Analysis of the Global Competitiveness of Northeastern Food Firms: Experience and interest in foreign Activity
Hagen, James M.; Santos, Carlos A.
The objective of this study was to gain a better understanding of the characteristics of small to medium sized food firms in the Northeast (New York and Pennsylvania) that influence their decision to be involved or interested in foreign markets. The study involved the use of a survey, and we used a series of logistic regression models as well as correlation and cross-tabulations. Of the 116 food-manufacturing firms of New York and Pennsylvania that we successfully contacted in the survey, 55 are involved in foreign activity or were in the past, and 73 firms were interested in starting or expanding their foreign activity. We grouped the determinants that influence a firm's decision to enter or be interested in entering foreign markets ~n seven categories: size, product type, diversification/specialization, marketing knowledge advantage, R&D intensity, seller concentration and competitive nature of the firm. The results indicated that the characteristics found in firms that have experience in foreign activity are large size, high diversification, less marketing knowledge, high R&D intensity, low local competition and high domestic competition. The characteristics associated with an interest in starting or expanding foreign activity were the type of product (perishable), high amount of own brands, high R&D expenses as a percentage of total sales, low local competition, and a high percent of domestic and foreign competition. Size was not significantly associated with any entry mode. Canada, Mexico, Europe, South America and Asia were the preferred foreign markets entered. Firms with experience in foreign markets were associated with an interest in direct exports. Firms producing non-perishable products tended to be more interested in establishing warehouses abroad. Small and more specialized firms tended to be more interested in copacking and licensing as entry modes. Europe was the market most firms were interested in entering, for every entry mode. Firms without experience in foreign activity described lack of information as a barrier to enter foreign markets. Firms with experience in foreign markets considered price competition, tariff barriers and other government regulations as obstacles to enter foreign markets. Lack of time was perceived as a barrier by firms that were specialized and had interest in foreign activity. Tariff barriers were a concern for firms that were large and diversified. Firms with no experience in foreign activity perceived their small size as a barrier. Almost all firms believed that their size is too small before entering foreign markets. When firms actually decide to go abroad, they realize that size is not that important. Firms that feel threatened by foreign competition tended to have experience or interest in foreign activity.
Charles H. Dyson School of Applied Economics and Management, Cornell University