The Impact of Entrepreneurial Orientation and Networking Capabilities on the Export Performance of Nigerian Agricultural SMEs

Abstract

SME internationalisation is growing apace, signifying the global importance of SMEs to local and global economies. A key form of SME internationalisation is export. This article provides an empirical basis to understand how institutional factors could affect export performance of the Nigerian agricultural sector’s SMEs. We empirically assess the relationship between entrepreneurial orientation, networking capability, institutional environment factors and export performance of 235 Nigerian agricultural firms. The result affirms that there is a strong positive relationship between entrepreneurial orientation, networking capabilities, institutional environment factors and the export performance of agricultural sector SMEs in Nigeria. Our results suggest that the ability of agricultural SMEs to be proactive, innovative, take risks, manages its networking capabilities and institutional environment factors; all having a direct impact on the export performance of Nigerian Agricultural SME’s. Institutional environment factors such as government policies, procedures and regulations can lessen the influence of entrepreneurial orientation and networking capabilities on Nigerian agricultural SMEs’ export performance. Our research offers guidance for future research on the internationalisation of agricultural SMEs, especially in emerging economies.

Keywords

SME internationalisation entrepreneurial orientation networking capabilities institutional environment factors and export performance

Introduction

Growing businesses are often measured in terms of their ability to operate outside their domestic markets, and in particular the export of their products and services. A lack of resources and capabilities could affect a firm’s ability to meet the requirements of foreign markets and could therefore, seriously hamper the export performance of the firm (Arteaga-Ortiz & Fernández-Ortiz, 2010). This article identifies and investigates the influence of agricultural SMEs’ resources and capabilities on the export performance of this sector in an emerging economy context.

According to Balabanis and Katsikea (2003) international trade is associated with a lot of risk because of the uncertainty inherent in export markets as well as the complexity and hostility that exists in international markets. This volatility may centre on the components of entrepreneurial orientation, which are innovativeness, proactiveness and the capacity or willingness of the firm to take risks (Balabanis & Katsikea, 2003; Lumpkin & Dess, 1996; Miller, 1983; Patel & D’Souza, 2009).

Recent studies by the Economic Intelligence Unit (The Africa Report, 2012), and the Mckinsey reports on Africa (2012) suggest that Africa offers some of the best entrepreneurial opportunities for the future and that growth in Africa now outstrips that of BRICs (Brazil, Russia, India and China) by a number of measures. These new developments justify the context of this research. This article focuses on how institutional environment factors affect the impact of entrepreneurial orientation (EO) and networking capabilities of Nigerian agricultural SMEs and their export performance.

The Nigerian Economy and the Agriculture Sector

Nigeria has the potential to be among the 20 largest economies in the world by 2025 (Sanusi, 2003). As of 2011, the economy is ranked 30th in the world in terms of purchasing power parity. It is the sixth largest producer of petroleum in the world, the eighth largest exporter and has the 10th largest proven reserves, while the revenues made from oil provide the highest source of income for Nigeria. Nigeria has the largest economy in the West African region and the third largest economy in Africa. In 2000, Nigeria made over 98 per cent of its earnings from export, about 83 per cent from federal government revenue and 70 per cent of Nigeria’s GDP was accounted for by oil and gas export (CBN Report, 2005).

Despite the country’s vast oil wealth, the majority of Nigerians are poor with 71 per cent of the population living on less than one dollar a day and 92 per cent on less than two dollars a day. Although the country is rich in natural resources, its economy cannot meet the basic needs of the people. Such disparity between the growth of the GDP and increasing poverty is indicative of a twisted distribution of Nigeria’s wealth. The 2007 United Nations Human Development Index ranks Nigeria 158 out of 177 countries; this is a significant decrease in its human development rank of 151 in 2004. About 64 per cent of households in Nigeria consider themselves to be poor, while 32 per cent of households say that their economic situation has worsened over a period of one year (Kale, 2012).

In the 1960s, Nigeria’s agricultural sector was a beacon of hope for its contribution to local production, foreign exchange earnings and employment opportunities. Almost 30 years later, the sector still played this pivotal role, although the oil sector usurped its position as the leading foreign exchange earner. The oil boom led to its decline in terms of its contribution to economic growth. Agriculture’s share in the nation’s GDP was 60 per cent at the time of independence but by the turn of the 21st century, it had dropped to 26 per cent. Some of the other factors that led to the decline of the agricultural sector in Nigeria were inappropriate and unstable economic policies, and the almost complete neglect of the sector at national and regional levels.

Nigeria’s agriculture has also suffered from years of corruption, mismanagement, and poorly designed programs and policies. Nigeria is no longer a leading exporter of cocoa, groundnuts (peanuts), rubber and palm oil. Cocoa production, mostly from obsolete varieties and overage trees, is stagnant at around 180,000 tons annually but 25 years ago, it was 300,000 tons. Once the largest producer of poultry in Africa, commercial poultry output has declined from 40 million birds per annum to 18 million birds per annum. Import constraints limit the availability of many agricultural and food processing inputs for poultry and other sectors. Fisheries too are poorly managed (NEPC Report, 2011).

However, according to Olomola (2007), agriculture is an essential part of the Nigerian economy. Agriculture accounts for over 26.8 per cent of GDP and two-thirds of employment. This sector employs some 67 per cent of the nation’s workforce, contributing to 42 per cent of the nation’s Gross Domestic Product (GDP) and is the provider of 88 per cent of non-oil earnings in 2007 (CBN, 2009). The country is ranked 25th in the world and first in Africa in terms of farm output. Small-scale farmers were responsible for 90 per cent of the agricultural output with fewer than two hectares under cultivation (World Bank, 2008). Before oil came on the scene, agriculture was the leading foreign exchange earner. The change suppressed the development of agriculture in Nigeria. The national budget gives little attention to the development of the agricultural sector (Olomola, 2007). This is proved by the fact that oil accounts for some 95 per cent of the nation’s foreign exchange, while agriculture rakes in less than 5 per cent. Nevertheless, Nigeria is still seen as a country with great agricultural potential (CIA World factbook, 2013).

Since the country has the coastline of the Atlantic Ocean around its borders, there is ample opportunity to engage in profitable agricultural practices, such as fisheries and other forms of aquaculture. Therefore, the sector has a massive potential to boost the GDP of Nigeria and also generate revenue and employment for the government and the citizens of the country.

Akande (2002) mentioned that the agricultural and ecological diversity of Nigeria’s landscape stands the country in good stead to make headway in the production of staple crops. These crops ensure a considerable measure of income, food security and household satisfaction. Nigerian staple food crops consist of cereals (maize, sorghum, rice, millet and wheat), tubers (cocoyam, cassava and yam), vegetables, cowpeas, groundnut and legumes. As a matter of fact, Nigeria is the leading producer of agricultural produce (physical production) in Africa; her agricultural output in 2007 was three times that of South Africa, one-and-a-half times that of Egypt’s and almost 8 per cent the total production in the African continent (FAO STAT, 2010).

Between 2003 and 2007, Nigeria attempted to implement an economic reform program called the National Economic Empowerment Development Strategy (NEEDS). The objective of the NEEDS was to improve the standard of living of the people through some initiatives such as deregulation, macroeconomic stability, privatisation, liberalisation, transparency and accountability. The NEEDS was initiated to offset some major deficiencies such as unreliable power supplies, impediments to private enterprise decaying infrastructure, the lack of freshwater for household use and irrigation and corruption. The expectation of the government was that NEEDS would create seven million new jobs, diversify the economy, boost non-energy exports, increase industrial capacity utilisation, and improve agricultural productivity. The corresponding initiative at the state level is the State Economic Empowerment Development Strategy (SEEDS).

The food crisis of 2008 left a bitter taste in the mouth of the government as avoidable challenges plagued the agricultural sector. This crisis was down due to a number of factors, notably the types of cultivated farmlands used for crop farming, the inflated price of grains, irregular rainfall patterns throughout the planting season and the types of fertilisers used before the crisis also contributed to the dire consequences of the food crisis in Nigeria. The overall effect was a great reduction in the productivity of agriculture (Badmus & Ogundele, 2009).

It is against this changing backdrop of what is essentially a key sector in Nigeria’s economy that we explore the country’s potential to revive the sector through enhanced networking activity among agricultural SMEs. Inherent in the changing fortunes of the economy are the role of institutions and the ability of organisations to search for opportunities to create or recreate prospects for redevelopment and growth. Whether the entrepreneurial intentions and networking capabilities of agricultural SMEs are able to negotiate the institutional environment for such growth is the objective of our enquiry. The answer to these questions lies in understanding the place, role and capacity of Nigerian SMEs and especially those operating in the agricultural sector.

Nigerian SMEs

Okpara and Pamela (2007) indicate that SMEs have contributed greatly to employment generation and household income in Nigeria; it is stressed that SMEs provide 20–45 per cent of full-time employment and 30–50 per cent of rural household income. According to the Federal Office of Statistics, 97 per cent of Nigerian businesses employ less than 100 employees (Ariyo, 2004). The statutory definition of small businesses classifies SMEs into three categories: Micro Industry (MI) with labour size no more than 10 workers and the working capital no more than N1.5 million; Small-scale Industry (SMI) with labour size of 11 to 100 workers and the working capital no more than N50 million; and Medium-scale Industry (MSI) with labour size of 101 to 300 workers and the working capital between N50 to N200 million (Udechukwu, 2003). However, the performance of SMEs is very low relative to the expectation that could generate sound development for the larger economy. According to the NIPC (Nigerian Investment Promotion Council, 2001), SMEs represent about 90 per cent of the industrial sector in terms of number of enterprises; however, they contribute a meagre 1 per cent of the GDP. This is highly insignificant when compared to the performance of SMEs in other developing economies. According to IISD (2004), Indian SMEs amount to 95 per cent of all industrial units, 49 per cent of manufacturing outputs, 34 per cent of exports, 50 per cent of GDP and 65 per cent of employment. Also, in South Africa, SMEs account for 80 per cent of formal business and 95 per cent of the total business sector, 46 per cent of the economic activities and 84 per cent of private employment.

The state of development of SMEs in Nigeria calls for government and institutional actions that would transform the sector to an enviable pillar of sustainable growth. The peculiarities of the sector reveal the problems of weak institutions and dominance of informal operational challenges of efficiency like other developing economies (IISD, 2004). Udechukwu (2003) further stresses that SMEs in Nigeria experience high mortality rates due to mistrust among partners or owners, poor partnership spirit, a harsh regulatory environment, policy instability and reversals, and an inadequate infrastructure. Other issues confronting SMEs are poor financing and restricted access to financial support, inadequate training and manpower development to sustain the firm’s growth and transition, poor competitiveness relative to MNCs and indigenous companies, bureaucracy and a bottleneck in the administration of policies and incentives, poor marketing channels or products to penetrate the regional and international markets, poor linkage between SMEs and large organisations etc. (Kauffman, 2004; Mambula, 2002; Mambula & Sawyer, 2004; Udechukwu, 2003). These are issues which affect the entrepreneurial capacity and orientation of firms, together with their ability to collaborate and network with each other.

The federal government alongside other governmental institutions has increased its attention on and support to stimulate SME growth and sustainable development in the economy. Importantly, one of the cardinal objectives of the SAP (Structural Adjustment Programme) that was embraced in 1986 is to ‘restructure and diversify the productive base of the economy, so as to reduce dependency on the oil sector and imports’ (NCEMA, 2004). Towards this, the government has set up different institutions and agencies to ameliorate the challenges of SMEs, for instance, the National Economic Reconstruction Fund (NERFUND, 1990), Small Scale Industries Credit Scheme (SSICS, 1971), and Small and Medium Industries Equity Investment Scheme (SMIEIS, 2001) were set up to provide financial assistance to the sector (Sanusi, 2003). The National Directorate of Employment (NDE, 1986) and different technical, training and extension programmes like the ITF (Industrial Training Fund), CMD (Centre for Management Development) and FIIR (Federal Institute of Industrial Research) were also set up for the development of the necessary managerial and technical skills that will enhance SMEs growth. Other foreign assistance comes from the World Bank through the SME 11 Loan Project which amounted to $132.8 for 211 SME projects between 1990 and 1994; another $107.1 for 102 projects by 1996. The Africa Development Bank (ADB) also granted an export stimulation loan of $252 guaranteed by the federal government for SMEs’ internationalisation of operations (Sanusi, 2003).

Nigerian SMEs and their Capacity to Export

Small and medium enterprises (SMEs) have sought the intervention of government to help increase their capacity, so that the sector could connect resourcefully in the export of their products to heighten government’s non-oil sector export drive (Leadership online, 2013). Kuteyi (2013) argued that the government could help in providing the capacity needed to improve export. He stated that when the right environment is provided and some SMEs can produce and export, then the Nigeria Export Promotion Council (NEPC) will be in a good position to promote products in the international market. The empirical analysis in this study will help to identify the strengths and weaknesses of Nigerian agricultural SMEs in terms of their ability to internationalise and export.

Given a favourable policy environment and support, it is believed that SMEs can achieve an efficient production process that would enable them to compete successfully in the global market (Briggs, 2007). Therefore, government policies should be directed towards improving the economic environment in which SMEs operate (Everett & Watson, 1998; Fredland & Morris, 1976). There is now a renewed emphasis on the development of SMEs, especially in LDCs (ECA, 2001). This is in view of LDCs governments’ formulation of policies that would create the enabling environment for the establishment and the operation of SMEs (Agboli & Ukaegbu, 2006).

It is in the context of a rather complex environment of institutional deficits of the past and new fostering of institutional support that we examine the entrepreneurial orientation of Nigerian agricultural SMEs and their capacity to network and negotiate institutional factors especially for exporting.

Literature Review

Entrepreneurial Orientation

The importance of entrepreneurial orientation for the survival and performance of firms has been acknowledged in the entrepreneurship literature (Covin & Slevin, 1991; Hughes & Morgan, 2007; Lumpkin & Dess, 2001; Smart & Conant, 1994; Tat et al., 2007; Wiklund & Shepherd, 2005). It has also been extended to SMEs’ internationalisation studies in a Nigerian context (Ibeh, 2003; Ibeh & Young, 2001; Okpara & Koumbiadis, 2010). Entrepreneurial orientation is a firm’s ability to engage in innovative activities, undertake somewhat risky ventures and engage in proactive innovations (Fazul et al., 2010). Patel et al. (2009) and Lumpkin and Dess (1996) defines entrepreneurial orientation as a set of decision making styles, processes, practices, rules, and norms according to which a firm makes decisions to enhance its innovativeness, proactiveness and risk-taking propensity. SMEs that have the predisposition to engage in creativity and experimentation through the introduction of new products/services as well as technological leadership via R&D are innovative. Some Nigerian SMEs have come up with new products and services or new ways of packaging the products, so that they are attractive to international buyers.

Risk-taking involves taking bold actions by venturing into the unknown, borrowing heavily, and/or committing significant resources to ventures in uncertain environments (Chandra et al., 2007; Fazul et al., 2010; Idah & Mahmood, 2011; IIhami, 2011). Risk-taking indicates the will to commit proportionally large amounts of resources despite high potential for failure (Covin & Slevin, 1991; Lumpkin & Dess, 1996; Sepulveda, 2010).

Proactiveness is an opportunity-seeking, forward-looking perspective characterised by the introduction of new products and services ahead of the competition and acting in anticipation of future demand (Rauch et al., 2004; Yoon-joo, Min-jae, Jun-seok, & Lee-joo, 2010). Ibeh and Young (2001) suggest that exporting is an entrepreneurial act and can be defined as the process by which individuals, either on their own or inside organisations pursue export market opportunities without regarding the resources, which they currently control or environmental disincentives, which they face.

Identifying the influence of entrepreneurial orientation exclusively without considering other internal resources such as networking capabilities may not give the full picture of the influence of a firm’s internal resources and capabilities on export performance. It has been acknowledged by Hermannsdottir et al. (2007) that entrepreneurial orientation can be valuable in achieving firm performance in a foreign market, if the internal and external factors are well aligned. They observe that variables such as environment, strategy and structure are critical in obtaining optimal performance. This indicates that entrepreneurial orientation may not be entirely relied upon by any firm as an internal resource required to yield high performance in a foreign market. Therefore, this article also considered the ability of a firm to network as another internal capability that may translate to high performance in exporting.

Entrepreneurial Orientation of Nigerian Agricultural SMEs

Nigerian SMEs have come up with new products and services, or new ways of packaging the products so that they are attractive to international buyers. It takes an entrepreneurial-oriented firm in Nigeria to commit a lot of money for exporting without considering the high risk involved in selling abroad. Many exporting SMEs will go to the extent of borrowing from the banks, using their homes as collateral security without considering the end result of losing their houses in order to export into a foreign country. Entrepreneurial-oriented SMEs in Nigeria can therefore be identified as firms with a willingness to proactively pursue international business opportunities with products that are innovative regardless of the risks involved. For a firm to be able to translate resources into advantages and performance, the firm needs distinctive capabilities. It is very important to continuously develop, integrate, and reconfigure firms’ skills and abilities in order to adjust to change in the marketplace (Eisenhardt & Martin, 2000). It has been acknowledged by Hermannsdottir et al. (2007) that entrepreneurial orientation can be valuable in achieving firm performance in a foreign market if the internal and external factors are well-aligned.

Networking capability

Networking capability is the ability of a firm to develop and utilise inter-organisational relationships and to gain access to resources held by other actors (Walter & Amelung, 2006). Firms need this capability to improve performance and be an organisation-wide characteristic (Walter & Amelung, 2004; 2006). According to Weerawardena and Mort (2006), networking capability is also what enables rapidly internationalising firms to identify and act on market opportunities to speed up their internationalisation process. Networking capability is its ability to initiate, maintain and utilise relationships with various external partners (Walter & Amelung, 2006). Networking capabilities are network characteristics, which include strong ties, building relationships and trust between partners. It is a synergy between network orientation and network resources. Network orientation is about initiation, coordination and learning, and network resources are about human resources, synergy sensitive activity and information sharing. Chetty and Agndal (2007) and Jones and Young (2009) feel that although some researchers have focused on the firm’s network positions and connections, how these affect internationalisation (Axelsson & Johanson, 1992) has been neglected. Previous research on the relationship between networking capabilities and performance (Bernadino & Jones, 2009; Goerzen, 2007; Kenny, 2009; Shrander, 2001) has also been carried out exclusively without considering other available resources and capabilities.

Networking theory suggests that the ability of owners to gain access to resources not under their control in a cost-effective way through networking can influence the success of business ventures (Zhao & Aram, 1995). Florin et al. (2003) suggested that networking can provide value to members by allowing them access to the social resources embedded within a network; that is, networking can provide the means by which SME owners can tap into much-needed resources (Jarillo, 1989).

Networking Capability of Nigerian SMEs

Nigerian SMEs that possess the ability to build strong ties abroad initiate relationships and build trust with foreign partners may experience high performance in exporting. Also, the ability to build relationships within a network may translate to performance. Nigerian SMEs have the ability to initiate relationships, coordinate and learn from one another. Networking resources also involve human capital resources, resources to synergise and share information with one another. Also, the effect of institutional environmental factors is tested on the contribution of internal entrepreneurial orientation and networking capabilities to relative firm performance.

This study is about how the entrepreneurial intentions and the networking capabilities for exporting by agricultural SMEs are being affected by the institutional environment. Different research has been carried out on SMEs and international activities. According to Okpara (2009), these studies have been primarily conducted in the West. Given the structural differences between developed and developing countries and the legal, procedural and government policies in Nigeria, it is possible that SMEs in developing countries like Nigeria may face challenges that are different to those faced by its counterparts in the developed world. This study provides scope for an important gap within the literature on the need to investigate an appropriate level of analysis to measure the contribution of a firm’s resource and capabilities to SMEs performance in a developing economic context.

The outcome of previous work on resources, capability and firm performance is that capabilities may operate differently on the resource base of the firm and it may have different implications for competitive advantage and firm performance (Hoopes, Madsen & Walker, 2003, Leiblein & Madsen, 2009). Many theoretical and empirical issues on capabilities and firm performance remain a source of debate (Armstrong & Shimizu, 2007; Hoopes, Madsen & Walker, 2003; Newbert, 2007; 2008). Considering the legal, procedural and government policy in an economy like Nigeria, there is a need to carry out further studies to test the relationship between institutional environment and the contribution of entrepreneurial orientation and networking capabilities to relative firm performance in a number of geographical areas and environments, which have received limited consideration to date, including Nigeria which represents one of the developing countries.

Our article focuses attention on the West African state of Nigeria.

Conceptual Framework and Hypothesis Development

Conceptual Framework

The independent variables evaluating the EO of the firm are Innovativeness, Proactiveness and risk taking ability; While independent variables evaluating networking capabilities are network characteristics (tie strength, relational capability and trust), network relationship (initiation, coordination and learning) and network resources (network human capital resources, synergy sensitive resources and information sharing). Also, the effect of institutional environmental factors is tested on the contribution of EO (entrepreneurial orientation) and networking capabilities to Nigerian agricultural SMEs’ export performance.

Many studies considered the institutional environment as a key factor that provides the infrastructure of strategy implementation (Taslak, 2004). According to Okumus (2003), institutional environmental issues are cited as a determinant of success or failure of strategy implementation.

Figure 1

Source: Author’s own.

Hypothesis Development

Using the conceptual framework and the overview of the literature that feed the framework, a set of seven hypotheses are developed:

H1a: The stronger the level of a firm’s innovativeness, the greater the firm’s export performance.

H1b: The higher the degree of positive institutional environmental influence, the greater the contribution of innovation to a firm’s export performance.

H2a: The stronger the level of a firm’s proactiveness, the greater the export performance.

H2b: The higher the degree of positive institutional environmental influence, the greater the contribution of proactiveness to a firm’s export performance.

H3a: The stronger the risk-taking ability of a firm, the greater its export performance.

H3b: The higher the degree of positive institutional environmental influence, the greater the contribution of risk-taking to a firm’s export performance.

H4a: The stronger the level of a firm’s network characteristics, the greater the export performance.

H4b: The higher the degree of positive institutional environmental influence, the greater the contribution of network characteristics to a firm’s export performance.

H5a: The stronger the level of a firm’s network orientation, the greater the export performance.

H5b: The higher the degree of positive institutional environmental influence, the greater the contribution of network orientation to a firm’s export performance.

H6a: The greater the use of network resources, the greater the effect on a firm’s export performance.

H6b: The higher the degree of positive institutional environmental influence, the greater the contribution of network resources to a firm’s export performance.

H7a: The stronger the level of negative institutional intervention affecting SMEs, the lesser is their export performance.

H7b: The stronger the influence of positive environmental factors, the greater the effect on Nigerian agricultural SMEs’ export performance.

Research Methodology

Using cross sectional survey methods, we investigated 500 agriculture SMEs registered with the Nigerian Export Promotion Council (NEPC), a government agency responsible for export development.

We developed a questionnaire based on previous studies on competencies and their moderating effects on export performance, and then modified it to suit the study context through extensive consultations with executives of some firms. We measured firm’s competencies on the dimensions of entrepreneurial orientation, networking capabilities and environmental dynamism using measurement items adapted from Katsikeas, Piercy and Ioannidis (1996) anchored on a 5-point Likert-type scale ranging from (1) much worse to (5) much better. Respondents were asked to rate the ability of their firms to undertake the suggested activities related to exporting as compared to their main competitors. Similarly, export performance (the dependent variable) was measured using scales developed by Zou & Stan. (1998). Here respondents were asked to indicate the extent to which exporting had achieved the firm’s strategic, financial and management satisfaction rated on a 5-point Likert-type scale ranging from (1) extremely not true to (5) extremely true.

However, out of a frame of 500 firms provided by NEPC, we established that 380 would be eligible for the study based on the inclusion criteria. Consequently, we personally administered 380 questionnaires to the Chief Executive Officers (CEOs) or those familiar with the exporting activities of these firms as units of enquiry. In order to enhance the response rate and quality of data, we contacted the Executive Director of NEPC for an introductory letter to CEO’s of the firms in issue. The letter highlighted the objective of the research, anticipated gains and encouraged firms to participate in the survey. The other set of persons that facilitated the field exercise comprised of five well trained field assistants. A total of 235 useable responses, accounting for an effective response rate of 61.84 per cent were considered as the sample for the study. Considering that low response rates are typical in surveys involving top management and that 15–20 per cent response rates are considered adequate (Sousa, 2004), this response rate was considered more than adequate.

Data Analysis and Interpretation

Internal consistency reliability was examined using Cronbach’s alpha in the SPSS programme. The results of the analysis revealed a Chronbach’s alpha of greater than 0.70, which is considered an agreeable value for Cronbach’s alpha reliability (Nunnally, 1978).

In order to establish the values of the demographic characteristics of the studied firms, we analysed the data for the descriptive statistics. Table 1 presents the results obtained from the analysis of descriptive statistics through the SPSS statistical package.

Demographic Characteristics of the Studied Firms

Table 1

Frequency Distribution of Demographic Characteristics of the Studied Firms

	Frequency	Percent
Age of firm
1–10	114	48.8
11–20	52	22.1
21–30	34	14.5
Above 30 years	3	1.3
No response	32	13.6
Total	235	100.00
Legal status of firm
Sole trader	89	37.9
Partnership	85	36.2
Public ownership	32	13.6
Private ownership	22	9.4
Other	7	3.0
Total	235	100.00
Number of employees
1–50	206	87.7
51–100	21	8.9
≥101≤250	8	3.5
Total	235	100.00

The frequency distribution of the ages of the firms under consideration reveals that 48.8 per cent of the firms fall in the firm age category of 10 years, while those in the age range of 11–20 years, 21–30 years and above 30 years represent 22.1 per cent, 14.5 per cent and 1.3 per cent respectively. Nearly 14 per cent did not give any response.

The ownership structure proxied as the legal status of the firm was examined and this showed that 37.9 per cent are sole traders, 36.2 per cent fall into partnership, 13.61 per cent fall into the category of public ownership, 9.4 per cent private ownership, while 3.0 per cent fall into the category of other ownership agreement.

The classification of firm size is based on the number of employees. By inspection, 87.7 per cent of firms have between 1 and 50 employees, 8.9 per cent have 51–100 employees, while 3.5 per cent have between 101 and 250 employees. Firms were categorised as exporting and non-exporting. The study revealed that out of 235 agricultural firms employed in this research, 90.2 per cent are exporting firms while 9.8 per cent are non-exporting firms. Next, we analysed the descriptive statistics of the independent and dependent variables and these are summarised in Table 2 below.

Descriptive Statistics of Variables

Table 2

Descriptive Statistics of Independent and Dependent Variables

Variable	N	Mean	Std. Dev.
Dependent Variable
Export Performances (average sales growth rate)	225	3.7751	1.14084
Export Performances (average profitability)	226	2.3832	.56716
Export Performances (overall growth)	231	17.0476	2.76977
Independent Variable
Risk-taking	235	7.0383	2.37747
Proactiveness	232	38.8491	11.43620
Innovativeness	229	38.4236	11.17601
Network orientation	232	31.1422	9.89956
Network characteristics	234	137.0769	36.38803
Network resources	228	102.3640	24.91402
Institutional environment factors	232	14.6034	9.31682

The correlation matrix in Tables 3, 4 and 5 below show the significant correlations between independent and dependent factors as acceptable level among the measures.

Correlation Analysis

Table 3

Correlation Matrix of the Predictors and Export Performance (Average Sales Growth Rate)

	Variable	1	2	3	4	5	6	7	8
1	Export Performances (average sales growth rate)	1.000
2	Risk-taking	0.353*	1.0000
3	Proactiveness	0.482*	0.731*	1.0000
4	Innovativeness	0.499*	0.707*	0.921*	1.0000
5	Network orientation	0.368*	0.504*	0.592*	0.369*	1.0000
6	Network characteristics	0.494*	0.766*	0.897*	0.911*	0.780*	1.0000
7	Network resources	0.504*	0.617*	0.759*	0.775*	0.726*	0.835*	1.0000
8	Institutional environment factors	–0.458*	–0.505	–0.634*	–0.625*	–0.499*	–0.665*	–0.674*	1.0000

Note: *correlation significant at 0.05 (2-tailed).

Table 4

Correlation Matrix of the Predictors and Export Performance (Average Profitability)

	Variable	1	2	3	4	5	6	7	8
1	Export Performances (average profitability)	1.000
2	Risk-taking	0.158*	1.0000
3	Proactiveness	0.234*	0.731*	1.0000
4	Innovativeness	0.237*	0.707*	0.921*	1.0000
5	Network orientation	0.167*	0.504*	0.592*	0.369*	1.0000
6	Network characteristics	0.232*	0.766*	0.897*	0.911*	0.780*	1.0000
7	Network resources	0.232*	0.617*	0.759*	0.775*	0.726*	0.835*	1.0000
8	Institutional environment factors	–0.272*	–0.505	–0.634*	–0.625*	–0.499*	–0.665*	–0.674*	1.000

Table 5

Correlation Matrix of the Predictors and Export Performance (Overall Growth)

Variable	1	2	3	4	5	6	7	8
Export Performances (overall growth)	1.000
Risk-taking	0.242*	1.000
Proactiveness	0.350*	0.731*	1.000
Innovativeness	0.375*	0.707*	0.921*	1.000
Network orientation	0.306*	0.504*	0.592*	0.369*	1.000
Network characteristics	0.366*	0.766*	0.897*	0.911*	0.780*	1.000
Network resources	0.413*	0.617*	0.759*	0.775*	0.726*	0.835*	1.000
Institutional environment factors	–0.307*	–0.505	–0.634*	–0.625*	–0.499*	–0.665*	–0.674*	1.000

Innovativeness versus Export Performance

We find from the tables above that innovativeness is significantly and positively related to SMEs’ export performance (average sales growth rate) between the year 2007 and 2011 (P value < 0.01, r = 0.499). This implies that the greater the innovativeness characteristics of the SMEs, the greater the SMEs’ international performance in exporting in terms of the overall growth rate. Thus, Hypothesis 1a—the stronger the level of SME innovativeness the greater the SME export performance—is supported.

The result supports previous studies, which investigated innovation impact on the export performance of the firms. They have generally found positive and significant effects of innovation (DiPietro & Anoruo, 2006; Greenhalgh, 1990; Leon-Ledesma, 2005; Montobbio & Rampa, 2005; Narula & Wakelin, 1998; Özçelik & Taymar, 2004; Pla-Barber & Alegre, 2007; Sterlachini, 1999; Verspagen & Wakelin, 1997; Wakelin, 1998)). The result also supports the resource base view theory of firm. Innovative firms will be able to use their capability to commit greater resources to international activities and gradually increase their share of sales derived from the international markets. Based on the theories of Vernon (1966) and Krugman (1979) innovation is considered to be a driving force behind international trade. Recent studies (Anh et al., 2009; Damijan & Kostevc, 2008) controlled for the endogeneity issue, and the results of innovation impact on export performance are similar with the previous ones. Generally, the literature suggests a positive and significant effect of innovation indicators on export performance, whether or not input or output indicators have been used as innovation measures.

On the other hand, the institutional environment factor (government, legal, foreign and procedural) has a negative and significant relationship with innovativeness (P value < 0.05, r = –0.625). Thus, Hypothesis 1b—the stronger the institutional environment factor, the greater the level of SME innovativeness, which would invariably affect the SME export performance—is supported. In case of Nigeria the innovativeness of the SMEs, which enhances their export performance is weighed down by the institutional environment factors of legislative, procedural and government policies in the country.

Table 4 above shows that innovativeness is significantly and positively related to SMEs’ export performance (average profitability) between the year 2007 and 2011 (P value < 0.05, r = 0.237). This implies that the greater the innovativeness characteristics of the SMEs, the greater their international performance in exporting in terms of average profitability. Thus Hypothesis 1a—the stronger the level of SME innovativeness the greater the SME export performance—is supported. This indicates that agricultural SMEs that are innovative were more successful than their counterparts with less innovative products. This finding supports Miller and Friesen’s (1982) argument, which suggests that innovating boldly would enable firms to be more successful. The result also confirms findings in the radical innovation literature that argue that competing with radically innovative products ensures greater firm performance (Augusto & Coelho, 2009; Frishammar & Hörte, 2007; Tellis, Prabhu, & Chandy, 2009). Again the institutional environment factor has a negative and significant relationship with innovativeness (P value < 0.05, r = –0.625).

This lends support to Miller and Friesen’s (1982) call for firms to innovate regularly. It indicates that agricultural SMEs that invent new ways of exporting their products, or come up with novel innovative products perform better in exporting. Other studies confirm that unique product development is positively related with international performance (Knight & Cavusgil, 2004). Augusto and Coelho (2009), Frishammar and Hörte (2007) and Tellis et al. (2009)) also confirm that innovative products ensure greater performance. Here, too, the institutional environment factor has a negative and significant relationship with innovativeness (P value < 0.05, r = –0.625). This latter finding is in keeping with Van Waaden’s (2001) conclusion that formal legal institutional reduces the competition and freedom of firms, including the freedom to innovate. The institutional environment which includes the rules of the game may influence the propensity of firms to innovate (North, 1990).

Proactiveness versus Export Performance

Proactiveness is significantly and positively related to SMEs’ export performance (average sales growth rate) between the year 2007 and 2011 (P value < 0.01, r = 0.482), as shown in Table 3 above. This implies that the greater the proactiveness characteristics of the SMEs, the greater their international performance in exporting in terms of average sales growth rate. Thus Hypothesis 2a—the stronger the level of SME proactiveness the greater the SME export performance—is supported. Yet again, we find that the institutional environment factor has a negative and significant relationship with proactiveness (P value < 0.05, r = –0.634). Thus, Hypothesis 2b—the stronger the institutional environment factor, the lesser level of SME proactiveness, which would invariably affect the SME export performance—is supported. The proactiveness of SMEs which enhances their international performance is hampered by the institutional environment factor in Nigeria.

Proactiveness is significantly and positively related to SMEs’ export performance (average profitability) between the year 2007 and 2011 (P value < 0.05, r = 0.234). This implies that the greater the proactiveness characteristics of the SMEs, the greater their international performance in exporting in terms of average profitability. Thus Hypothesis 2a—the stronger the level of SME proactiveness the greater the SME export performance—is supported. This suggests that agricultural sector SMEs that are proactive will be more successful in export markets than the less proactive SMEs. This corroborates previous findings. For example, Hughes and Morgan (2007) and Morgan and Strong (2003) assert that proactive behaviour is strongly associated with firm’s success. In addition, Covin, Slevin and Green (2006) also report a positive relationship between proactiveness and sales growth once again the institutional environment factor has a negative and significant relationship with proactiveness (P value < 0.05, r = –0.634). Thus, Hypothesis 2b—the stronger the institutional environment factor, the lesser level of SME proactiveness, which would invariably affect the SME export performance—is supported.

Proactiveness is significantly and positively related to SMEs’ export performance (overall growth) between the year 2007 and 2011 (P value < 0.01, r = 0.350). This implies that the greater the proactiveness of the SMEs, the greater their international performance in exporting in terms of overall growth rate. Thus, Hypothesis 2a—the stronger the level of SME proactiveness the greater the SME export performance—is supported. The institutional environment factor has a negative and significant relationship with proactiveness (P value < 0.05, r = –0.634). Thus, Hypothesis 2b—the stronger the institutional environment factor, the lesser level of SME proactiveness, which would invariably affect the SME export performance—is supported.

From Table 3 above we note that risk-taking is significantly and positively related to SMEs’ export performance (average sales growth rate) between the year 2007 and 2011 (P value < 0.01, r = 0.353). This implies that the greater the risk-taking ability of the agricultural SMEs, the greater their international performance in exporting in terms of average sales growth rate. Thus, Hypothesis 3a—the stronger the level of SME risk-taking, the greater the SME export performance—is supported. The institutional environment has a negative and significant relationship with risk-taking (P value < 0.05, r = – 0.505). Thus, Hypothesis 3b—the higher the degree of positive institutional environmental influence, the greater the contribution of risk-taking to a firm’s export performance—is, therefore, supported.

From Table 4 above we observe that risk-taking is significantly and positively related to SMEs’ export performance (average profitability) between the year 2007 and 2011 (P value < 0.05, r = 0.158). This implies that the greater the risk-taking ability of the SMEs, the greater their international performance in exporting in terms of average profitability. Thus, Hypothesis 3a—the stronger the level of SME risk-taking, the greater the SME export performance—is supported. The result contradicts previous findings. For example, Frishammar and Hörte (2007), who asserted that risk-taking is not related to performance. Hughes and Morgan (2007) also show that risk-taking is negatively related to performance. In addition, Pearce, Fritz and Davis (2010) in their paper of not-for-profit religious organisations find that risk-taking does not translate to performance. However, our findings are corroborated by Cavusgil (1984) who states that the willingness to commit large firm resources to export operations (i.e., export risk-taking) is positively related to successful export. The negative and significant relationship of the institutional environment with risk-taking (P value < 0.05, r = – 0.505) supports Hypothesis 3b.

We see in Table 5 above that risk-taking is significantly and positively related to SMEs’ export performance (overall growth) between the year 2007 and 2011 (P value < 0.01, r = 0.242). This implies that the greater the risk-taking characteristics of the SMEs, the greater their international performance in exporting in terms of overall growth. Thus, Hypothesis 3a—the stronger the level of SME risk-taking the greater the SME export performance—is supported. Hypothesis 3b is also supported by our finding relating to the institutional environment factor which has a negative and significant relationship with risk-taking (P value < 0.05, r = – 0.505).

Networking Characteristics versus Export Performance

Networking characteristics are significantly and positively related to SMEs’ export performance (average sales growth rate) between the year 2007 and 2011 (P value < 0.05, r = 0.494). This implies that the more network characteristics of the SMEs, the greater their international performance in exporting. Thus, this result supports hypothesis 4a, which states that the stronger the level of SME network characteristics the greater the export performance. However, the correlation between institution environment factor is significantly and negatively related to SMEs’ network characteristics (P value < 0.05, r = –0.665). Thus, hypothesis 4b—the higher the degree of positive institutional environmental influence, the greater the contribution of network characteristics to a firm’s export performance—is supported.

Network characteristics are significantly and positively related to SMEs’ export performance (average profitability) between the year 2007 and 2011 (P value < 0.05, r = 0.232). This implies that the more network characteristics of the SMEs, the greater their international performance in exporting. Thus, this result supports hypothesis 4a, which states that the stronger the level of SME network characteristics the greater the export performance. However, the correlation between institution environment factor is significantly and negatively related to SMEs’ network characteristics (P value < 0.05, r = –0.665), thus supporting hypothesis 4b, which states that the higher the degree of positive institutional environmental influence, the greater the contribution of network characteristics to a firm’s export performance.

Network characteristics are significantly and positively related to SMEs’ export performance (overall growth) between the year 2007 and 2011 (P value < 0.05, r = 0.366). This implies that the more the network characteristics of the SMEs, the greater their international performance in exporting. Thus, this result supports hypothesis 4a, which states that the stronger the level of SME network characteristics the greater the export performance. The correlation between institution environment factor is significantly and negatively related to SMEs’ network characteristics (P value < 0.05, r = –0.665). This finding supports Hypothesis 4b, which states that the higher the degree of institution environment factor, the lesser the contribution of network characteristics to SME export performance, is supported.

This result confirms some previous findings presented in the existing literature on export performance. Based on the analysis of survey data from 78 Nigerian-based firms, Ibeh (2003) found that such internal factors influence the export performance of the firms. Wicks and Berman (2004) emphasised the important idea that trust is a costly governance mechanism to be deployed only when necessary. They suggest that the greater the degree of interdependence between the parties to the exchange, the greater will be the need for trust. Importantly, Wicks & Berman (2004) points to the notion that the extent of trust in inter-organisational relationships is a choice made by firms. They go on to suggest that trust in these relationships is supported by institutional, socio-cultural, and industry norms, and these ‘trust support mechanisms’ moderate the relationship between the choice firms made about how much to invest in trust and performance outcomes.

Network Orientation versus Export Performance

Network orientation (Table 3 above) is significantly and positively related to SMEs’ export performance (average sales growth rate) between the year 2007 and 2011 (P value < 0.05, r = 0.368). This implies that the more the network orientation of the SMEs, the greater their international performance in exporting. Thus, this result supports hypothesis 5a, which states that the stronger the level of SME network orientation the greater the export performance. However, the correlation between institution environment factor is significantly and negatively related to SMEs’ network orientation (P value < 0.05, r = –0.499). Thus, hypothesis 5b—the higher the degree of institution environment factor the lesser the contribution of network orientation to SME export performance—is supported.

Network orientation is significantly and positively related to SMEs’ export performance (average profitability—Table 4 above) between the year 2007 and 2011 (P value < 0.05, r = 0.167). This implies that the more the network orientation of the SMEs, the greater their international performance in exporting. Thus, this result supports hypothesis 5a, which states that the stronger the level of SME network orientation the greater the export performance. However, the correlation between institution environment factor is significantly and negatively related to SMEs’ network orientation (P value < 0.05, r = –0.499). Thus, hypothesis 5b—the higher the degree of positive institutional environmental influence, the greater the contribution of network orientation to a firm’s export performance—is supported.

Network orientation is significantly and positively related to SMEs’ export performance (overall growth—as shown in Table 5) between the year 2007 and 2011 (P value < 0.05, r = 0.306). This implies that the more the network orientation of the SMEs, the greater their international performance in exporting. Thus, this result supports hypothesis 5a, which states that the stronger the level of SME network orientation the greater the export performance. However, the correlation between institution environment factor is significantly and negatively related to SMEs’ network orientation (P value < 0.05, r = –0.499). Thus, hypothesis 5b—the higher the degree of positive institutional environmental influence, the greater the contribution of network orientation to a firm’s export performance—is supported.

Network Resources versus Export Performance

Network resources are significantly and positively related to SMEs’ export performance (average sales growth rate) between the year 2007 and 2011 (P value < 0.05, r = 0.504). This implies that the more network resources of the SMEs, the greater their international performance in exporting. Thus, this result supports hypothesis 6a, which states that the stronger the level of SME network resources the greater the export performance. However, the correlation between institution environment factor is significantly and negatively related to SMEs’ network resources (P value < 0.05, r = –0.674). Thus, hypothesis 6b, which states that the higher the degree of institution environment factor, the lesser the contribution of network resources to SME export performance, is supported.

Network resources are significantly and positively related to SMEs’ export performance (average profitability) between the year 2007 and 2011 (P value < 0.05, r = 0.232). This implies that the more network resources of the SMEs, the greater their international performance in exporting. Thus, this result supports hypothesis 6a, which states that the stronger the level of SME network resources the greater the export performance. However, the correlation between institution environment factor is significantly and negatively related to SMEs’ network resources (P value < 0.05, r = –0.674). Thus, hypothesis 6b—the higher the degree of positive institutional environmental influence, the greater the contribution of network resources to a firm’s export performance—is supported.

Network resources are significantly and positively related to SMEs’ export performance (overall growth) between the year 2007 and 2011 (P value < 0.05, r = 0.413). This implies that the more network resources of the SMEs, the greater their international performance in exporting. Thus, this result supports hypothesis 6a, which states that the stronger the level of SME network resources, the greater the export performance. Here again, the correlation between institution environment factor is significantly and negatively related to SMEs’ network resources (P value < 0.05, r = –0.499), thus supporting Hypothesis 6b, which states that the higher the degree of positive institutional environmental influence, the greater the contribution of network resources to a firm’s export performance.

Institutional Environment Factors versus Export Performance

Institutional environment factors are significantly and negatively related to SMEs’ export performance (average sales growth rate) between the year 2007 and 2011 (P value < 0.05, r = –0.458). This implies that the more the institutional environment factors affect SMEs, the lesser their international performance in exporting. Thus, this result supports hypothesis 7a, which states that the stronger the level of SMEs’ institutional environment factors the lesser the export performance. As expected, the institutional environment factors are significantly and negatively related to SMEs’ export performance (average profitability) between the year 2007 and 2011 (P value < 0.05, r = –0.458), which supports Hypothesis 7b, which states that the stronger the level of SMEs’ institutional environment factor, the lesser the export performance.

Institutional environment factors are significantly and negatively related to SMEs’ export performance (overall growth) between the year 2007 and 2011 (P value < 0.05, r = –0.458). This implies that the more the institutional environment factors of the SMEs, the lesser the SMEs’ international performance in exporting. Thus, this result supports hypothesis 7a, which states that the stronger the level of SMEs’ institutional environment factor, the lesser the export performance. The research reported in this article shows a significant negative relationship using both bivariate and multivariate analysis techniques. These results confirm previous findings presented in the existing literature on export performance (Alvarez, 2004; Arinaitwe, 2006; Cicic et al., 2002; Crick, 1998; Ibeh, 2003; Kaleka & Katsikeas, 1995; Koksal, 2006; Korez-Vide, 2007; Morgan, 1997; Morgan & Katsikeas, 1997; Shoobridge, 2004; Tagoe et al., 2005; Tesfom & Lutz, 2006; Walter, 1983; Wilkinson & Brouthers, 2006).

Table 6

Regression Analysis Results

Variable	Average sales growth rate	Average profitability	Overall growth between 2007 and 2011
Risk-taking Coefficient P value	–0.125	–0.093	–0.108
	0.203	0.401	–0.293
	{.564}	{.564}	{.564}
Proactiveness	0.084	0.183	0.131
P value	0.632	0.365	0.463
Innovativeness	0.224	0.036	0.075
	0.261	0.871	0.693
	{.812}	{.812}	{.812}
Network orientation	0.016	0.035	0.012
	0.889	0.784	0.924
Network characteristics	0.002	–0.039	–0.840
Network resources	0.223	–0.014	0.360
Institutional environment factors	–0.162	–0.203	–0.045
R Squared	.310	.092	.187
Adjusted R Squared	.286	.061	.159
F-Statistics	12.818	2.922	6.752
Number of Observations

Risk-taking, proactiveness, innovativeness, network orientation, network characteristics, network resources and institutional environment factors significantly and jointly predictors of export performance of the SMEs in terms of overall sale growth (p < 0.01, F_7,207 = 12.818). All the predictors explained 31 per cent of the variability in the export performance (R² = 31.0 per cent). Network resources and institutional environment factors are the independent significant predictors of export performance of the SMEs in terms of overall sales growth at a 0.1 significance level (90 per cent confidence interval).

Risk-taking, proactiveness, innovativeness, network orientation, network characteristics, network resources and institutional environment factors are significant joint predictors of export performance of the SMEs in terms of profitability (p < 0.01, F_7,208 = 2.922). All the predictors explained 6.1 per cent of the variability in the export performance (R²= 6.10 per cent). Institutional environment factors are the independent significant predictors of export performance of the SMEs in terms of overall sales growth at a 0.05 significance level (95 per cent confidence interval).

Risk-taking, proactiveness, innovativeness, network orientation, network characteristics, network resources and institutional environment factors are significant joint predictors of international performance of the SMEs in terms of overall growth (p < 0.01, F_7,213 = 6.752). All the predictors explained 18.7 per cent of the variability in the export performance (R² = 18.7 per cent). Network resources are the independent significant predictors of export performance of the SMEs in terms of overall sales growth at a 0.05 significance level (95 per cent confidence interval).

Overall, the findings indicate that institutional environmental factors concerned with legal/government environment factors play an important role in agricultural SMEs’export performance (Sousa et al., 2008; Zou & Stan, 1998).

Implications for theory and Practice

Our findings extend previous research outcomes in a number of ways.

First, we examined the influence of firm capabilities while explicitly establishing their individual effects on export performance of small and medium manufacturing exporters in Nigeria. The findings show that the component of entrepreneurial orientation has a positive relationship with the firm’s export performance, especially those variables related to innovativeness, proactiveness, and ability to take risk.

Second, our study verified that networking is a potential capability of firms, which impacts on their resource base. It underlies the core concept of the Resource Base View (RBV) about the firm being the primary driving force of its own business behaviour and performance through the utilisation of its resources and capability (Penrose, 1959).

Finally, institutional environment factors are significantly and negatively related to SMEs’ export performance (overall growth) between the year 2007 and 2011 (P value < 0.05, r = –0.458). This implies that the absence of a supportive institutional environment for SMEs results in lower levels of international export performance. The findings indicate that institutional environmental factors including legislation and other government policies play an important role in promoting the export performance of agricultural SMEs (Sousa et al., 2008; Zou & Stan, 1998).

Limitations and Areas for Future Research

This study has some limitations. First, the cross sectional design applied in this study makes it difficult to examine causality variables, thus precluding us from going beyond finding associations between these variables. Future studies should attempt to employ a longitudinal study to capture the dynamic performance effects of firm capabilities. This would help establish the causal relationships between firm competencies and export performance.

Second, the scope of the research participants was confined to CEOs. Hence, there is a measure of sample bias that may lead to inaccurate coefficient estimates. This issue was verified in this study using a Harman’s one-factor test and such problem was not found in the data collected for the study. However, based on the views of Podsakoff and Organ (1986), future research should collect data from more than one respondent in each firm to help minimise possibilities of common methods variance in the data collected.

Future research could assess and evaluate the potential relationship between different export performance dimensions and assessment modes. They could utilise structural equation modelling to investigate the potential relationship established between export performances assessed objectively and export performance measured subjectively.

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