Marketing Intelligence & PlanningBarriers to internationalisation in SMEs: evidence from JordanKhalil Al-Hyari Ghazi Al-Weshah Muhammed Alnsour

Article information:To cite this document:Khalil Al-Hyari Ghazi Al-Weshah Muhammed Alnsour, (2012),"Barriers to internationalisation in SMEs:evidence from Jordan", Marketing Intelligence & Planning, Vol. 30 Iss 2 pp. 188 - 211Permanent link to this document:http://dx.doi.org/10.1108/02634501211211975

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Barriers to internationalisation inSMEs: evidence from Jordan

Khalil Al-Hyari, Ghazi Al-Weshah and Muhammed AlnsourFaculty of Planning and Management, Al-Balqa Applied University,

Al-Salt, Jordan

Abstract

Purpose – This study aims to identify some of the major barriers that may hinder potential small tomedium-sized enterprise (SME) exporters and non-exporters from exporting their operations in theinternational market.

Design/methodology/approach – Based on the aim of this study, a questionnaire based surveymethod was conducted among 250 Jordanian manufacturing SMEs using random sampling withusable response rate of 54 per cent. Data were analysed using relevant statistical methods rangingfrom factor analysis to regression analysis.

Findings – The results show that economic/political-legal and governmental barriers, financial andinformation barriers have a significant negative relationship with the export performance of SMEs inJordan. Also, the results show that exporters and non-exporters significantly agree in their views of thevarious barriers.

Research limitations/implications – The study was carried out on SMEs operating in Jordan.Hence, caution should be taken when generalisation across cultures is considered. However, thefindings of the study provide public and company policy makers with valuable guidelines for theformulation of suitable export marketing strategies and national export assistance programs.

Originality/value – This is ascribed to the relatively small local market size and to the country’sgradual shift from heavy reliance on import substitution strategies in the last two decades tocontemporary export orientation. Also, there is now a need for an urgent action plan to correct thedeficit in the trade balance in the Jordanian economy. This action plan needs to include what causesJordanian SMEs to export or prevents them from doing so. Once the relative importance of thesebarriers is detected, their validity in predicting the probability of a SME firm being an exporter can betested.

Keywords Internationalization, Exports, Exporting barriers, Jordan, Small to medium-sized enterprises

Paper type Research paper

1. IntroductionOne of the major hallmarks of the twenty-first century business environment is thephenomenal growth of globalisation (Pinho and Martins, 2010). Impelled byglobalisation, there is now intense policy focus on the internationalisation ofnational firms (Zimmermann and Kattuman, 2007). As a result of the intensifyingglobalisation of the world’s economies, as well as the focus on improving nationaldeficits, international business involvement is becoming particularly relevant both interms of national prosperity and for individual organisations (Morgan and Katsikeas,1997). The globalisation of the industrial environment and the marketplace in generalhas increased competition and exports. These issues are the most simple and commonways of the internationalisation of small and medium-sized enterprises (Papalexiou,2009).

The current issue and full text archive of this journal is available at

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Received 24 September 2010Revised 20 November 201011 February 201124 April 2011Accepted 27 April 2011

Marketing Intelligence & PlanningVol. 30 No. 2, 2012pp. 188-211q Emerald Group Publishing Limited0263-4503DOI 10.1108/02634501211211975

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Export activities increase profitability, improve trade balances, and help to dealwith the problems of poverty and unemployment (Karadeniz and Gocer, 2007; Koksal,2008; United States International Trade Commission, 2010). Small firms are becomingincreasingly international, and they have been reported to contribute between 25 and35 per cent of world exports in manufacturing activities (Andersson and Floren, 2008).Moreover, in the case of SMEs, they gain a particular relevance; export is the mostcommon foreign market entry mode for these firms (Organisation for EconomicCo-operation and Development, 2009). However, there are still many SMEs indeveloping countries that do not export or even contemplate doing so, despite the factthat exporting does not require a large amount of capital investment and has lessfinancial and commercial risk as a mode of a foreign market entry mode compared tosome forms of direct investment (Lages and Montgomery, 2004; Agndal and Chetty,2007).

Many of the previous studies on the internationalisation of firms have focused onmultinational enterprises or large, well-established firms (Ahmad and Julian, 2006;Zeng et al., 2008). In addition, an overview of the broad body of literature thataddresses exporting barriers facing SMEs in developing countries reveals that there islack of extensive research on this subject (Leonidou, 2004; Altintas et al., 2007). From ageographical view, the majority of research on export-related topics has been carriedout mainly in America and Europe (Ibeh, 2003; Neupert et al., 2006). As a result, therehas been paucity of research dealing with small enterprises and export development inthe Middle East in general and in Jordan in particular. Research on this topic has beendisappointingly scarce. This observation provides a scope for an important gap withinthe existing literature to be addressed concerning the need for more research to beundertaken in a number of geographic areas that have been neglected to date, such asJordan, which is a develop countries. This study is an attempt to bridge that gap.

The development of SMEs has been one of the major planks of Jordan’s economicdevelopment strategy since its independence. The SME sector occupies a place ofstrategic importance in the Jordanian economic structure due to its considerablecontributions in terms of output, exports, and employment (Lozi, 2008). For SMEs inJordan, the recognition of barriers that hinder involvement in exporting and how todeal with those barriers may stimulate more SMEs to contribute in the export market.Consequently, this study can make a significant contribution to both researchers andpractitioners in manufacturing SMEs. This study also can provide insights to bothexporters and non-exporters, as well as to decision makers, and may help to increaseperformance at the firm level. As a result these insights may be reflected in the nation’smacro-economic environment.

Following a review of the literature pertaining to internationalisation, exporting andexporting barriers, the methodology adopted in the study is outlined. Thereafter,findings are presented and discussed and issues for future research are identified.Finally, the implications for research in the area and for public policy markers insupport of the internationalisation of small firms are considered.

2. InternationalisationInternationalisation is defined as business activities that cross national borders; it isintended to create value in organisations (Welch and Luostarinen, 1988). Nowadays,internationalisation affects all firms, large and small. Increasingly, SMEs are

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confronted with international competition and forced to play an important role ininternational markets (Kuada, 2006). Internationalisation is found to be a significantaspect of the maximisation of business opportunities, and over the last few decades,many SMEs began internationalisation as a requirement for a business success(Rundh, 2007; Saixing et al., 2009).

Internationalisation has been widely used to describe the outward movement of theinternational operations of a firm (Zeng et al., 2008). Most internationalisation studiesfocus on the outward processes that are associated with exporting, licensing,franchising and foreign direct investment, with exporting being the main mode ofinternationalisation for SMEs (Eusebio et al., 2007; Westhead, 2008). This study isdesigned to investigate only one very relevant facet of internationalisation in detail –exporting, which is the most relevant to SMEs’ international business activities.

Growth of a firm outside of its own country is more crucial than growth inside thedomestic location only (Manolova et al., 2002). Numerous SMEs have successfully setup activities beyond their home markets and their role is increasingly important incontributing to future growth (Knowles et al., 2006). Companies, which a decade agofelt secure within their national borders, are now facing ever-increasing internationalcompetition (Etemad, 2004). In addition, domestic business environments have beenincreasingly affected by international economic factors, and the capability for smallfirms to isolate themselves from foreign competition has diminished, especially forfirms that operate in global industries (Anderson et al., 2004).

Internationalisation in general and exporting in particular can enhance a firm’smanagerial skills and capabilities, contributes to the economic development of nations,in developing national industries, improving productivity and creating employment,better facilitate the use of resources, and give it a greater degree of flexibility forundertaking diversified business risks (Rocha et al., 2009; Pinho and Martins, 2010).Similarly, operating in overseas markets may allow a firm to benefit from internationalcompetition and increase its involvement in foreign markets, thereby becoming astronger player in its home market (Kuada, 2006).

The trend toward increased internationalisation of world markets emphasises theimportance of understanding how firms behave and how they perform in internationalmarkets. An important research area has been export marketing research and inparticular a focus on internal and external determinants of export performance.

Research on the internationalisation of small firms has grown quickly in the lasttwo decades. There is a widespread and well-built body of literature that hasinvestigated small-firm international growth (Etemad, 2004; Kuada, 2006). Usually,SME internationalisation is dealt with using three distinctive and interconnectedapproaches: internationalisation process, export development and barriers, andinternational entrepreneurship (Manolova et al., 2002). This study focuses on exportingactivities and barriers and their effects on exporting performance for SMEs in Jordan.

3. ExportingExporting has become a significant internationalisation strategy for both companiesand national economies in the world markets (Koksal, 2006). Growing liberalisation,integration and competition in the world’s economies have been responsible for theincreasing engagement of firms in exporting activities (Ural, 2009). Also, pursuant tothe growing globalisation of the world’s economies, exporting activities for SMEs have

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become more consequential for the survival, growth and long-term viability ofbusiness organisations, since exporting is generally a less resource-laden approach ascompared with alternative foreign market entry and expansion modes since it requiresminimum business risk, needs low commitment of resources, and offers high flexibilityof movements (Neupert et al., 2006; Korez-Vider, 2007).

Policy towards SMEs internationalisation (or specifically exporting) has severalstrands. One strand is to encourage current exporting firms to export more. A secondstrand is to instigate non-exporters to begin exporting. Tesfom and Lutz (2006)indicated that international trade is particularly significant for developing countries,since it may create employment and provide foreign exchange with imports. Moreover,in developing countries an export strategy is perceived as a vehicle for growth andenhanced profitability for SMEs (Kazem and Van Der Heijden, 2006). Also, Ahmed et al.(2004) clarified that a common objective in most developing countries is to find ways toincrease exports. This can be obtained either by stimulating exporting firms to exportmore or by encouraging non-exporters to start exporting.

At the macro level, the engagement of more companies in exporting activities isconsidered to be an effective way of coping with trade deficit problems as well as atechnique to enhance the accumulation of foreign exchange, generating spillovereffects such as societal prosperity and assistance for local industries to boostproductivity, and driving economic growth (Morgan and Katsikeas, 1997) whereas atthe micro level, exporting can provide individual businesses with opportunities togrow, increase profits, stabilise demand, improve the utilisation of production capacity,develop superior management capabilities, enhance innovation in product and process,and strengthen financial performance (Lages and Montgomery, 2004).

Because exporting activities can generate such attractive benefits in globalbusinesses, and due to their growing importance in industrialised countries, anunderstanding of the exporting barriers has become particularly a significant issue intoday’s business environment (Kuada, 2006; Pinho and Martins, 2010). According toPinho and Martins (2010) and Leonidou (2004), the effective way of motivating localSMEs to go into overseas markets is to identify the main barriers that are faced bySMEs in going and operating effectively in overseas markets. Specifically, asacknowledged by Rocha et al. (2008; cited in Pinho and Martins, 2010), understandingbarriers to exporting may help the adoption of government policies to stimulatedomestic firms to export by eliminating or minimising the major impediments to theirforeign expansion.

The decision to internationalise activities is of crucial importance for manufacturingcompanies today, because intense worldwide competition in both domestic and foreignmarkets forces firms to compete internationally. Within the global context, Jordanianmanufacturing SMEs struggle to maintain competitive positions. SMEs in Jordan aremotivated to export by sales growth, market enlargement, strengthening ofcompetitiveness, and diminishing dependence on the home market (Sadeq, 1997).This importance of export for Jordanian firms can be justified partly based on the smallsize of the country and partly from general trends such as globalisation. Along thesame lines, to promote faster economic growth and reduce unemployment, Jordan hasfocused on a private-sector export oriented growth strategy (Hamoury and Labady,2003; Abual-Foul, 2004).

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Jordanian manufacturing companies are being forced to go beyond the Jordanmarket in order to survive. More and more companies are facing challenges ofglobalisation with the accompanying open borders. Hence, there is a real need forJordanian entrepreneurs to identify target exporting markets by adopting a globaloutward-oriented vision of business development.

4. Barriers encountered by SMEs in international businessBarriers to exporting have received considerable research attention from bothconceptual and empirical approaches (Ghauri et al., 2003; Altintas et al., 2007).Exporting barriers are treated within the literature as restrictions that disturb thefirm’s capability to start, develop, or uphold business operations in overseas markets(Morgan and Katsikeas, 1997). Export barriers often provoke failure in foreignoperations, bringing financial losses alongside negative attitudes towardsinternational activities amongst both current and would-be exporters (Leonidou, 1995).

Exporting barriers will only be perceived as problems to the level that they aresignificant and hard to manage (Katsikeas and Morgan, 1994). The conceptualproposition states that barriers make business performance more difficult overseas incontrast with domestic market activities. In this respect, removal or minimisation ofthese obstacles would contribute toward a higher export propensity and performance,a highly desirable goal of most governments (Wengel and Rodriguez, 2006).

Morgan (1997) found in his review of the literature about exporting barriers thatbarriers can be divided into two forms:

(1) barriers that dishearten firms from engaging in export activities; and

(2) barriers experienced by firms that have already started exporting activities –these barriers are often experiential in nature.

In contrast, in non-exporting firms, exporting barriers are likely to be perceptualreflecting the decision maker’s subjective opinion and beliefs (Morgan, 1997; Pinho andMartins, 2010). Actually, the occurrence of these barriers can largely clarify whycurrent exporters are not reaching their full potential in the international marketplaceand why non-exporters are not engaged in exporting at all (Leonidou, 1995).

Some researchers have investigated international business barriers and suggestedthat export barriers depend on the categories in which the firm can be placed andbecause of that, many studies found that manufacturing firms are often vulnerable to anumber of export obstacles that are identifiable at all stages of the internationalisationprocess, from the early stages to the more advanced stages (Johanson andWiedersheim-Paul, 1975; Bilkey, 1978). Export barriers can be encountered by the firmat any stage of the export development process, from pre-export and other initial stagesto extensive levels of international involvement. However, the aggregate nature ofthese barriers tends to differ systematically from one stage to another (Leonidou andKatsikeas, 1996). Although these differences in barriers are encountered, the literaturehas tended to emphasis two forms of export barriers, namely:

(1) barriers that discourage firms from engaging in export activities; and

(2) barriers experienced by firms which already have initiated export operations(Morgan, 1997).

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To bring the characteristics of these barriers together, different classificatorytechniques have been proposed. For instance, some of the literature distinguishesbetween initial problems and ongoing problems. More specifically, initial problems arerelated to a shortage of experience or knowledge and ongoing problems linked togreater participation in foreign markets (Bilkey and Tesar, 1977). Classification ofexport barriers was also undertaken by Leonidou (2004), who conducted acomprehensive analysis of 32 studies and classified 39 export barriers into internaland external barriers, whereby internal barriers can be referred to as those barriersthat originate within the firm’s internal environment and can be controlled by the firm,such as those associated with the firm’s resources and strategic approach to exportbusiness. On the other hand, external barriers are those barriers that are related todomestic and foreign environment within which the firm operates, but over which thefirm has no control.

While an extensive body of literature exists in terms of the need for understandingthe nature and role played by perceived obstacles to exporting (Leonidou, 1995, 2004;Katsikeas and Morgan, 1994), it is noticed that the research of exporting barriers stilllacks a comprehensive theory base that classifies the main export-marketing barriersof SMEs in small-sized countries whose economic development strongly depends onthis kind of activity. Also, an overview of the broad bodies of literature that addressexporting barriers facing SMEs in developing countries reveals that there has beenlack of extensive research on this subject (Tesfom and Lutz, 2006; Altintas et al., 2007).The majority of studies have reported upon data gathered in industrialised typicallyWestern countries (Ahmad and Julian, 2006; Leonidou, 2004). It is unfortunate to notethat not much is known about the international activities of these firms in developingcountries. The main reason for this is that they do not receive the same kind ofattentions as large companies do.

Many studies have been conducted to date; however, there are no common findingsamong these studies. Although is not the intention of this paper to analyse the reasonsfor the inconsistency among these studies. There are different reasons that areconsidered to be the causes of this inconsistency, such as country of origin, type ofindustry, type of firm, type of product, and the time frame contexts in which each studywas conducted, as well as the different research methods applied. In order to ensure agreater depth of understanding of SME exporting barriers, and to go a step further, thisstudy focuses on the internal and external exporting barriers that Jordanianmanufacturers face when engaging in international business, and their relationshipwith the export performance of Jordanian SMEs.

Given the structural differences between developed and developing countries, it ispossible that SMEs in developing countries may face challenges that are different tothose faced by their counterparts in the developed world. Therefore, as many authorshave stressed (e.g. Leonidou, 2004; Kazem and Van Der Heijden, 2006), understandingthe scope and importance of different barriers may be expanded by extending suchresearches outside of the developed countries arena.

5. Objectives/proposed conceptual frameworkThe importance of the contribution of SME to the Jordanian economy, and particularlyexport earnings, is therefore clear from the literature review. Growth is clearly animportant element and exporting is one of the most important forms of such growth.

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Hence, the need for SMEs to overcome export barriers is a key factor in their existence.These considerations and an examination of the literature have led to the followingmajor research objectives:

(1) to examine the relationship between exporting barriers and exportingperformance of Jordanian SMEs; and

(2) to investigate possible differences from SMEs managers’ perspectives towardsexporting barriers that are considered by way of their level of exportingactivities, ranging from non-exporter to exporter.

The conceptual framework for this study is presented in this section, along with thedevelopment of research hypotheses. The framework is comprised of three mainconstructs:

(1) internal exporting barriers;

(2) external exporting barriers; and

(3) exporting performance (see Figure 1).

So far, our review of the existing literature suggests that firms face many barriers toexport to international markets. These barriers have been categorised in different ways;however, for the purposes of this paper, the focus of study is on internal and externalbarriers. These barriers are major concerns for firms, especially SMEs, because of thenegative effects that they have on these firms’ performance in the internationalenvironment. In summary, this framework indicates that internationalisation barriersare the main cause of SMEs’ poor performance in international business.

5.1 Hypotheses developmentBelow, we consider the relational linkages in the proposed model and discussspecifically those variables that, according to existing theory, are likely to affect exportperformance.

The independent variables evaluating the exporting barriers to be used in theresearch are as follows:

. internal exporting barriers; and

. external exporting barriers.

To bring barrier characteristics together, different classificatory techniques have beenproposed. Based on an additional literature review and discussions with practitioners

Figure 1.The conceptualframework for thisresearch

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in Jordan a modified version of Leonidou’s (2004) model was developed into internalexporting barriers that correlated with organisational capabilities/resources andcompany approach to export business. For analytical purposes, internal barriers can bebroken up into informational, functional, financial and marketing barriers. Externalbarriers related to the home and host environment within which the firm operates can,for analytical purposes, be broken up into procedural, governmental, task andenvironmental barriers (see Table I).

Thirty-six export barrier items were selected for the study. As it has been advocatedthat one issue may be a frequent problem but not too important, while another may beof importance but rarely a problem, each barrier was measured for its obstructingimpact on ongoing export operations on a five-point scale, ranging from not important

Internal barriersInformational Insufficient information about overseas markets

Difficulty in gaining access to some data sourcesDifficulties in making customer contacts

Functional Lack of managerial time to deal with exportsLack of export skillsLack of excess production capacity for exportsLack of new technology

Financial High cost of capital to finance exportLack of financial resource to finance exports

Marketing Product Developing new products for foreign marketsDifficulties in adapting export product designMeeting export product quality/standardsMeeting export packing/labelling requirementsOffering technical/after sales service

Price Lack of competitive price to customers in foreign marketsDistribution Complexity of foreign distribution/advertising channels

Accessing export distribution/advertising channelsObtaining reliable foreign representation

Logistics High insurance costUnavailability of warehousing facilities abroadHigh transportation costs

External barriersProcedural Complexity of export documentations requirements

Inadequate communications with overseas customersSlow collection of payments from abroad

Governmental Lack of Jordanian government incentivesInadequate government regulations and rulesComplex government bureaucracy

Task Keen competition in export marketsEnvironmental Economic Poor or deteriorating in economic situation in the region

Currency fluctuationsUnconvertible foreign currencies

Political-legal Political instability in foreign marketsStrict foreign rules and regulationsHigh tariff and non-tariff barriers

Sociocultural Language differences overseasCultural differences overseas

Table I.Classification of export

barriers based on themodified model of

Leonidou (2004)

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at all (1) to very important (5). The classification proposed by Leonidou (2004) is ofparticular interest as it systematises the major internal and external export problemsthat can influence an export-marketing strategy (Table I). This typology provides acomprehensive basis for understanding exporting barriers, and is useful for theformulation of suitable marketing strategies and national export assistance programs.

The dependent variable, export performance, has long been a construct of centralinterest in the international marketing literature (Sousa, 2004; Katsikeas et al., 1996).Such interest was activated by the low exporting performance of many countries thathave the prospective to be successful exporters, and the incapability ofmacro-economic studies to clarify the different export performances of firms withinthe same industry and country (Boukersi, 1990; cited in Boodai, 2001). Since then, asubstantial amount of literature has confirmed that external and internal variablesaffect an individual firm’s export performance and its internationalisation process(Katsikeas et al., 2000).

There is no general agreement about a theoretical framework regarding the exportperformance of firms. However, a number of researchers have tried to give anintegration of the literature in order to posit such a framework and models of exportperformance (e.g. Katsikeas et al., 2000). In addition, there is general evidence thatexport performance is affected by a variety of factors; nevertheless there is nounanimous agreement on the existence or the influence of certain factors on the exportperformance. Such factors are numerous. For example, Gemunden (1991; cited inBoodai, 2001) in his review of 50 export-related empirical studies recognised more than700 factors.

With this background, export performance was operationalised using subjectivemeasures of export sales, total sales and profitability. Respondents were asked toindicate their perception of how well their company had performed in achieving each ofthese objectives over the last three years. A five-point scale, ranging from “significantdecline” (1) to “significant increase” (5), was used.

It is considered that the causal link between perceived export barriers and exportperformance was likely to be that the former gives drop to the latter. Thus, theargument is that the greater the level of certain perceived export barriers, the less likelygood performance will be. Thus, it is expected that perceived export barriers arerelated to export performance and the following hypotheses are presented:

H1. The perceptions of SMEs managers toward exporting barriers are similarbetween exporters and non-exporters.

H2. The higher the perceived (a) internal and (b) external international barriers,the lower the performance.

6. Methodology of the studyThis study employed a quantitative research design using a survey method. Twohundred and fifty questionnaires were distributed to Jordanian manufacturing SMEsusing random sampling. The sample was drawn from the population of Jordanianindustrial firms that were determined, based on the Jordanian Ministry of Industry andTrade, to fit definition of small and medium-sized organisations (employing 249personnel or fewer). This sample was based on a sampling frame provided by theJordanian Ministry of Industry, Chamber of Commerce, and General Statistics

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Department. The sample covers a wide cross number of industries including, food,clothing and textiles, paints, furniture, electronics, pharmaceuticals, health, andpersonal care products, specialty chemicals and detergent products.

The questionnaire was piloted with a small group of respondents (exporters andnon-exporters) and some academic in relevant disciplines to test face validity for thedesigned questions. Cronbach’s a was used to test the reliability of the measurementscales. The results of the analysis revealed a Cronbach’s a of 0.906 for the multi-itembarriers scale indicating satisfactory internal reliability.

Data were gathered during summer 2010. The data obtained form the questionnairewere reduced using factor analysis. The research model was constructed usingmultiple regression analysis technique. The software used for all the statisticalanalysis was SPSS Version 17. The multiple regression analysis was carried out withdependent variables that measured SME export performance, and 36 independentvariables that measured internal export barriers and external export barriers.

7. Analysis and discussionThe characteristics of the sample are summarized in Table II. A total of 140questionnaires were returned from 250 sent, 135 of which were useable. This translatesinto an overall response rate of 56 per cent, and a usable response rate of 54 per cent. Asfor the profile of the respondents, the sample consisted of 135 respondents, of whom127 were top and middle management (94.1 per cent of the sample) and eight werelower management (5.9 per cent of the sample). This is consistent with the definition of

Profile of the companies n Percentage

Highest educationPrimary school 7 5.2Secondary school 48 35.5Undergraduate 43 31.9Postgraduate 37 27.4

Number of employees1-9 15 11.110-49 69 51.150-249 51 37.8

Currently export overseasYes 101 74.8No 34 25.2

Title of respondentTop management 78 57.8Middle management 49 36.3Lower management 8 5.9

Respondents’ age20-30 years 10 7.431-40 years 29 21.541-50 years 40 29.651-60 years 36 26.7.60 years 20 14.8

Table II.Profile of sample firms

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a SME, in that the owner usually is the manager. Moreover, 59.3 per cent of therespondents had at least a Bachelor’s degree. As far as export activity was concerned,of the 135 firms that responded 101 were current exporters and 34 were non-exporters.

In terms of firm size, Table II shows that approximately 62.2 per cent of the firmsemploy 49 workers or fewer. The number of employees in the firms in the sampleranges from one to 249 employees. It is illustrated that 100 percent of the respondentsare within the Jordanian government definition of SMEs. This confirms that the targetaudience of SMEs completed the questionnaires.

The results of the principal component analysis with Varimax rotation are given inTable III. According to the results of the analysis, external exporting barriers aregrouped under three headings. The first factor relates to issues of governmental,economic, political, and legal barriers. The second factor is heavily loaded with fivevariables exemplifying procedural and currency barriers. The third factor containsthree variables exemplifying task and sociocultural barriers. Factor analysis explains74.206 percent of the total change in variation.

From the 21 variables that measure internal exporting barriers, four variables werediscarded (i.e. meeting export packing, unavailability of warehousing facilities,developing new products for foreign markets, and offering technical/after sales service)since these had low factor extraction (,0.50).

The results of the principal component analysis with Varimax rotation are given inTable IV. The results show that the internal exporting barriers are grouped under threeheadings. These are barriers relating to the lack of foreign market information and lackof financial resource to finance exports, marketing barriers, and functional barriers.Factor analysis explains 67.289 per cent of the total change in variation.

Factor groups

Mean(non-

exporters)Mean

(exporters) 1 2 3

Governmental and economic political/legal barriersLack of Jordanian government incentives 3.78 3.87 0.888Inadequate government regulations and rules 3.89 3.93 0.872Complex government bureaucracy 3.68 3.71 0.795Poor or deteriorating economic situation in the region 4.15 4.49 0.851Political instability in foreign markets 4.02 4.46 0.858Strict foreign rules and regulations 4.02 3.92 0.761High tariff and non-tariff barriers 0.768

Procedural and currency barriersCurrency fluctuations 3.71 3.64 0.625Unconvertible foreign currencies 3.64 3.67 0.624Slow collection of payments from abroad 3.89 3.92 0.725Complexity of export documentations requirements 3.14 2.97 0.760Inadequate communications with overseas customers 3.59 3.63 0.815

Task and sociocultural barriersKeen competition in export markets 4.03 4.09 0.889Language differences overseas 3.05 2.85 0.901Cultural differences overseas 2.84 2.79 0.798

Table III.Rotated componentmatrix for externalexporting barriers: mean

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The exporting performance of SMEs is measured through the “overall subjectiveexport performance” factor. This factor is composed of the variables that measureoverall sales, export sales, and profitability, all over the last four years, as given inTable V.

7.1 Test of hypotheses7.1.1 Test of H1. This hypothesis was tested by comparing the mean scores ofexporters’ and non-exporters’ perceptions about exporting barriers. To conduct theanalysis, our sample was split into exporters and non-exporters for the sole reason ofcomparison. According to the mean value of the importance distribution of exporters’and non-exporters’ perceptions towards exporting barriers considered by way of their

Factor groups

Mean(non-

exporters)Mean

(exporters) 1 2 3

Informational barrierInsufficient information about overseas markets 4.35 3.66 0.686Difficulty in making customer contact 3.03 2.98 0.825Difficulties in gaining access to data sources 3.49 3.51 0.666

Functional barriersLack of managerial time to deal with exports 3.51 3.49 0.506Inadequate/untrained personal for exporting 3.91 3.71 0.791Lack of export skills 3.00 3.01 0.529Lack of new technology 2.89 3.04 0.655Lack of excess production capacity 3.02 3.12 0.540

Financial barriersHigh cost of capital to finance export 4.35 3.78 0.826Lack of financial resource to finance exports 4.36 3.41 0.802

Marketing barriersDifficulties in adapting export product design 2.98 3.03 0.708Meeting export product quality/standards 4.42 4.05 0.744Lack of competitive price to customers in foreignmarkets 3.85 4.38 0.647Complexity of foreign distribution channels 2.98 3.01 0.607Obtaining reliable foreign representation 3.12 3.06 0.594High transportation costs 3.62 4.37 0.518High insurance costs 3.20 3.21 0.525

Table IV.Rotated componentmatrix for internal

exporting barriers: mean

Initial eigenvalues Extraction sums of squared loadings

Component TotalPercentage of

varianceCumulativepercentage Total

Percentage ofvariance

Cumulativepercentage

1 2.713 90.442 90.442 2.713 90.442 90.4422 0.182 6.079 96.5213 0.104 3.479 100.000

Note: Extraction method: principal component analysis

Table V.Total variance explained

for the subjectiveperformance factor

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level of export activities, Tables III and IV show that the most important perceivedbarriers for exporters seem to be political instability in foreign markets, and a poor ordeteriorating in economic situation in the region. High transportation costs and lack ofcompetitive prices to customers in foreign markets are other areas of concern.

The high ranking of these factors is to be expected, since they reflect the viability ofexport involvement in overseas markets and the political instability of the region,particularly in Iraq and Palestine, and the high competition due to the newly signedfree trade agreements (FTA). Muhtaseb (1998) found that Jordan’s export prices wereaffected by the economic crisis that faced Jordan and the lower increases in Jordan’scompetitors’ prices owing to recessionary conditions in the world economy andsluggishness in world trade. In addition, these results are consistent with those ofLeonidou (1995), Ahmed et al. (2004) and Kaleka and Katsikeas (1995), who found thatpolitical instability in foreign markets and international competition in export marketsare major barriers to exporting. Excessive transportation costs arise from longdistances between foreign markets, and the political instability of the regionparticularly in Iraq and Palestine, which usually lead to delays in product delivery andincreased transportation costs.’

In contrast, the most important perceived barriers for non-exporters seem to be:. insufficient information about overseas markets;. lack of financial resources to finance exports; and. difficulties in meeting importers’ product quality

The latter seems to be the biggest barrier. The quality of the product is generallydesignated one of the essential conditions for entering foreign markets. Manufacturersand operations managers have to pay more serious attention to the higher value ofproducing new products instead of only concentrating on existing products.

According to Leonidou (2004), barriers are connected to the product, and the lack ofproduct/service suitability (design/functionality) assumes particular significance fornon-exporters. This can be clarified by the varied conditions of use, diverse consumertastes, and diverse socio-cultural settings that favour a major adjustment to thecharacteristics of each foreign market. In some cases, foreign governments applyspecial legislation to set quality standards for certain types of products, makingproduct adaptation an important requirement.

SMEs that consider the lack of information as an important export barrier becomeless internationalised. These implications show that if the firms have a high level ofknowledge barriers, they are likely to feel uncertain about how to engage in exports.Thus, firms that perceive a high level of knowledge constraints become lessinternationalised. This result is consistent with the model of Johanson and Vahlne(1977), which indicates that international market development is an incrementalprocess characterised by the firm’s acquisition, integration and use of knowledge aboutforeign markets and operation and by a successively increasing commitment to foreignmarkets.

Compared to larger firms, SMEs are typically characterised as“resource-constrained”, a situation that lessens their ability to export. SMEs aremore likely to face scarcities of financial and human resources that limit their ability toact on opportunities abroad (Pankaj and D’Souza, 2009; Okpara, 2010). This can bejustified by the fact that the perception of non-exporters about financial incentives for

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exporting activities are not adequately attractive, they may have little or no interest inexporting, or may lack the time and expertise to apply for government funds.Unexpectedly, a lack of financial assistance is not perceived as an influential barrier forexporters, maybe since their expectancy about export assistance programs is low orthey have already internationalised.

According to Ajlouni (2006), access to finance is one of the common problems facingall SMEs in Jordan. This can be observed in the firms’ need for funds to start up andgrow. The banking sector is reluctant to lend to SMEs since they are unable to pledgeenough collateral and sometimes their newness translates as an insufficient trackrecord. Lozi (2008) argued that despite the attractiveness of small industries forinvestment, financial institutions in Jordan seem hesitant to finance this sector, sincethese industries are characterised as having traditional assets, being high risk andhaving low value when compared to the capital assets of large-scale firms.

A number of researchers have directed their attention to managers’ perceptions ofexport constraints and barriers over the past two decades. Leonidou (2004) found thatwhile export barriers can be found at any stage of the export development process,their nature may differ from one stage to another. The recognition of barriers at eachstage is a very significant issue to identify whether certain barriers thwart the progressof a firm from one stage to the next stage. If the firm is unable to deal with obstacles inthe early stages then the firm will probably withdraw from exporting. According toPinho and Martins (2010), the perception of barriers can vary intensively depending onthe export stage of the individual firm. Actually, the occurrence of these barriers canlargely clarify why current exporters are not exploiting their full potential ininternational markets and why non-exporters are not engaged in exporting at all.

As shown in Tables III and IV, we reject H1, but one could conclude that exportersand non-exporters largely agree in their views of these barriers to export. Moreover, thestudy shows that there is a high similarity between the export problems that are facedby manufacturing firms in both developed and developing countries. Almost all exportbarriers that are identified in developing countries exist in the developed world,especially for small and medium-sized firms.

From a simple inspection of Tables III and IV, it is apparent that external exportbarriers are viewed as being greater than internal barriers, since the mean values forthe external barriers are higher as compared with the mean values of the internalbarriers. These results indicate that external barriers are viewed as more of a problemthan internal barriers overall. The findings in this section are consistent with previousresearch done in the field. The results of Neupert et al. (2006), after using the distinctionbetween “internal” and “external” barriers, which are noted by Leonidou (2004),revealed that most of the barriers encountered by Idaho firms would be classified as“external”, and are related to differences in rules and regulations between countries, aswell as socio-cultural and procedural differences. Many researchers have recognisedthat the origins of a substantial number of exporting barriers facing firms are couchedin the external environment (Silva and Rocha, 2001; Tesfom and Lutz, 2006). Also,Koksal (2006) found that the most important export barriers that firms encountered inhis study of Turkish companies were generally related to the macro environment inwhich they operate, such as the continuously changing exchange rate of the Turkishlira, economic instability and inadequate government export incentives.

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Furthermore, it is interesting to note from a simple inspection of Tables III and IVthat the majority of the items have a mean value above the mid-point of the scale,which implies that the sample of firms regards both internal and external exportingbarriers as presenting serious barriers in relation to export development.

7.1.2 Test of H2. Multiple regression analysis was used to test H2 to ascertainwhether a significant amount of the variation in the export performance of small firmscould be explained by these variables. Having evaluated all the regression methods –i.e. enter, stepwise, forward, backward and remove – the researchers decided to adoptstepwise. Tables VI and VII shows the results of the regression analysis. In addition,Table VII reports the adjusted R 2 for the full model. Beta coefficients for the full modelare also presented in Table VI.

From the data presented in Tables VI and VII, two of the perceived export barriersfactors are strongly linked to overall subject export performance in model 2. These areeconomic/political-legal and governmental barriers and information and financialbarriers, which have a significant negative relationship with export performance.These results provide support for H2 in relation to these specific factors but not inrelation to procedural and currency barriers, marketing barriers, functional barriers,and task and sociocultural barriers.

The findings show that the vast majority of the manufacturing SMEs in Jordan thatconsider certain political and economic uncertainly in foreign markets tend to have alow exporting performance. This could be interpreted, as firms that do not takemarketing risks tend to have a low export performance. Moreover, the managerialbelief of a political and economic uncertainty in the potential target market is a result ofthe lack of expertise in exporting activities, which is a result of lack of information.Mellahi et al. (2005) found that the major risk of export is when countries experience amajor political instability.

Because of the political and economic uncertainty in the region, Jordan has lostmany of its export markets in the Gulf, together with an important source of financialaid and official development assistance. Jordan relied heavily on neighbouring Arabmarkets (in particular Iraq and the Gulf countries). Approximately 50 per cent ofJordanian exports went to Arab countries, with Iraq absorbing the largest share (44.4per cent), followed by India and the EU. Jordan was hoping to compensate for the lossof Iraqi exports by intensifying trade relations with the Palestinian National Authority(PNA). However, security-related impediments to trade with the PNA have led to asubstantial decline in Jordan’s exports to Palestine.

For Jordan, the 1990s began in a difficult fashion. The country had to face the hardissues of how to respond to difficulties arising from Iraq’s attack on Kuwait in Augustof 1990. The imposition of restrictions on Iraq in 1990 – Jordan’s biggest tradingpartner at the time – meant that commercial ties with Baghdad collapsed. In 2003, theeffect of regional events on the country was also underlined yet again due to the waragainst Iraq, which caused a substantially negative impact on the Jordanian economy.The unstable security in Iraq presented a devastating blow to Jordan’s economy,particularly to the SME sector. Moreover, around 300,000 Jordanians returned from theGulf countries, leading to a considerable increase in unemployment. The risk thatfurther rising unemployment causes to political stability is obvious, and hence theimportance of exporting as a means of lowering this problem becomes clearer.

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Un

stan

dar

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fact

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Table VI.Multiple regression

analysis results

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Therefore, Jordan has to re-evaluate its situation and provide transitional help to SMEsin order to continue and improve their function as the backbone of Jordan’s economy.

Exporters often suffer due to the inadequacy of government export promotionpolicies that contain lack of gathering and provision of information on available exportpossibilities, and worthless promotion of the country’s exports overseas (Tesfom andLutz, 2006). In addition, the assistance offered by government does not provide for thespecific needs of small firms because often it does not take into account their stage ofexport development. Ahmed et al. (2004), in their study exploring the barriers to exportthat Lebanese entrepreneurs face when engaging in international business, found thelack of government assistance to be the major barrier to export. Kaleka and Katsikeas(1995) concluded that Cypriot exporting manufacturers attached a high degree ofimportance to a set of government-related problems such as a lack of governmentassistance and export promotion programmes sponsored by the government. Bilkey(1978) and Morgan and Katsikeas (1997) concluded that government restrictions wereone of the most frequent obstacles to exporting. Freeman and Reid (2006) found thatgovernment regulations and bureaucracy were a key constraint emphasised withinCentral and Eastern Europe (CEE).

SMEs that consider lack of information an important export barrier show highprobabilities of having poor export performance, since quick access to new technicalinformation on foreign markets can play a strong role in the export performance. Thenegative relationship between knowledge barriers and export performance could beexplained by the fact that if firms have a high level of knowledge barriers then they arelikely to export less due to feelings of uncertainty about how to engage in exports. Thus,firms that perceive a high level of knowledge constraints become less internationalised.This result is consistent with model of Johanson and Vahlne (1977) that internationalmarket development is an incremental process characterised by the firm’s acquisition,integration and use of knowledge about foreign markets and operation and by itssuccessively increasing commitment to foreign markets. This model of gradualincremental steps to international business enlargement was established on a sequenceof incremental decisions whose successive steps of increasingly higher commitment werebased on knowledge acquisition and learning about the foreign market, whereas firmswill gradually increase their commitment to foreign markets as they gain knowledge andexperience in those markets. The implication is that some firms are limited in the degreeto which they can become internationalised because of knowledge barriers.

The financial barriers variables have a negative relationship with an exportperformance, mainly because the represent constraints to international expansion thatconsiderably limit the activities of SMEs, and have a negative impact on SMEs’ abilityand probabilities to sell abroad. Finance is one of the common problems that face allSMEs in Jordan. This can be observed in the firms’ need for funds to start up and grow.

Model R R 2 Adjusted R 2 SE of the estimate Durbin-Watson

1 0.848 0.719 0.714 0.534455152 0.891 0.795 0.790 0.45867164 1.590

Notes: aPredictors: (constant), REGR factor score 1 for analysis 2. bPredictors: (constant), REGR factorscore 1 for analysis 2, REGR factor score 2 for analysis 2

Table VII.Model summary

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The banking sector is reluctant to lend to SMEs since they are unable to pledge enoughcollateral and sometimes their newness translates as an insufficient track record. Also,the recent global financial and economic crisis has been accompanied by anunprecedented decline in international trade volumes (Freund, 2009). Apart from theslump in global demand, restricted access to trade finance could be one reason for thisdecline (Arndt et al., 2009).

8. ConclusionsThis study shows that there is high similarity between exporting barriers that arefaced by manufacturing firms in developed and developing countries. This means thatmanufacturing firms in developing countries can learn some remarkable lessons fromthe experience of the developed world in solving export barriers. In addition, the resultsof the current study show that exporters and non-exporters largely agree in their viewsof these barriers to export. Actually, the occurrence of these barriers can largely clarifywhy current exporters are not exploiting their full potential in the internationalmarketplace and why non-exporters are not engaged in exporting at all. In addition,this study provides an exploratory step in extending the work of Leonidou (2004) toother countries, in particular to developing countries.

Several factors were identified as barriers that hinder the development of exportactivities in Jordan, more specifically:

. political instability in foreign markets;

. poor or deteriorating in economic situation in the region;

. financial and informational barriers; and

. lack of competitive price to customers in foreign markets.

All of the factors play a major role in a firm’s decision to enter the export market.Recently, a main target mission in Jordan’s development strategy has been to reducethe economy’s reliance on economic and political developments in the wider region. It issignificant to avoid the return of past incidents of reversals in economic growth owingto external regional shocks. Supporting trade activity that ties Jordan with countriesoutside the region is another priority. Another barrier to internationalisation isregulations and red tape. Therefore, policy measures should aim at decreasing thesebarriers, rather than further increasing the administrative responsibility that SMEsalready have to deal with.

Globalisation has presented SMEs with many threats and challenges. Even indeveloped countries, few SMEs have attempted to build export competitivenesswithout government support; hence policy measures should aim at reducing entrybarriers and lowering the cost of international expansion, such as the protection ofproperty rights, and transaction costs. It is also necessary that a culture of essentialassessment of such exports is improved so that Jordanian exports are developed notonly in terms of quantity, but also in terms of quality and the value added included inthem. The study concludes that public policy makers and export assistanceorganisations in Jordan should play an active role in enhancing exporting activitiesamongst local firms. It can be considered that if barriers to a firm exporting can beidentified, efforts by public policy makers could be better targeted to support firms andovercome such obstacles.

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9. Implications of the studyBased on the findings of and insights gained from this study, some implications andrecommendations can be proposed to different parties, such as government policymakers and SME managers in Jordan. Public policymakers should assist companies inreducing the inhibiting consequence of export barriers, as exporting can improve tradebalances and help to deal with the problems of poverty and unemployment. There isclearly a need for well-designed national policies to provide useful help for exporters,including specific incentives to stimulate exporting activity. Government should try tomaintain and enhance information networks on a national basis, such as the institutionof trade fairs, exhibitions, the use of e-commerce as a tool for overcoming marketdistance, and trade missions, as they appear to be popular sources of exportinformation and have an immediate impact on enhancing export sales. Also, it isnecessary to motivate non-exporters to become interested in entering foreign marketsby increasing decision makers’ awareness of the growth and profit advantage that canbe achieved through export activities.

Also, organised private sector institutions can play a critical role in providing theexport knowledge, training, and education needed to SMEs through workshops andseminars. Graduate courses in most Jordanian business schools are still limited and donot address the most relevant matters for export managers. In some cases,international business and international marketing courses are considered highlyspecialised areas from the point of view of SMEs. There is a need to reposition andpromote these courses within the context of small and medium-sized enterprises.

At the management level of SMEs, there are a number of managerial implicationsthat can be drawn from this study. Exporting activities may be very attractive from themanager’s perspective; going beyond national borders and exporting to foreignmarkets can provide many positive benefits for SMEs such as growth, expansion, andsurvival. More specifically, through exporting, SMEs can generate more funds forreinvestment and growth, extend the life cycle of their products, build a strongercompetitive position, diversify their businesses and minimise risks by operating inmultiple markets, and use foreign market to absorb their excess capacity.

The value of the study can be represented in the theoretical and practicalcontributions. It presents a set of guidelines to pledge continuing viability and successin the global marketplace. Exporters in developing countries need to be moreinnovative when selling their goods overseas and internalise all export marketingtasks currently carried out by their import customers. This would steadily ease boththe nature and intensity of export obstacles and permit indigenous firms to developtheir financial, marketing and other business competences. This could be attained, forinstance, throughout closer cooperation with overseas customers, creating strategicalliances with other exporters.

To assuage the negative relation between lack of managerial experience and exportperformance, more visits overseas, export workshops and seminars, and overseastraining programmes on product development and marketing will help SME managersto overcome mental barriers and develop positive attitudes toward internationalmarketing activities. Also, better targeting of foreign markets could reduce troublefrom a deteriorating economic situation and high political instability.

This study has provided a contribution to the literature by discussing the empiricalfindings and formulating conclusions from a Jordanian perspective, and therefore has

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laid the foundations for researchers to replicate the research with respect to export andexporting barriers in other countries in addition to advancing particular aspects of thisstudy in Jordan.

10. Limitations and future researchInterpretation of our study findings and conclusions should be made in light of somelimitations. From a methodological point of view, the scope of this quantitative studywas national, but still essentially manufacturing-oriented. While these samples areindicative of the industrial marketing of SMEs, they are unlikely to be entirelyrepresentative. The question of generalisation inevitably arises from the use of alimited number of participants. Therefore, the economic and cultural differences ineach environment should be considered in generalising these findings to othergeographical contexts.

For future research in this area, there is a need to focus on different countries anddifferent sectors and extension of the model to additional areas or to other sectorswould be welcome. It is also worth examining the impact of the same exportingbarriers over a long period of time, by carrying out a longitudinal study. It is beneficialfor future research to explore the other factors influencing the export performance,such as country of origin, type of industry, type of firms and type of products. Also,there is a need to consider differences in perceived export problems based on thedifferent export stages of the individual firms. Furthermore, future studies could use aqualitative technique such as interviews to determine how and why the export barriersoccur, and how these barriers can be effectively resolved. After all, it is hoped that thepresent study sheds light on this field of research and encourages future research.

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About the authorsKhalil Al-Hyari is an Assistant Professor of SMEs Management at the Faculty of Planning andManagement, Al-Balqa Applied University, Jordan. He has a PhD in SMEs Management from

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Glamorgan University, UK. Dr Al-Hyari has published several research papers in the field ofSMEs management in international refereed business journals. His research interests are theinternationalisation of SME activities and exporting, Islamic marketing, research methods, andSMEs management. Khalil Al-Hyari is the corresponding author and can be contacted at:khyari77@yahoo.com

Ghazi Al-Weshah is an Assistant Professor of Marketing and Assistant Dean for Planning,Development, and Quality Assurance at the Faculty of Planning and Management, Al-BalqaApplied University, Jordan. He has a PhD in Marketing from University of Wales, UK. DrAl-Weshah has published several research papers in the field of marketing in internationalrefereed business journals. His research interests are marketing information, competitiveintelligences, SMEs marketing, e-business, and e-marketing.

Muhammed Alnsour is an Assistant Professor in Marketing at the Faculty of Planning andManagement in Al-Balqa Applied University. He has a PhD in Marketing from University ofBradford, UK. His areas of interest are relationship marketing, e-commerce, ethics and culturalissues in marketing.

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