THE PROPENSITY TO ENTER AND EXIT EXPORT MARKETS: A MAIL SURVEY OF SMALLER AGRI-FOOD FIRMS IN MICHIGAN

EXECUTIVE SUMMARY: In the Fall of 1994, researchers in the Department of Agricultural Economics at Michigan State University identified the following two questions: 1.To what degree (if any) are smaller agribusiness and food industry firms involved in international markets? 2.To what degree (if any) are international markets a potential opportunity for smaller agribusiness and food industry firms? In an effort to address these two questions, researchers contacted 543 Michigan-based, small- to medium-sized agri-food firms to solicit their participation in a mail survey. Firms willing to participate in the study returned a postcard with a limited amount of information on it about the company's current marketing and sales activities. An additional 88 firms agreed to participate in the survey when they were contacted by telephone. Of the 242 firms that were sent a mail survey, 46% returned a completed questionnaire (n=112). Sixty-seven of the returned surveys were from non-exporting firms, 37 were current exporters and 12 were firms that had once been exporters but were now re-focused on U.S. markets. Statistical analysis of the returned survey data consisted of cross- tabulations, a base-line logistic regression using variables taken from the mail survey, and a second logistic regression using a six factor model generated during factor analysis of the data base. The predictive accuracy of the two logistic regression models were 88.46 and 87.76%, respectively. The statistical analysis identified a set of explanatory variables that influenced the probability a given firm would be an exporter. The implications of these findings are that decisions about exporting are influenced by the following: * a decision maker's perceptions about transaction costs in international markets (e.g., the costs of writing and negotiating contracts, collecting payments, enforcing protection from bankruptcy defaults) * a decision maker's perceptions about demand in international markets (e.g., growth of markets, sales opportunities, global supply relative to demand) * the ability to establish and sustain relationships with international customers * key environmental stimuli that increase the decision maker's exposure to an international frame of reference (e.g., receiving unsolicited orders from customers outside the U.S., having customers who are exporters) * firm size correlates positively with the probability to export. However, size is neither a necessary nor sufficient condition to be an exporter. The study identified both very small firms (as few as 2 employees) that were exporters and larger firms (over 100 employees) that were non-exporters