WHAT MOTIVATES SMALL- AND MEDIUM-SIZED ENTREPRENEURS (SMES) TO EXPORT? A COMPARISON BETWEEN MALAY AND CHINESE SMES

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1 WHAT MOTIVATES SMALL- AND MEDIUM-SIZED ENTREPRENEURS (SMES) TO EXPORT? A COMPARISON BETWEEN MALAY AND CHINESE SMES Kim Hoe Looi PhD candidate, University of Malaya, Malaysia Senior Lecturer, Taylor s University, Malaysia ABSTRACT This paper examines whether Malay and Chinese small- and medium-sized entrepreneurs (SMEs) are driven by the same motivation factors and to identify the salient s underlying their motivation to export to new market(s) in the future. Structural equation modeling technique was used to analyze data collected from 243 Malay and Chinese SMEs. Malay SMEs are motivated by control followed by behavioral whereas Chinese SMEs are motivated by behavioral alone. Thus, international entrepreneurship is not necessarily driven by both desirability and feasibility. The path coefficients from control to export intention between Malay and Chinese SMEs are significantly different, thus in the research framework this path is not generalizable across the two ethnic groups. Overall, Malay SMEs reported significantly higher level of motivations and export intention than their Chinese peers. Finally, this study also identified similarities and differences in salient s across these two ethnic groups. JEL Classifications: C3, F2, F6 Keywords: Theory of Planned Behaviour, small- and medium-sized entrepreneurs, international entrepreneurs, export, Malay SMEs, Chinese SMEs. Corresponding Author s Address: gideon_looi@siswa.um.edu.my; kimhoe.looi@taylors.edu.my INTRODUCTION Export is traditionally the domain of large multi-national corporations and many theories have been developed to explain their internationalization behavior. However, few researches investigate the motivations of small- and medium-sized entrepreneurs to export, particularly from the perspective of emerging economies. Our knowledge of the motivations for export by small- and medium-sized entrepreneurs is still limited and this constitutes an area worthy of further empirical scrutiny. Theory of Planned Behaviour (TPB) has been extensively applied in the field of entrepreneurship and thus far the results generally lend support for its usefulness. Along similar line, this study argue that examining export intention of small- and medium-sized entrepreneurs (SMEs) using TPB is a productive area of research especially to shed new light on the underlying salient s. Therefore, the findings from this study not only add to the body of knowledge but have implications for policymakers. This paper is organized as follows. The second section presents the literature review on small- and medium-sized entrepreneurs and export, Theory of Planned Behaviour and ethnic differences in motivation to develop research purposes, research framework and hypotheses. The third section describes the research design. The fourth section presents the results of data analysis. The fifth section discusses the findings and this paper ends with implications and conclusions. LITERATURE REVIEW Small- and Medium-sized Entrepreneurs (SMEs) and Export International entrepreneurship (IE) is entrepreneurial activities across borders (McDougall and Oviatt, 2000). It can contribute to a nation s economy and increase its competitiveness (Kelley et al., 2012). In the era of globalization, small- and medium-sized entrepreneurs are both motivated and forced to internationalise their businesses. Extant body of literature suggests that for a small country, the motivations to adapt international orientation should be greater. SMEs are becoming increasingly international (Andersson et al., 2004; Reynolds, 1997) with export being the most common approach used (Miesenbock, 1988; Reynolds, 1997). At present majority of international business or international marketing literature usually discuss internationalisation from the perspectives of large corporations. As a result, research on internationalization of SMEs is attracting growing

2 interest from scholars (Andersson et al., 2004). Export behavior in the small firm is more likely determined by individual entrepreneur (Andersson, 2000; Reid, 1981), hence a fruitful area for further inquiry into the internationalization of SMEs is cognition, motivation and s of individual entrepreneur (Andersson et al., 2004). There are also calls for a more process-oriented research design (Aldrich and Waldinger, 1990) and a more dynamic behaviorial model of export (Reid, 1981). All these point to the usefulness of Theory of Planned Behaviour to investigate individual entrepreneurs. Even though it is usually applied to study new venture intention but theoretically it has the potential to predict other strategic decisions (Krueger et al., 2000), such as export. Theory of Planned Behaviour (TPB) Theory of Planned Behaviour (Ajzen, 1991) is drawn upon to examine international entrepreneurs motivation. There are two approaches to applying TPB: direct approach and composites approach. In the direct approach, the antecedents of intention are attitude, subjective norm and perceived behavioural control. This approach is used by majority of prior studies (Ajzen, 2002). In the composites approach, the antecedents of intention are behavioural s, normative s and control s. Behavioral s is measured by b i e i where b is behavioral and e is outcome evaluation; normative s is measured by n i m i where n is normative and m is motivation to comply; control s is measured by c i p i where c is control and p is control power. Belief composites approach thus provides insight into the cognitive and affective foundations, i.e. antecedents, which become invaluable information to design effective behavioral intervention programmes (Ajzen, 1991, 2002, n.d.; Fishbein and Yzer, 2003). At the same time, TPB can reveal the relative influence of behavioural, normative s and control upon intention in the population under consideration (Ajzen, 1991; Fishbein and Yzer, 2003). In summary, both the salient s and the relative influence are important not just for academics but for both practitioners and public policy makers as well. Generally, TPB is parallel to Shapero and Sokol s (1982) entrepreneurial event formation (Krueger et al., 2000), i.e. desirability is equivalent to attitude and subjective norm, feasibility is equivalent to perceived behavioural control. Both models stressed the importance of desirability and feasibility in the formation of intention. Ethnic Differences in Motivation A major and growing area of international entrepreneurship research is studies that compare entrepreneurship across different cultures (Coviello et al., 2011; Aldrich and Waldinger, 1990). The question of whether entrepreneurs are the same across cultures is worth asking (Thomas and Mueller, 2000). Cross cultural psychology literature indicate that there are cultural variations in terms of attitudes, s, expectations and values which allow for comparing and contrasting similarities and differences in individuals behaviour from different cultures or ethnic groups (Lonner and Adamopoulos, 1997). By researching ethnic differences within country (Kanter and Corn, 1994), researchers can investigate how cultural context impacts entrepreneurial motivation (Carsrud and Brännback, 2011) because research findings in one culture may not be generalizable to other cultures (Baron and Bryne, 2003). In this respect, Hayton et al. (2002) suggest to use a common conceptual framework to identify both the similarities and differences among entrepreneurs from different cultural background. Majority of Malaysian studies to compare and contrast the behavior of different ethnic groups focused mostly on Malays and Chinese (Fontaine and Richardson, 2003). Research Purposes, Framework and Hypotheses The purpose of this scholarly endeavor is to investigate whether Malay and Chinese small- and medium-sized entrepreneurs (SMEs) are driven by the same motivation factors to export to new market(s) in the future and to identify the underlying salient s. The moderated framework in Figure 1 provides a way of investigating entrepreneurial diversity between the two ethnic groups. Four hypotheses to be tested are: H 1 : There is no significant difference in the path coefficient from behavioural to export intention between Malay and Chinese SMEs. H 2 : There is no significant difference in the path coefficient from normative s to export intention between Malay and Chinese SMEs. H 3 : There is no significant difference in the path coefficient from control to export intention between Malay and Chinese SMEs.

3 H 4 : The latent mean structures for all constructs in the research framework are the same for both Malay and Chinese SMEs. Ethnic Behavioural Normative s Export intention Control FIGURE 1. MODERATED FRAMEWORK RESEARCH METHODOLOGY This is a positivist study and cross-sectional. Theory of Planned Behaviour constructs are operationalized in the context of export by small- and medium-sized entrepreneurs based on extant theoretical and empirical literature in the fields of psychology, international business and entrepreneurship. Moreover, all the items developed are compatible with the export intention in terms of action, target, context and time elements (Ajzen, n.d.). To control for the differences in key variables and arrive at more conclusive results that facilitate interpretation and generalization for small businesses internationalization, four extraneous variables controlled are product (food, beverages and agricultural produce), international activity (export), stage of internationalization (export to new market) and country (Malaysia) (Miesenbock, 1988). Data are gathered from Malay and Chinese small- and medium-sized entrepreneurs throughout Malaysia and analyzed using structural equation modeling statistical technique. Prior to any cross-group comparison, measurement invariance across groups is established to provide a strong foundation for drawing scientific inference (Vandenberg and Lance, 2000). DATA ANALYSIS The characteristics of the sample are presented in Table 1. Majority of respondents are male. The sample consists of 44% Malays and 54% Chinese. 66% of respondents are currently exporting. TABLE 1. DESCRIPTIVE STATISTIC

4 Variable Category Frequency Percentage Gender Male Female Total Ethnicity Malay Chinese Others Total Current export status Exporter Non-exporter Missing Value Total Data examination was conducted to identify potential outlier and one respondent was subsequently removed. Normality tests revealed that not all constructs are normally distributed. As a result, Partial Least Squares (PLS) which is distribution-free is considered a more appropriate statistical technique for the current study. Factor analysis, item loadings, reliability and validities for all constructs in the research framework for Malay and Chinese SMEs are examined separately and both groups yielded satisfactory results in order to proceed to structural model estimates and interpretation. The means and standard deviations for the constructs in the Theory of Planned Behaviour for both ethnic groups are presented in Tables 2 and 3. Note that The behavioural s and control s constructs are represented by behavioural and control only because outcome evaluation and control power are obviously positive and hence redundant (Ajzen, n.d.). Normative s is the product of normative and motivation to comply, hence the larger means and standard deviations. Malay SMEs reported higher levels (note: smaller number means higher level) for both behavioral and control, which mean Malay SMEs perceived more advantages as well as more enabling factors for export to new market(s) in the future. Moreover, with respect to normative s, the result indicate that Malay SMEs are more concern about individuals or groups who approve or disapprove their export to new market(s) in the future and also more motivated to comply with these referents. TABLE 2. MEANS AND STANDARD DEVIATIONS FOR MALAY SMES (N = 108) Construct Mean Standard deviation Behavioural Normative s Control Export intention TABLE 3. MEANS AND STANDARD DEVIATIONS FOR CHINESE SMES (N = 130) Construct Mean Standard deviation

5 Behavioural Normative s Control Export intention For the three hypothesized antecedents of export intention, the results suggest that only behavioural and control have significant impact on Malay SMEs export intention (Table 4). At the same time, control has a larger effect than behavioural on export intention. These significant paths are schematically represented in Figure 2. TABLE 4. PATH COEFFICIENTS FOR MALAY SMES Path Path coefficient S. E. Behavioural -> Export intention 0.26 ** 0.11 Normative s -> Export intention Control -> Export intention 0.38 *** 0.10 Notes: *** Significant at 0.01 level, ** Significant at 0.05 level, * Significant at 0.10 level. Behavioural 0.26 ** Normative s Export intention 0.38 *** Control FIGURE 2. SIGNIFICANT PATHS FOR MALAY SMES Notes: *** Significant at 0.01 level, ** Significant at 0.05 level, * Significant at 0.10 level. For Chinese SMEs, the only significant path is from behavioural to export intention (Table 5). The significant path is schematically shown in Figure 3. TABLE 5. PATH COEFFICIENTS FOR CHINESE SMES

6 Path Path coefficient S. E. Behavioural -> Export intention 0.49 *** 0.10 Normative s -> Export intention Control -> Export intention Notes: *** Significant at 0.01 level, ** Significant at 0.05 level, * Significant at 0.10 level. Behavioural 0.49 *** Normative s Export intention Control FIGURE 3. SIGNIFICANT PATHS FOR CHINESE SMES Notes: *** Significant at 0.01 level, ** Significant at 0.05 level, * Significant at 0.10 level. Measurement invariance is usually tested using multi-group confirmatory factor analysis (MG-CFA) (Byrne, 2010; Cheung and Rensvold, 2002; Hair et al., 2006) and this technique is available in AMOS. Overall, the measurement invariance hypotheses testing using multi-group confirmatory factor analysis supported testing for Partial Least Squares multi-group analysis (PLS-MGA) (Table 6). Although construct mean comparison does not meet the requirement as the change in CFI (ΔCFI) is more than -0.01, Cooke et al. (2001 cited in Byrne, 2010) argued that scalar variance should not prevent items from measuring their underlying constructs. On the basis of this literature support, this study will proceed to compare construct means as well (Table 8). TABLE 6. TESTING MEASUREMENT INVARIANCE Model CFI ΔCFI RMSEA 1. Hypothesized multi-group baseline model Configural model Metric model Scalar model To analyse the difference in the path coefficients from the three antecedents to export intention between Malay and Chinese SMEs, i.e. Partial Least Squares based multi-group analysis (PLS-MGA), this study adopts both t-test (Chin, 2000; Keil et al., 2000) and probability technique (Henseler, 2012). There is a significant difference in the path from control to export intention as indicated by the two different techniques (Table 7). It indicates that the path from control to export intention is not generalizable across the

7 two ethnic groups. This will mean that Hypotheses One and Two cannot be rejected while Hypothesis Three is rejected. TABLE 7. TESTING FOR PATH DIFFERENCES BETWEEN MALAY AND CHINESE SMES Path Probability T-test Behavioural => Export intention 0.94 Normative s => Export intention 0.37 Control => Export intention 0.03** ** Notes: ** Significant at 0.05 level. The construct mean estimates for the non-reference group (i.e. Malay SMEs) show whether the construct means for this group are significantly different from those for reference group (i.e. Chinese SMEs). Table 8 shows that all construct mean differences are significant as all critical ratios (C.R.) are greater than The negative values are interpreted as indicating that non-reference group (i.e. Malay SMEs) have significantly higher behavioural, normative s, control and export intention than their Chinese counterparts. Therefore, Hypothesis Four is rejected. TABLE 8. CONSTRUCT MEAN DIFFERENCES BETWEEN MALAY AND CHINESE SMES Construct Estimate S.E. C.R. Significant Behavioural *** Normative s *** Control *** Export intention *** Note: *** Significant at 0.01 level. From Table 9, it is observed that the salient s held by Malay and Chinese SMEs are about the same. The notable differences are with respect to additional behavioral considerations by Chinese SMEs to overcome unfavorable domestic market condition and reduce risk. In terms of referents, Malay SMEs seem to emphasize spiritual mentor(s) whereas Chinese SMEs take network members into cognizant. With regard to control, Chinese SMEs reported the relevance of international market orientation. TABLE 9. SALIENT BELIEFS Belief Malay SMEs Chinese SMEs Behavioural Overcome unfavorable - domestic market condition - Reduce risk through market diversification Increase sales and profit Increase sales and profit Make my company more competitive Make my company more competitive Make my company Make my company successful in the long-term successful in the long-term Normative s Entrepreneurial orientation Entrepreneurial orientation SME associations SME associations Government Government - Network members Spiritual mentor(s) - Business mentor(s) Business mentor(s) Role model(s) Role model(s) Business partner(s) Business partner(s)

8 Control Ability to recognize a potential export opportunity Export ability International experience Flexibility - Confidence to succeed in new export market(s) Knowledge about export market(s) Entrepreneurial orientation Ability to recognize a potential export opportunity Export ability International experience Flexibility International market orientation Confidence to succeed in new export market(s) Knowledge about export market(s) Entrepreneurial orientation DISCUSSIONS This section discusses the findings from an investigation into the motivations of small- and medium-sized entrepreneurs to export to new market(s) in the future by means of the research framework of Figure 1. An instrument is typically constructed within a particular cultural environment and is likely to be idiosyncratic, for example in the formulations of items (Poortinga, 1989). However, the measurement invariance tests provided evidences that the items in the present study are reasonably well developed on the basis of Theory of Planned Behaviour and relevant literature which enabled it to measure the constructs of interest and add to the body of knowledge in the domain of international entrepreneurship. The results on path coefficients revealed the motivations for export to new market(s) in the future for the two ethnic groups under investigation. Malay SMEs are primarily motivated by control followed by behavioural. It means that control is a stronger predictor of Malay SMEs export intention. In other words, Malay SMEs are driven firstly by enabling factors and secondly by the advantages of export to new market(s) in the future. On the other hand, Chinese SMEs are motivated solely by behavioural or the advantages of export. The impact of normative s on export intention is non-significant for both groups, a finding consistent with previous research (Krueger et al., 2000; Linan and Chen, 2009) and provide more support that normative s is irrelevant in the context of entrepreneurship. The motivations of Malay SMEs may be explained in terms of the encouragement, assistance and support provided by various government agencies in Malaysia (see Dana, 2001; Isenberg, 2010). With all these efforts by the government, it has probably resulted in Malay SMEs strong s about the availability of enabling factors for export to new market(s) in the future. The motivation of Chinese SMEs seems consonant with extant entrepreneurship literature. For instance, entrepreneurship is viewed as a process by which individuals pursue opportunities regardless of the existing resources (Stevenson and Jarillo, 1990). Furthermore, the findings also lend credence to the literature that ethnic groups adjust to the resources which differ substantially across societies (Aldrich and Waldinger, 1990). Consequently, these findings add to our understanding of the motivational forces for these two ethnic groups. The paths from control to export intention are significantly different between the two ethnic groups and this finding compliments the finding in the preceding paragraph. The findings are interpreted to mean that the path from control to export intention in the research framework of Figure 1 is not generalizable across the two ethnic groups. Overall, this study found that Malay SMEs seem to be more motivated and also more inclined to export to new market(s) in the future compared with the Chinese SMEs. Malay SMEs are higher than Chinese SMEs on export intention and this difference can be explained by the fact that Malay SMEs are higher than Chinese SMEs on the antecedents of export intention. It may be reasonable to argue that the Malaysian entrepreneurship development programmes have been successful to increase the incidence of export by Malay SMEs. In addition, the current study provides valuable information about similarities and differences in terms of the salient s underlying motivations for both ethnic groups. For instance, Chinese SMEs consider more advantages pertaining to export to new market(s) in the future than Malay SMEs. Although normative s is not a significant predictor of export intention, it is interesting to find that Malay SMEs take on board the opinions of spiritual mentor(s) which is consistent with the notion that Malays are more religious (Lim and Abdullah, 2001). This referent is presently not researched in the field of entrepreneurship to the best of this researcher s knowledge. On the other hand, network members are a significant referent for Chinese SMEs.

9 IMPLICATIONS AND CONCLUSIONS This is probably the first study to apply Theory of Planned Behaviour in the context of export by small and medium-sized entrepreneurs and overall, results indicate its utilities. Moreover, this study moves beyond previous research by adopting the composites approach to identify salient s pertaining to export by SMEs. Hopefully this will spur more future research to adopt the composites approach. The central contribution of this study to international entrepreneurship literature is in making progress toward understanding the different export motivations and level of export motivation for the two major ethnic groups in Malaysia. Another contribution of this study lies in the valuable insights into ethnic similarities and differences in salient s underlying entrepreneurial motivations to export to new market(s) in the future. Although generally promoting entrepreneurial intentions involves both feasibility and desirability, the results of this study reveal that there may be exception due to circumstances. These contributions also have policy implications. In light of these findings, public policy designed to facilitate international entrepreneurship can be directed at one or more of its determinants: behavioural and/or control, depending on the ethnic group. In other words, policy makers will know exactly what to encourage for these two ethnic groups. Nevertheless, it is often easier to produce change by introducing information that lead to the formation of new s than to change existing s (Ajzen, n.d.). What information that leads to the formation of new s about export can be a potential productive area for future research. REFERENCES Ajzen, I., The theory of planned behavior, Organizational Behavior and Human Decision Processes, 1991, Vol. 50(2), pp Ajzen, I., Perceived behavioral control, self-efficacy, locus of control and the theory of planned behavior, Journal of Applied Social Psychology, 2002, Vol. 32(4), pp Ajzen, I., Constructing a Theory of Planned Behavior questionnaire, n.d., Retrieved 21 April 2011, from Aldrich, H. E., & Waldinger, R., Ethnicity and entrepreneurship, Annual Review of Sociology, 1990, Vol. 16, pp Andersson, S., The internationalization of the firm from an entrepreneurial perspective, International Studies of Management and Organization, 2000, Vol. 30(1), pp Andersson, S., Gabrielsson, J., & Wictor, I., International activities in small firms: Examining factors influencing the internationalization and export growth of small firms, Canadian Journal of Administrative Sciences, 2004, Vol. 21(1), pp Baron, R. A., & Bryne, D., Social Psychology (10 ed.), 2003, Boston, MA: Allyn and Bacon. Byrne, B. M., Structural equation modeling with AMOS: Basic concepts, applications and programming (Second ed.), 2010, New York: Routledge. Carsrud, A., & Brännback, M., Entrepreneurial motivations: What do we still need to know?, Journal of Small Business Management, 2011, Vol. 49(1), pp Cheung, G. W., & Rensvold, R. B., Evaluating goodness-of-fit indexes for testing measurement invariance, Structural Equation Modeling, 2002, Vol. 9(2), pp Chin, W. W., Frequently Asked Questions Partial Least Squares and PLS-Graph, 2000, Retrieved 28th February 2013, from Coviello, N. E., McDougall, P. P., & Oviatt, B. M., The emergence, advance and future of international entrepreneurship research - An introduction to the special forum, Journal of Business Venturing, 2011, Vol. 26, pp Dana, L.-P., The education and training of entrepreneurs in Asia, Education + Training, 2001, Vol. 43(8/9), pp Fishbein, M., & Yzer, M. C., Using theory to design effective health behavior interventions, Communication Theory, 2003, Vol. 13(2), pp Fontaine, R., & Richardson, S., Cross-cultural research in Malaysia, Journal of Cross-cultural Management, 2003, Vol. 10(2), pp Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. L., Multivariate Data Analysis (6 ed.), 2006, Upper Saddle River, N. J.: Pearson Education Inc. Hayton, J. C., George, G., & Zahra, S., National culture and entrepreneurship: A review of behavioral research, Entrepreneurship: Theory and Practice, 2002, Vol. 26(4), pp Henseler, J., PLS - MGA: A non-parametric approach to Partial Least Squares-based multi-group analysis, In W. Gaul, A. Geyer-Schulz, L. Schmidt-Thieme & J. Kunze (Eds.), Challenges at the Interface of Data

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