
2015; Greve, 2003; Pauwels & Hanssens, 2007). However, at least in the short-term, firms with
relatively fixed resources that are already de- ployed across their businesses may exhibit “threat
rigidity” which trans- lates to decreased competitive aggressiveness (Audia & Greve, 2006).
As performance increases, the performance-feedback literature sug- gests that the following are
likely to happen. First, it becomes clear that the currently followed strategic approach is “well
received” in the market, supporting its continuation (Baum & Dahlin, 2007). Second, there will be a
tendency toward routine rigidity (Gilbert, 2005). Third, there is likely to be a slowdown in
explorative activities, as success tends to breed laxity (Ferrier, 2001; Gino & Pisano, 2011;
Levinthal & March, 1993; Miller & Chen, 1994). Fourth, loss averse decision-makers anchor on the
forth- coming need to become more efficient, as outperformance cannot be ex- pected to continue
ad infinitum (Lee, Beamish, Lee, & Park, 2009).
Following this line of reasoning in our export venture context, high venture performance suggests
that strategic intentions would reflect a continuation of the extant strategic approach. Such
performance in- creases signal that the current strategic path is the right “fit” for the company
and the venture. However, taking into account the resource and capability requirements needed
for the continuation of the current “successful” approach, strategic intentions are likely to be
affected dif- ferently. Specifically, efficiency intentions are likely to grow as current venture
performance increases as successful ventures appreciate the boundaries of the specific overseas
market and the allied growth poten- tial. Success in certain markets is also likely to fuel further
export expan- sion efforts (Gao et al., 2010; Lee et al., 2009). Incumbent firms can consider
efficiency (in terms of economies of learning) as a convenient path for existing ventures to generate
the necessary funds for export ex- pansion in other markets. Even when expansion is not part of the
prox- imate export venture plan, efficiency is the least demanding path in terms of resource and
capability needs, and therefore likely to be the intended one.
Marketing differentiation concerns the firm's specific export market offerings and refers to unique
marketing activities vis-à-vis competition and/or innovations in these activities. In the short-run
good perfor- mance in the export market is a signal that the firm has achieved a working
strategy-environment fit and this is likely to foster an increased commitment to the current path of
marketing differentiation. However, in the longer-term, for ongoing export ventures high
performance is likely to increase inertia and complacency (Gilbert, 2005; Kotter,
2008). Differentiation is demanding in terms of resources and innova- tion-related explorative
activities. Over time, it is likely that the differ- entiated marketing approach will progressively lose
its regenerative thrust and a decreasing emphasis in the venture's differentiation-devel- oping
efforts would be unsurprising. Thus, successful exporting manu- facturers can eventually be
expected to cease learning and be confined to routinely follow a specific differentiation approach
rendering them vulnerable to market changes and unable to maintain their momentum (Gino &
Pisano, 2011; Miller & Chen, 1994).
Would successful, albeit increasingly complacent differentiators de- velop an intention to switch to
a focus on efficiency (a strategic change) or would they continue to call marketing
differentiation what is
increasingly less innovative and less different (i.e. pursue less effectively marketing
differentiation)? In either case the current performance- marketing differentiation intentions
relationship is likely to be negative.

H2. a: Current market performance will be positively associated with stra- tegic intentions of cost efficiency in the
export markets. b: Current market performance will be negatively associated with strategic intentions of mar- keting
differentiation in the export markets.

2.5. The role of competitive intensity

Both the capability based view and performance feedback theory build on elements controlled by
the firm to generate intended strategy content. With competition being the most prominent and
typically con- tinuously monitored component of the external market, it is also likely to have a role
in the development of firms' strategic intentions. Accord- ingly, competition is implicitly
considered in the capability view and performance feedback theory as both capabilities and
performance are typically assessed with rivals as a key reference point. Nonetheless, it is direct
observation of competitive intensity that predicts how firms are likely to perform in overseas
markets (Brouthers, Nakos, Hadjimarcou, & Brouthers, 2009; Morgan et al., 2012; Murray et al.,
2011). From this perspective, competitive intensity is the degree of per-
ceived hostility in the environment stemming from competition (Pelham & Wilson, 1995) or
the effect that a firm has on other firms' chances for survival (Ang, 2008; Barnett, 1997).
Perceptions of low competitive intensity are likely to strengthen firms' inertial tendencies
(Ferrier, 2001). In less competitively intense export markets, information acquisition and product
development pro- cesses will tend to run more routinely and the firm's attention is likely to focus
on other export markets presenting greater challenges and ex- pansion potential. As performance
increases, so will the expectations of relatively easy—due to lack of competitive threat—rent
garnering, lead- ing to an attenuation of the drive to actively pursue efficiency and, to a greater
extent, the generally more demanding differentiation path.
In highly competitive export markets, the level of uncertainty of strategic moves, product
introductions and customer relationship ef- forts of incumbent firms increases, requiring greater
additional infor- mation and information processing (Daft, Sormunen, & Parks, 1988). Thus, firms
may be expected to draw more heavily on their informa- tional capabilities and try to exploit
these to a greater extent both in their efficiency and marketing differentiation endeavors
(Eisenhardt et al., 2010). Further, it is likely that the positive link between current per- formance
and intended strategies will become stronger under the threat arising from the increasing strength
and/or abundance of rival offerings. Under high levels of competition, both high and low performing
compa- nies are likely to realize that their performance results are likely to be negatively affected
unless they intensify their efforts, placing greater emphasis on both efficiency and marketing
differentiation activities. More specifically, high performers may have to overcome complacency
and make serious differentiating efforts, while low performers are likely to do the same but may also
consider exiting the export market.

H3. a: The positive effect of informational capabilities on strategic in- tentions of cost efficiency
will be stronger when competitive intensity is high rather than low. b: The positive effect of
informational capabili- ties on strategic intentions of marketing differentiation will be stronger
when competitive intensity is high rather than low.

H4. a: The positive effect of current market performance on strategic intentions of cost efficiency
will be stronger when competitive intensity is high rather than low. b: Low (high) levels of
competitive intensity will accentuate (appease) the negative effect of current performance on
marketing differentiation intentions.

However, intensity of competition could also have a more direct ef- fect on strategic intentions as
a response to current marketplace conditions. Past research has found little evidence of
considered strate- gic competitive reasoning in firms (Montgomery, Moore, & Urbany,
2005), but ample support for firm reactions to rivals' actions (Clark & Montgomery, 1996; Smith et
al., 2001), which could approximate inten- tions as responses to competitively intensive markets.
However, there is no consensus regarding the type or likely direction of such reactions. Here,
increased competitive intensity in the overseas market is likely to act as a stress factor for the
exporting firm, although it is unlikely that it will take the firm by surprise. Their experience with the
domestic market competitive situation and in different export markets will act as a buffer and
increased competitive intensity will alert, but not unnerve them. In such situations, firms may be
expected to protect their gains and show reduced appetite for risk-taking, increasing their drive for
ex- ploitation rather than exploration, and increase their pursuit of effi- ciency. In a related
vein, export ventures are likely to consider intensifying (albeit conservatively rather than
experimentally) their marketing differentiation efforts to strengthen or at least maintain their
market position. This suggests that:

H5. a: Competitive intensity in the overseas market will be positively associated with strategic
intentions of pursuing cost efficiency in that market. b: Competitive intensity in the overseas
market will be posi- tively associated with strategic intentions of pursuing marketing differ-
entiation in that market.

3. Methods

3.1. Exploratory interviews

Semi-structured interviews were conducted with executives from nine UK based manufacturers
with different levels of exporting involve- ment. The executives were asked to select (at least) one
successful and one less successful international venture and to explain how they typi- cally went
about deciding on and implementing the future strategy that their firm would follow in their
export markets. Their descriptions re- vealed a variety of approaches to export venture strategy
making. Exporting firms review their targeting and positioning in their overseas markets
intermittently, often in cooperation with the distributor. Once decisions on the (potentially)
attractive areas (geographical areas or in- dustry segments) within an overseas market are made,
these are likely to hold for long periods. On a more continuous basis, the strategic em- phasis is on
strategy aspects that address the chosen market area needs and respond to or pre-empt
competitive moves.
Managers did not always have set ideas on the effectiveness of their strategies. They were often
unsure whether the approach they had adopted was optimal, and they were occasionally
considering alterna- tive strategic routes in their particular markets. A clear tendency was to rely
on distributor feedback for cues on the market situation and ap- propriate strategic actions.
Interviewees described an array of such ac- tions, which were used subsequently to describe the
main competitive strategy dimensions.
There was a notable scarcity of systematic or explicit association of idiosyncratic firm factors with
the intended strategies, although man- agers acknowledged the importance of such links when
probed by the interviewer. When discussing underperforming ventures, interviewees frequently
considered less obvious structural or situational market fac- tors for cues on potential causes and
appropriate response plans. An al- lied strong tendency was the mention of the distributor's role
as key contributory factor in ventures deemed satisfactory or successful.

3.2. Data collection

An initial attempt to build secondary data in the design was unsuc- cessful, as data at the export
venture level were not publicly available and very often unavailable even at the company level.
Many exporters
only kept records of their sales at more aggregate levels (e.g., regions or units exported). We
therefore use primary data sources. Initial details of
1093 British manufacturers of mainly industrial goods (one third of these could be of dual use,
that is, as industrial and consumer goods) from a cross-section of industries with international
involvement were selected from the Dun & Bradstreet directory. To ensure the directory's
currency, accuracy and comprehensiveness each company was contacted by telephone to check its
eligibility and identify the most appropriate in- dividual to whom the questionnaire should be
addressed. This process left 887 active exporters that were targeted in the mail survey. A total of
312 usable responses were obtained in two waves yielding a response rate of 35%. Managers were
asked to select an export venture in which they were personally involved, of which they had good
knowledge, and refer to that venture when answering the survey questions. Of the se- lected
ventures 58% were active up to 5 years, about 25% for 6–10 years,
13.4% were operating for 11–20 years and just over 3% for over
20 years. Half of the participating firms (50.48%) were exporting to EU countries, 13.50% to the US
and Canada, 3.22% to Japan, 4.18% to other de- veloped countries, 3.54% to Ex-Eastern European
countries 16.72% to de- veloping countries and 7.40% to newly industrialized countries. To test for
non-response bias the responding firms of the two mailshots were com- pared on number of
employees, years exporting and number of export markets they were operating in. The t-tests
revealed no significant differ- ences between the two groups.

3.3. Measures

To measure the main model constructs, adaptations of existing scales from Morgan et al. (2004)
were used, all measured with 7-point Likert scales. Specifically, three types of marketing capabilities
were measured: customer relationship capabilities, informational capabilities and product development
capabilities. Respondents were asked to compare their firm with rivals in the specific venture
market in terms of various aspects reflecting the above capabilities. Examples are: identification of
prospec- tive customers, acquiring export market related information, and moni- toring
competitive products in the export market for informational capabilities; understanding
overseas customer requirements, and estab- lishing and maintaining close customer relationships
for informational capabilities; and, development of new products for our export customers and
adoption of new methods and ideas in the manufacturing process for product development
capabilities.
Current market performance. In line with Katsikeas, Morgan,
Leonidou, and Hult's (2016) marketing performance assessment guide- lines, the focus of this
construct is product-market outcomes with com- petition as referent. It was measured with three
items: market share and sales volume over the past 12 months and revenue from products
introduced in the last 3 years compared to the main competitors.
For intended cost efficiency strategy, respondents were asked to indi-
cate the level of emphasis they intended to place in future on: improv- ing production/operating
efficiency, maintaining experienced and trained personnel, and adopting new/innovative
manufacturing methods/technologies. For intended marketing differentiation strategy, the question
gauged the level of emphasis that they intended to place in future on: improving/maintaining
advertising and promotions; building brand awareness in the overseas market; and, adopting
new/ innovative marketing methods and techniques. Both scales were an- chored “no emphasis
at all” and “great emphasis”.
For competitive intensity, the Jaworski and Kohli (1993) scale was
used. The items of this scale as well as those of the other scales alongside their contribution to the
measurement of the relevant constructs are provided in Table 2.

3.4. Scale validation

Scale reliability was assessed using Cronbach's alpha coefficients. All coefficients ranged from 0.73
for strategic intentions of efficiency to 0.87 for informational capabilities and current market
performance. Com- posite reliabilities are in parentheses. Subsequently, confirmatory factor
analysis (CFA) was used to assess each scale's convergent and discrimi- nant validity using one
measurement model including all main model constructs. The results presented in Table 2 reveal
acceptable levels of model fit and all factor loadings are large and significant at the 0.01 level,
providing evidence of convergent validity. To assess discriminant validity, AVEs were compared
with the shared variance (squared corre- lation) between pairs of constructs. The AVE was higher
than the related shared variance in all cases, indicating discriminant validity. The square roots of the
AVEs of the study constructs are on the diagonal in Table 1.
With the threat of common method bias and the allied social desir- ability bias in cross-sectional
studies, a number of precautionary mea- sures were taken. First, after being reassured of
anonymity and data confidentiality, respondents were probed to select an export venture in-
dependently of its degree of success. Second, in the introduction to per- tinent questions,
participants' attention was explicitly drawn to adopting their main rivals in the specific
venture market as the frame of reference in their assessments of their firms' capabilities. Third,
ques- tions relating to strategic intentions, those relating to market perfor- mance and those
capturing marketing capabilities were well separated in the questionnaire. To test a
posteriori whether common method bias is a potential threat to data analysis and interpretation
Harmon's one-factor test was adopted. An unconstrained EFA resulted in a six-factor solution
explaining 68.51% of the data variance, where the largest single factor contribution was just
13.55% of the explained variance. We also used a marker variable, “level of industrialization of the
target country”, which had very small and insignificant correlations with all the study variables, and
followed the approach recommended by Lindell and Whitney (2001). Controlling for this marker
variable, we calculated partial correlations between all study constructs. The resulting pattern
was very similar to the one reported in Table 1. We also introduced a common method factor and
cross-loaded it on all items of the model constructs. The significance of the model paths was
unaffected. The results from the application of all these methods suggest that common method
bias is not an issue of concern in this study.

4. Findings

4.1. Main model

In Table 3, the “All observations” column contains the structural model results. The model has
an acceptable fit: χ2(265) = 474.21, p b 001; χ2/df = 1.79; NNFI = 0.95; CFI = 0.96;
RMSEA = 0.05 (0.043, 0.058). In terms of the hypothesized paths, both informational
(b = 0.18, t-value = 2.33) and product development capabilities (b = 0.15, t-value = 1.88)
have a positive and significant impact on strategic intentions of efficiency and similar patterns are
observed for strategic intentions of marketing differentiation with (b = 0.67, t- value = 3.36) for
informational and (b = 0.18, t-value = 2.26) for prod- uct development capabilities. These results
support H1a and H1b. The findings for the effect of market performance on strategic intentions
are somewhat different. Current market performance has a positive and significant effect on
efficiency intentions (b = 0.13, t-value =
1.83) supporting hypothesis H2a, and a negative, but non-significant ef- fect on marketing
differentiation intentions (b = −0.01, t- value = −0.10); indicating lack of support for
hypothesis H2b. The two non-hypothesized paths from customer relationship capability to
informational capability (b = 0.73, t-value = 8.99) and from informa- tional capability to product
development capability (b = 0.38, t- value = 5.18) are both significant. The results on the role of
competitive intensity are discussed in the following Section 4.2. The explained vari- ances for
efficiency and differentiation intentions are 12% and 14% respectively.

4.1.1. Control variables

While there is no evidence on an influential role of demographic or other substantive variables on
export intentions in the literature, logic suggests that the size of the firm might affect the choice of
competitive strategy. Small companies are more likely to favor differentiation, as they are too
small to reap efficiency benefits. To test the existence and potential effect of this on our
hypothesis testing results, the main model was re-run with the number of employees included as
an addi- tional variable. The model fit was worse and while all main model paths retained their
power and significance the added size paths were non-significant; (b = −0.03, t-value = −0.44)
for the path to intended efficiency and (b = 0.08, t-value = 1.12) for the path to marketing
differentiation.
Another potential control could be the number of markets the man- ufacturer exported to, as this
could also imply potential mimetic effects on the choice of strategy in the specific venture market.
The model was run again with both these control variables included and allowed to cor- relate with
each other. Again, all paths retained their original power and significance, while the added paths
were non-significant; (b = −0.02, t-value = −0.27 and b = −0.05, t-value = −0.72) for the
paths from number of employees and number of export markets to intended efficiency and (b =
0.08, t-value = 1.13 and b = −0.02, t- value = −0.21) for the respective paths to
marketing differentiation. As these tests were largely speculative and intended only to rule out al-
ternative explanations, they are not included in further analyses.

Table 1
Descriptives, correlations & Average Variance Extracted of the main constructs.

Construct (2) (3) (4) (5) (6) (7) (8) (9)

(1)
(1) Customer0.78
relationship capability

(2) Informational0.62⁎⁎ 0.75

capability

(3) Product0.30⁎⁎ 0.35⁎⁎ 0.79

development capability

(4) Current market0.37⁎⁎ 0.37⁎⁎ 0.35⁎⁎ 0.84

performance

(5) Intended cost0.14⁎ 0.24⁎⁎ 0.27⁎⁎ 0.20⁎⁎ 0.71

efficiency

(6) Intended marketing0.23⁎⁎ 0.26⁎⁎ 0.23⁎⁎ 0.15⁎⁎ 0.17⁎⁎ 0.73

differentiation

(7) Competitive−0.00 −0.07 −0.02 −0.07 0.08 0.02 0.67

intensity
 Controls

(8) Number of0.05 0.00 −0.02 0.10 −0.04 0.05 0.02 –

employees

(9) Number of Export0.24⁎⁎ 0.08 −0.03 0.20⁎⁎ −0.03 0.05 0.02 0.19⁎⁎ –
markets
Mean 5.45 4.49 4.95 4.77 5.24 4.26 4.28 203.47 28.26
Standard 0.97 1.05 1.08 1.26 1.20 1.40 1.22 211.76 27.57
Square root
deviation of Average
Variance Extracted
(AVE) on the diagonal.
⁎⁎ p b 0.01.
⁎ p b 0.05.
Table 2
Confirmatory factor analysis results.

Construct Factor loading

(t-value)
α (Composite reliability)
competitive intensity were in line with the hypotheses, the differences in chi-squared were not
significant (Δχ2 = 0.23 for H3a; Δχ2 = −0.013 for H3b; and Δχ2 = 0.62 for H4a
respectively).
To test the hypotheses concerning the role of competitive intensity
Customer relationship capabilityb0.81 (0.82)
as a potential direct determinant of the intended competitive strategies
Understanding overseas customer requirements
Establishing & maintaining close customer relationships
Establishing & maintaining close distributor relationships
0.73 (–a) 0.80 (11.68) 0.79 (11.58)
the respective paths of the main model (see all observations column in
Table 3) were examined. The competitive intensity path to the intended differentiation was non-
significant (b = 0.07, t-value = 0.93) but the path to intended efficiency was significant at 5% (b
= 0.15; t-value =
1.96). Accordingly, the study's working model is presented in Fig. 2.
b
Informational capability 0.87 (0.87) Identification of prospective customers 0.69 (– ) a
Capturing important market information 0.72 (10.76) Acquiring export market related
information 0.84 (12.38)
Making contacts in the export market 0.83 (12.25)

4.3. Accounting for current market position

Given the relatively small impact of current performance on firm
Monitoring competitive products in the export market
Product development capability
Development of new products for our export customers
Improvement/modification of existing products
Adoption of new methods/ideas in manufacturing process
0.66 (9.95) 0.82 (–a) 0.85 (11.05) 0.71 (7.86) 0.75 (0.84)

strategic intentions for export ventures observed, we conducted addi-

tional analyses to provide further insights. Specifically, we ran the main model separately for
ventures that had already achieved a cost ef- ficiency position and those which had achieved a
differentiated position in the market with their offerings. To calculate the achievement of cur- rent
market position of cost efficiency, firms had been asked how their business offering currently
compares in the market in terms of “produc-
tion cost per unit”, “cost of goods sold”, and “selling price to end-cus-
Current market performance 0.87 (0.88)
Sales revenue from products introduced in past 3 years
Market share over past 12 months 0.95 (13.11)
Sales volume over past 12 months 0.90 (13.02)
Intended cost efficiencyc 0.73
Improving production/operating 0.74 (–a) (0.75)
efficiency
Maintaining experienced/trained 0.80 (9.01)
personnel
Adopting innovative manufacturing 0.58 (8.07)

methods/technologies
Intended marketing differentiationc
Improving/maintaining advertising &
promotions
Building brand awareness/identification in the overseas markets
Adopting innovative marketing
methods/techniques
0.67 (–a) 0.70 (–a) 0.74 (9.52) 0.75 (9.54) 0.78 (0.77)

tomers”. The average of these questions represented current market

position of cost efficiency. In a similar fashion, current market position of differentiation was the
average of similar questions on “product qual- ity”, “design and style”, and “packaging”. The main
model was then run for those ventures whose score in current market position of cost effi- ciency
was above the median and repeated for ventures that had an above the median current market
position of differentiation.
As seen in Table 3, in the respectively annotated columns, a common pattern emerges, almost
regardless of the achieved position. Informa- tional capability is positively related with
differentiation intentions (b = 0.40; t-value = 3.59) and (b = 0.33; t-value = 2.89) for firms
that have achieved efficiency and differentiation positions respectively. The path from product
development capability to cost efficiency
Competitive intensity 0.80 (0.80) Competition in our industry is cut-throat 0.69 (– ) a
intentions is positive both for firms that have achieved efficiency
(b = 0.21; t-value = 1.93) and those that had achieved a differentiation
There are many promotion wars in our industry
Anything one competitor can offer, others can match readily
Price competition is a hallmark in our industry
One hears of a new competitive move
0.73 (9.73) 0.57 (7.94) 0.66 (8.96) 0.69 (9.30)
position (b = 0.42; t-value = 3.34). However, the strength of the effects
exhibited is more pronounced in cases where there is a change in the type of intentions (i.e.,
from a differentiated position to efficiency intentions). The same effects are stronger for the firms
holding one or, indeed, both market positions in comparison to those for the entire sample.
 almost every day

Fit indices.
χ2 = 384.97; p b 0.001; NNFI = 0.97; CFI = 0.97; RMSEA = 0.04 (0.033,0.050).
(254)

a t-Values for these parameters were fixed for scaling purposes.

b In comparison to main competitors in the venture's market, anchored ‘much worse’,
‘much better’.
c Seven-point Likert scales, anchored ‘no emphasis at all’, ‘great emphasis’.
d Seven-point Likert scales, anchored ‘strongly disagree’, ‘strongly agree’.

4.2. The role of competitive intensity

In examining the role of competitive intensity two different perspec- tives have to be
accommodated in the analyses: moderation and direct effects. With regard to moderation,
multiple group analysis was con- ducted for the main model (without competitive intensity) with
groups formed by observations exhibiting high and low levels of competitive intensity. As shown
in Table 4, results revealed a significantly different effect of competitive intensity only on the path
from current market performance to strategic intentions of marketing differentiation (Hy-
pothesis H4b) (Δχ2 = −2.82). This path is negative for low levels of competitive intensity (b =
−0.22, t-value = −2.41) and positive but non-significant for high levels of competitive intensity
(b = 0.12, t- value = 1.25). Thus, hypotheses H3a, b and H4a were not supported. Al- though the
values of the estimates for low and high levels of Current market performance positively
influences efficiency inten- tions both for firms that have achieved efficiency (b = 0.17; t-
value = 1.78) and differentiation (b = 0.24; t-value = 2.48) positions, while the effect is even
stronger for those firms that have achieved both positions (b = 0.30; t-value = 2.48). However, as
in the “All Observa- tions” sample, there is no impact of market performance on differentia- tion
intentions for any of the efficiency and differentiation subsamples (b = −0.10; t-value =
−1.16 and b = 0.06; t-value = 0.67 respectively).
Finally, competitive intensity, which had a significant direct effect on cost efficiency in the entire
sample, now has a direct effect on neither ef- ficiency nor differentiation independent of the
currently achieved mar- ket position. Observing the strength of the effects, one can see a clear
trend for the greater effect of competitive intensity on efficiency inten- tions in all subsamples,
with the exception of the one which included ventures with no established position. In this last
subsample greater competitive intensity appears to trigger marketing differentiation intentions.

4.4. Studying the “extremes”

The above samples are not homogenous in terms of strategic pos- ture; they both comprise
ventures that have also achieved.
Table 3
Structural model results.

The “opposite” strategic position to some extent. In fact, 68 ventures which had achieved both
efficiency and differentiation positions are included in both samples of n = 157 and n = 144. A
further 79 ventures could not claim that they had achieved either of the two positions. The
study model was subsequently re-run for these two “extreme” (albeit sizeable) groups of
ventures and the results are displayed in the last two columns of Table 3. The results for the
“efficiency and differentia- tion” sample are in line with and further reinforce those of the differen-
tiation sample, with the exception of the non-significant path from informational to product
development capability (b = 0.24; t- value = 1.59). As for the “no established position” sample,
the only sig- nificant paths are those between capabilities.
All analyses were carried out using EQS 6.1. This multivariate analysis package can
accommodate small samples. However, there is no clear test as to how small the sample size can
be for a given model. The suggestion followed here (Bentler, 2006; Satorra, 2003) was to test
alternative, logically acceptable, albeit not theoretically anchored models; several of these
models were rejected suggesting that the sample size was sufficient (i.e., there is enough power
to reject alterna- tive models).

4.5. Alternative performance measures

Recent reviews on performance measurement outline the need for multiple performance
measures across business disciplines (Hult et al.,2005; Katsikeas et al., 2016) and emphasize the
potentially dissimilar contribution of different measures in the interpretation of performance
outcomes (Richard, Devinney, Yip, & Johnson, 2009). Accordingly, to

Table 4
Moderating role of competitive intensity.

Path Hypothesis Estimate Lo (t-Estimate Hi (t-Δχ2b

Informational capability → intendedH3a (no0.19 (1.64)
value) a 0.18 (1.63)
value) a 0.10
cost efficiency support)
Informational capability → intendedH3b (no0.26 (2.22) 0.29 (2.62) −0.01
marketing differentiation support)
Current market performance →H4a (no−0.07 (−0.74) 0.26 (2.64) 0.83
intended cost efficiency support)
Current market performance →H4b (no−0.13 (−1.27) 0.07 (0.07) 0.63
intended
The marketing
Δχ2 values differentiation
compare a constrainedsupport)
model (the beta coefficient between the Hi and Lo
groups is set to be equal) with an unconstrained model (the beta coefficient between the Hi
and Lo groups is unconstrained).
a Paths with t-values N1.96 significant (p b 0.05), N1.66 significant (p b 0.10), (two-tailed
test).
b Δχ2 values over 3.84 are significant at p = 0.05, N2.71 are significant at p = 0.10.
The moderating role of competitive intensity with overall performance assessment sures
respectively).
Path Hypothesis Estimate
Lo(t-value)a
Estimate
Hi(t-value)aΔχ2b

5. Discussion and implications

Informational
capability → intended cost efficiency
Informational
capability → intended marketing differentiation
Overall performance assessment → intended cost efficiency
Overall performance assessment → intended marketing differentiation
H3a (no support) H3b (no support) H4a (no support) H4b(support)
0.14 (1.16) 0.30 (2.59) 0.07 (0.73) −0.23 (−2.43)
0.21 (1.91) 0.30 (2.78) 0.11 (0.89) −0.02 (−0.26)
−0.06 0.09 0.01 2.42
Strategies are designed to exploit assets and capabilities controlled by the firm to effectively
position value offerings in target markets in ways that achieve above average economic rents.
These rents subse- quently become part of the assortment of firm resources and capabili- ties that
are being deployed by the strategy to continuously position offerings into changing, value-seeking
markets. Here, we focus on the initial part of the ongoing strategy process and address basic
questions on strategy formation: How do firms decide on which strategy to pur- sue? What drives
firms' decisions to pursue a specific strategy? Drawing from the capability based view and the
theory of learning from perfor- mance feedback, this study provides insights into the simultaneous
im-
 The direct effect of competitive
A. Kaleka, N.A.intensity with Management
Morgan Industrial Marketing different measures of performance Path
78 (2019)
Table
108–121
(b = 0.15; t-value = 1.97 for the overall and objectives fulfilment mea-
a
Estimate (t-value) n = 312
5

pact of two main theorized types of influence, namely, marketing capabilities and current
market performance on exporting manufac-

Overall
Objectives'turers' strategic intentions. In addition, the strategy
fulfilment literature
performa (B) the considers
intensity of competition in the target market
(A) nce minder of the need
as a continuous re-for additional strategic efforts. Hence,
Custo 0.74 we also plore
0.74 ex- the role that competitive intensity plays in
mer (9.02) (8.98) the shaping of firms'
relatio
nship
capabi
infor strategic intentions in their overseas markets.
lity → 0.38
matio 0.38
nal (5.20) (5.18)
capabi
lity development capability
Infor Informational capability → intended cost efficiency
matio Product development capability → intended cost efficiency
nal Informational capability → intended marketing differentiation
capabi Product development capability → intended marketing differentiation
lity →Overall performance assessment → intended cost efficiency
produ Overall performance assessment → intended marketing differentiation
ct Objectives' fulfilment → intended cost efficiency
Objectives' fulfilment → intended marketing differentiation
Competitive intensity → intended cost efficiency
Competitive intensity → intended marketing differentiation fit indices.

0.20 (2.50) 0.19 (2.48) 0.17 (2.14) 0.17 (2.13) 0.28 (3.64) 0.27 (3.48) 0.19 (2.39) 0.18
(2.31) 0.09 (1.29) −0.01 (−1.42) 0.09 (1.30) −0.05 (−0.70) 0.15 (2.04) 0.15 (1.97) 0.06
(0.79) 0.06 (0.89)

5.1. The role of marketing capabilities

We find that marketing capabilities strongly influence exporting manufacturers' intentions to

place emphasis on both cost efficiency and marketing differentiation. The ability to develop and
maintain good customer relationships facilitates the acquisition of valuable mar- ket information.
This informational capability directly shapes both types of strategic intentions, while it also works
with product development capability to achieve the same (Kaleka, 2011; Morgan, Vorhies, &
Mason, 2009; Zhou et al., 2012). As the development of such capabilities requires time and directed
effort, the results also point to the relative predictive strength of such long-term adaptable factors
over the more “transitory” market performance on firms' strategic intentions.
Interestingly, the “intentional landscape” changes for firms that al- ready hold a competitive
position of efficiency or differentiation (or both) in their overseas markets. In these cases, a
general pattern emerges: informational capability is strongly associated with marketing
differentiation, while product development capability drives efficiency
2(A) χ
(243)
(B) χ2 = 439.85, p b 0.001; NNFI = 0.90; CFI = 0.91; RMSEA = 0.05 (0.043,0.059).
intentions. First, companies that have developed a strong informational capability are more likely to
act on the market information they acquire
 The (221) = 411.53, p b 0.001; NNFI = 0.91; CFI = 0.91; RMSEA = 0.05 (0.045,0.060.
Δχ2 values compare a constrained model (the beta coefficient between the Hi and Lo
and be oriented toward differentiation independently of their previous
groups is set to be equal) with an unconstrained model (the beta coefficient between the
Hi and Lo groups is unconstrained).
a Paths with t-values N1.96 significant (p b 0.05), N1.66 significant (p b 0.10), (two- tailed
test).
b Δχ2 values over 3.84 significant at p = 0.05, N2.71 significant at p = 0.10, N1.64 sig-
nificant at p = 0.20.
check the robustness of our model and derive meaningful implications, two alternative
performance measures were employed: the extent of achievement of past year's objectives for the venture;
and, the overall as- sessment of the venture's performance over the past three years. These measures were
entered in the study model separately and combined, as a latent factor; the results for the overall
performance assessment (past 3 years) are displayed on Table 5 for the direct effects structural
model and the moderation analyses using the full sample. It is clear that there are differences in
the performance–intended strategies paths when performance is measured both as extent of
objectives achievement and as a latent factor. While, as before, performance is not associated
with differentiation intentions (and occasionally touches upon avoidance of such intentions), now,
it also does not drive effi- ciency intentions. Competitive intensity continues to have a significant
effect on efficiency intentions only (b = 0.15; t-value = 2.04) and position. A continuous and
plentiful flow of valuable market informa- tion appears to act as an energizing exploratory force
driving already differentiated firms to further refine their offerings' unique features or devise
novel ways of differentiation. More notably, it also drives effi- cient firms to invest in developing
differentiated offerings.
Secondly, firms with a strong product development capability tend to actively pursue efficiency.
Here, product development capability ap- pears to act as an enabler of strategic change.
Differentiated exporters may see a shift to efficiency as a more promising avenue toward im-
proving future performance in certain overseas markets where further differentiation may make
little or no sense. As this new direction would require substantial cost reductions by a firm that
has historically invested in developing expensive, specialized, and customized prod- ucts, flexible
and adaptable product development processes are likely to be critical in nurturing efficiency
intentions (Johnson, Lee, Saini, & Grohmann, 2003; Sanchez, 2007). In a parallel vein, efficient
firms possessing a strong product development capability demonstrate an ex- plorative tendency
toward marketing differentiation. These companies may be in an enviable position as they appear
to have managed to suc- cessfully combine efficiency and innovation, and could be on a path to
become ambidextrous (Hsu, Lien, & Chen, 2013; Raisch & Birkinshaw,2008). Their intentions to
pursue differentiation can be seen as a further confirmation and a step toward this direction.

5.2. The role of current performance

Exporting manufacturers seem to adopt a long-term stance in plan- ning their overseas activities.
Overall, current market performance—i.e. the most recent past performance, does not appear to
play a key role in driving strategic intentions. It does not influence marketing differentia- tion
intentions, and although it does have significant impact on effi- ciency intentions, this is less
pronounced when the overall performance and objectives fulfilment are adopted as alternative
as- sessments. This finding corroborates Miller and Chen (1994), where re- cent past performance
was unrelated to their “competitive inertia” construct—the firm's level of activity in response to
competitive chal- lenges—for strategic actions in US airline industry. One explanation may be
that competitive strategy decisions do not necessarily work at the individual venture level. Firms
may look at performance in a group of overseas markets to decide the strategic dimensions
they should emphasize. An alternative interpretation is that short-term mar- ket performance
results may be noted, but be viewed as episodic rather than symptomatic. Alternatively, the
development of strategic inten- tions in export ventures may be an instance of institutionalized
search (Greve, 2003) which works as a background process not readily responding to short-
term performance feedback.
Nonetheless, the finer-grained post-hoc analysis of this study's data revealed that while the above
hold for the lack of current performance- differentiation intentions effect, the respective market
performance-ef- ficiency intentions effect is significant for ventures that had already achieved
one or both of the rival strategic directions. It was only when they had achieved neither (i.e.
neither efficiency nor differentiation) that current performance played no role in their efficiency
(or indeed differentiation) intentions. These ventures with no established current position appear
to only rely on their firm's capabilities to guide their strategic intentions. In an attempt to obtain
additional clues, these ventures' current performance was plotted alongside achieved effi-
ciency and differentiation levels. In the majority of cases, they had re- ported faring better in
achieving differentiation over efficiency, but there was no clear pattern of their current
performance distribution. Given the number of these cases and the above observations, the ques-
tion of whether strategic planning always matters remains open.
Interestingly, for companies that have achieved a strong market po- sition—cost efficiency or
differentiation, or both—good market perfor- mance triggers efficiency intentions. These firms
follow a clear strategic path which has been proven successful. In line with prospect theory, as
long as they have not accumulated excessive slack, they are likely to be risk averse (March &
Shapira, 1992), prone to protect their gains and invest in cost efficiency rather than in the more
challenging marketing differentiation.

5.3. Competitive intensity

Recent work on competitive strategy stresses the primacy of firm- controlled factors over those of
the external environment in driving per- formance outcomes (Beleska-Spasova et al., 2012;
Brouthers et al.,
2009; Morgan et al., 2004). However, the direct positive effect of com- petitive intensity on
intended efficiency in our model —reflected in the revised Fig. 2— is in line with the strategic
positioning view (Cavusgil & Zou, 1994; O'Cass & Julian, 2003). We interpret this finding as
supportive of the need for a synthesis of the capability and strategic positioning views, situated in
the exporting context. This seems to be a straightforward, rational approach in free-market
environments, where competition is plentiful and competitive advantages quickly erode.
From capabilities and current performance to the formation of stra- tegic intentions, there is little
room for a moderating role of competitive intensity. Competitive intensity in the overseas markets
matters most in appeasing the negative relationship of current market performance with
marketing differentiation intentions when an overall performance assessment is adopted. In that
light, our results suggest a rethink of the
Fig. 2. The working model (significant paths only).
role of competition and, indeed, that of broader market and industry factors during the initial
stages in the development of strategic direction.

5.4. Managerial implications

U.K. exporters are clearly conservative in their strategic ap- proach to overseas activities, at
least in their short term planning. With efficiency and differentiation strategic intentions
analogous to exploitation and exploration, these firms show a clear prefer- ence for
exploitation over exploration and this appears to be strengthened when they have already
achieved a clear strategic position in the overseas market—efficiency or differentiation.
Greater insights are gained by examining the role of marketing ca- pabilities vis-à-vis that of
market performance. In an attempt to break the “circle of efficiency” observed, managers
should look into nurturing those elements that contribute to a more explor- ative,
differentiation approach in terms of information gathering and product development
capability. Firms that are up to date with developments in the overseas markets are
certainly keener to pursue differentiation avenues for their products.
The above have important resource and tactical implications. As the market sensing ability is of
utmost importance in shaping management's perceptions and the firm's strategic stance,
exporting manufacturers have to carefully manage the development and refine- ment of this
capability to devise relevant and effective differentiation avenues, especially in psychologically
distant markets (Yang et al.,
2012). For some this may imply ceasing to rely mainly on distributors for market information,
while for others it could mean conducting more systematic market analysis and establishing
seamless transmis- sion of electronic data to and from the distributor for real time customer
response analysis. The same applies to product development capability, which also plays an overall
differentiation-enabling role.
Our results also have predictive value for managers. Firms with less established offerings, in
pursuit of a specific market position may be advised that once they achieve such a position,
market per- formance improvements are likely to give rise to (even stronger) ef- ficiency
intentions. Managers should prepare internally for this. This advice is even more valuable for
companies committed to offering clearly differentiated offerings in their overseas markets.
Compared to efficiency-seeking, differentiation requires different resource ac- quisition and
development, sacrificing economy for specialization, design, and market responsiveness (e.g.,
product and production de- sign, marketing expenditure, development of customer relation-
ships). If these companies engage in differentiation-related activities knowing that soon they
are likely to be concerned with ef- ficiency, they may be able to make resource investment and
deploy- ment choices that provide for the former without rendering the latter unachievable.
As many companies see the development of their capabilities as real options, it may also make
sense to rethink their investment in platforms traditionally aimed at pre-empting changes in the
external environment and become relatively more inward-looking (Kogut & Kulatilaka, 2001).
Here, the suggestion is that such options could ac- commodate the likely shifts in strategic
direction and be designed to minimize switching costs from differentiation to efficiency enabling
platforms. Finally, the knowledge that intense competition in overseas markets typically triggers
efficiency intentions may inspire managers that ac- tively seek differentiation in their offerings
to resist the efficiency trend when competition intensifies. Instead, they can carefully assess the
likely viability of new rivals and competitive offerings vis-a-vis their own, and consider
persevering in their efforts to identify novel dif- ferentiation avenues potentially reaping substantial
future benefits (cf. Goddard & Eccles, 2012).

6. Limitations and future research

The research model was tested with cross-sectional survey data. Hence, we assess the firm's
intentions with regard to the examined ven- tures as perceived by export managers at that
specific point in time. However, these intentions could change eventually should other en-
vironmental factors become prominent between the intentions we capture and the subsequent
formal endorsement of the intentions by the exporting firm. Such environmental factors could be
external, such as changes in institutional or channel arrangements and perceived
effectiveness of the distributor, or internal such as the un- expected departure of the
experienced export manager. A longitudi- nal design could shed additional light on the
existence, pattern and frequency of such changes and their impact on the intentions-formal
endorsement link.
It is also possible that firms and managers, either explicitly or tacitly, allow some time for a certain
competitive strategy to prove its effective- ness. Thus, it may be useful to consider the stage in the
deployment of the specific competitive strategy when strategic intentions are exam- ined. For
example, it may be that there will be a greater tendency to seek change of strategic approach in
light of decreasing performance when this approach has been followed for a relatively long time
than when it was introduced recently.
Focusing on the structure of our conceptualization, while it offers valuable insights, the
examination of additional factors could further enhance our understanding of the shaping of
strategic intentions. For example, at the individual manager level, psychic distance (Durand,
Turkina, & Robson, 2016; Griffith & Dimitrova, 2014) and managerial in- tentionality (Buckley,
Devinney, & Louviere, 2007; Hutzschenreuter, Pedersen, & Volberda, 2007) may play a role when
decisions are largely taken by individual export managers (e.g., in small manufacturers where
the CEO acts as the export manager). These factors may moder- ate the relationships examined in
this study, as may the manager's past experience and the number of ventures in which the firm
and the specific manager are currently involved.
At the individual venture level, we are unable to control for the rel- ative importance of the
venture to the company. An obvious indicator would be the relative economic value of the
examined venture com- pared to other ventures in the exporting manufacturer's portfolio.
While prima facie there are aspirations of high performance eventually associated with all ventures
developed and maintained by an interna- tionally involved firm, it is possible that behind the
formally set objec- tives there are other, longer term, more strategic ones. These could be, for
example, merely establishing presence in a market with future po- tential for exploitation at a
later stage, or maintaining the venture to avoid (or postpone) a costly exit (cf. Sousa & Tan, 2015).
Adopting a broader view, future research may study firms' strategic intentions in both domestic and
international venture markets simulta- neously and examine the role of institutional, market,
distributor-re- lated and idiosyncratic firm factors driving intentional similarities and
particularities in the different environments. Alternatively, studies may consider and examine
different types of strategic intentions, such as market expansion (Hilmersson, Johanson, Lundberg
& Papaioannou, forthcoming), exploration and exploitation (Cui, Walsh, & Zou, 2014) and product
portfolio enrichment intentions.
Turning to the discrepancies between intentions and actions, an ambitious future research
design could include intentions, respec- tive strategic choices, and implemented strategies in the
same longi- tudinal study, and examine their effect on the different aspects of the ensuing
performance. Perhaps using a mix of primary survey data and secondary realized strategy at a
later time point would enable such a design to be realized. Crucially, this would allow
examination of the key question of how discrepancies between intentions and actions affect
performance.
Finally, the resilience of our conceptualization could be tested by surveying exporting
manufacturers before and after an important, extraneous change in key environmental factors
(e.g., domestic tax regime change, major political or social event), and also replicating the study
for exporting manufacturers based in different cultural and institutional environments,
notably the BRIC countries and emerging economies.

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A. Kaleka,
N.A.N.A.
Morgan
Morgan
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Industrial
Marketing
Marketing
Management
Management
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(2019) 119
108–121
108–121
120 A. Kaleka,
A. Kaleka,
N.A.N.A.
Morgan
Morgan
Industrial
Industrial
Marketing
Marketing
Management
Management
78 78
(2019)
(2019) 120
108–121
108–121
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108–121
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