Trade Mission’s effectiveness: A consumer perspective on Dutch trade missions

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Master Thesis

Leiden University

Public Administration: International and European Governance

Trade Mission’s effectiveness: A consumer perspective on Dutch

trade missions

Bram van Essen

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Abstract

The academic community is yet to find a unified answer to the question whether trade missions are effective in what they set out to do: Promote exports. Earlier research on the topic has stressed that research from a consumer-perspective could be useful to establish whether trade missions have added value in the internationalization-strategies of companies. This thesis outlines research based on government data of the Dutch government on 53 trade missions. This data is used to establish whether businesses perceive trade missions to have added value and what goals within their internationalization strategy are best served by participating in Dutch trade missions. Furthermore, the data is also used to examine what factors have influence over the perceived added value of trade missions. The overall goals of this thesis are to test previously conceived hypotheses on the effectiveness of trade missions and to better understand what gives some trade missions a strong perceived added value and others a low one.

Introduction

The modern world has made It much easier for businesses to explore foreign markets. One tool to go explore foreign markets is the trade mission. A recent example of a trade mission that got a lot of media attention is President Trump’s trade mission to China. The official website of the USA’s export promotion agency mentions that the mission was partly set up to address the export imbalance between the countries (Export.gov, 2017). The trade mission is in this regard not a goal in and of itself, but a tool used by government to address an economic disparity. The trade mission is also a tool for the businesses that participate in them. This is reflected in the official goal-statement of the export promotion agency on the mission, which mentions that some of the primary goals of the mission are to confirm the US’s support for US’s businesses in China and to promote new sales and investments between U.S. businesses and Chinese entities (Export.gov, 2017). Businesses are asked to pay a fee of 10.000 U.S. dollars (large companies or trade associations) or 9.500 U.S. dollars (small- or medium-sized companies) for every first participant they would like to send in the delegation of the trade mission. This begs the question of why companies choose to participate in these costly events, when they can also explore foreign markets on their own or participate in trade missions organised by trade associations or other businesses. Especially large companies, which have the recourses and the know-how to explore foreign markets on their own. What we see though is that Trump is joined in his mission to China by CEO’s of some of the largest companies in the U.S., examples are: the CEO of Goldmann Sachs, Qualcomm and Air Products (CNBC, 2017). This thesis will examine why businesses choose to participate in trade missions and does so by looking at what businesses perceive as the added value of trade missions.

To do so, this thesis will start with an overview of what other scholars have written about the effectiveness of trade mission in a literature review, then this thesis will detail it’s research design (goal, type and structure of the research) and research method ( central concepts, measurement and case selection). The analysis of the data comes after these two sections, which is following by a conclusion and discussion of the results.

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Background

This thesis is part of the master ‘Public Administration: International and European

Governance’ at Leiden University. Besides working on this thesis, I have had the pleasure of working for the Directorate of International Enterprise at the Dutch Ministry of Foreign Affairs in an internship from September 2016 till February 2017. This internship was instrumental in my understanding of the Dutch practice of trade mission-policy, as I had the opportunity to work with all organisations involved in the organization of Dutch trade missions. This internship also gave me the experience of being part of the organization of an outgoing trade mission myself and taught me the basics of the evaluation-process of Dutch trade missions. My academic background is in the field of Political Science, specifically International Relations.

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Literature review

The literature review will be split up into four separate parts: Part 1: General:The basic definitions and the academic research thus far

Part 2: A Theory for a firm’s internationalization process Part 3:Factors that contribute to a ‘successful’ trade mission

Part 4: The added value of my own research with reference to parts 1 and 2

-Part 1- General

The open liberal trade environment as well as some economic downturns of the recent past have pushed governments to adopt trade-promotion policies. Promoting exports is one of the goals these types of policies seek to accomplish (Spence, 1999, p2). This goal takes shape in the form of export promotion programmes, of which trade missions are one example. Other examples of export promotion programmes are subsidies, trade fairs and informational tools for companies. Most governments in developed, but also developing countries offer some form of export promotion programmes (Spence, 1999, p2). Another term linked to trade missions is ‘commercial diplomacy’, which is “a government service to the business community, which aims at the development of socially beneficial international business ventures” (Silva, 2015, p8). Trade missions fit this definition, because trade missions are organized mainly to benefit businesses, especially small- and middle-sized companies. Only in this case, supporting the internationalization-process of these types of companies itself is also seen as socially beneficial by some countries.

Export promotion programmes are defined as: "all public policy measures that actually or potentially enhance exporting activity either from a fírm, industry or national perspective" (Seringhaus 1986, p.55). The overall strategy behind export promotion programmes is: “to motivate firms to become more export-oriented by establishing stronger, more effective representation and contacts in overseas markets, thereby securing incremental export revenues over a sustained period” (Hibbert, 1990, p466). This last definition also applies to our subject of research, trade missions. What becomes clear from this definition is that the firm is used as a tool by governments to reach the overarching goal of increasing exports. As mentioned, trade missions are just one of the examples of export promotion, the forms that export programmes can take can be summed up in the following four categories:

Export information and advice Marketing support

Promotional activities abroad Finance and guarantees (Spence, 1999,p2).

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Trade missions can be divided into incoming and outgoing trade missions (Silva, 2015, p11). This specific research will analyse outgoing trade missions. The organization of trade

missions is always a cooperative effort between a country that sends a delegation of businesses and public officials and a host country. This specific aspect of trade missions makes an evaluation of the organization-process very hard, because both countries contribute to the success of a trade mission. Trade missions are often mistaken for state visits and vice versa. As far as this thesis is concerned the main distinction between the two is that a state visit is political in its primary focus and trade missions’ is economic. State visits are employed to strengthen bilateral relations between countries and all sorts of topics can be discussed during these events: climate, human rights, political issues or economics (Nitsch, 2005,p1).

Export promotion agencies are the organisations that are tasked with helping, in particular small- and middle-sized, businesses expand to markets abroad and thus responsible for most export-promotion programmes. The effectiveness of the export promotion agencies is highly depended on how these agencies manage their scarce time and recourses (Tesfom and Lutz, 2008, p365). Export promotion agencies find themselves in an odd place in terms of

responsibility, because they are neither responsible for export negotiations (mostly done by the diplomatic service of government) nor for the country’s capacity to export in the first place, which comes from business (Tesfom & Lutz, 2008, p365).

Academic Research

Academic literature on trade missions is often linked to literature on the effect of policies to increase bilateral or multilateral trade, otherwise known as export promotion programmes (Head & Ries, 2009, p1). The main branch of this set of literature is focused on research on the effect of formal trade agreements, like the creation of the World Trade Organization or the effects of regional trade agreements (Head & Ries, 2009, p1). Up until 1990, literature on trade promotion programmes has been described as ‘scarse’ (Hibbert, 1990, p481). On trade missions specifically, ‘little interest’ was shown in the evaluation of trade missions according to Spence in 1999 (Spence, 1999, p1). Even in 2015, Silva noted that research on trade missions “still hasn’t resulted in conclusions on trade missions’ usefulness and concrete effects” (Silva, 2015, p39). Because, it is still not 100% clear whether trade missions are effective or not, research on them can be divided in those that take an optimistic and those that take a pessimistic approach to the effects of trade missions.

On the pessimistic side, we find research claiming that trade missions have virtually no impact on bilateral trade and optimists pointing to all the potential a trade mission brings (Head & Ries, 2009, p1). They claim that, empirically, the effectiveness of trade missions to increase bilateral trade has not been supported (Head & Ries, 2009, p21). Also,

There are reasons to believe that trade missions are effective in promoting trade though. One reason for this, is the positive relation between state visits and exports (Nitsch, 2005). This research will both accept that trade missions can have aspects that mimic state visits and that

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they differ significantly. Either way, if the very presence of public figure in a state visit is enough to increase exports, than it reasonable to assume that a similar effect occurs in trade missions. Optimists will also point to a similar positive relationship between a permanent representation of the government in another country and exports to that country (Rose, 2005 & 2007). On a micro level, academics have claimed that trade missions are instrumental for firms to acquire knowledge about a certain market and that trade missions have a positive contribution in building foreign buyer-seller relationships (Spence, 1999, pII).

Evaluation of trade missions

Evaluating trade promotion programmes can be done in a multitude of ways. One dimension on which evaluation can be done is scale; an example of this would be that evaluations done on a macro- (international or governmental) or on a micro-level (firm) (Hibbert, 1990, p465). One of the main difficulties in the evaluation of the effectiveness of trade promotion

programmes, especially on a macro-level, are the number of variables that have an effect on export. Much of these variables are not under the control of the export promotion agency or any other national government institution for that matter (Hibbert, 1990, p466). Another difficulty is the so called ‘lag-effect’, which means that the effects of certain policies will only take place after a certain amount of time (Hibbert, 1990, p 477). This makes measuring the effect of an export promotion programme via an x amount of sales or investments hard. It also means, that a significant amount of time should be spend examining partial and indirect indicators of the policies’ success (Hibbert, 1990, p468). Another factor that makes the evaluation of trade missions difficult are the absence of precise targets, which is illustrated by the vast amount of performance-dimensions that academics have used to evaluate export promotion programmes (Tesfom & Lutz, 2008, p365). One of the most important things to do while evaluating these programs is thus to define the goals a certain policy was supposed to have (Hibbert,1990, p468). Other difficulties that are common in the evaluation of export promotion programmes are causal ambiguity, barriers to effective evaluation in developing countries and a lack of adequate statistics (Tesfom & Lutz, 2008, p365). Another dimension on which trade missions can be evaluated is to focus on the organization-process itself, instead of the effectiveness of the overall mission. Academically speaking, this type of research has not been conducted yet. Also, the organization of trade missions is a process of cooperation between multiple actors within a country (business community, export promotion agency, political figureheads and for example travel agencies), but also with similar actors in the host country. This makes evaluation and specifically the attribution of responsibility of aspects of a trade mission difficult, further complicated by the multifaceted goals a trade mission can have. Potentially, a trade mission can be a success politically speaking, because it positively reinforced bilateral relations, but a flop economically speaking. The perspective that is chosen to evaluate these programs can thus make a major difference in the outcome.

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-Part 2-

A Theory for a firm’s internationalization process The business perspective

This particular research will evaluate the export promotion programme that is trade missions through the lens of the private sector. Export promotion programmes are mostly geared towards small- and middle-sized companies that lack resources, information and/or

experience to investigate foreign markets themselves. Research has stressed the importance of making long-term relationships if companies want to successfully expand their markets to foreign countries. Export promotion programmes, therefor, require follow-up and preparation on behalf of the companies that participate in these programmes (Hibbert, 1990, p480). Also, export promotion programmes should thus be seen as part of a bigger marketing strategy that firms have in order to do business in unknown markets.

The perception of businesses should be considered a valuable indicator for the effectiveness of trade missions because the perceived reality of businesses has influence over their

behaviour and thus indirectly on exports (Tesfom & Lutz, 2008, p366). In Tesfom and Lutz’s research from 2008 the success of a trade mission is defined as: “The better the export support services contribute to the export objectives of the manufacturers, the higher they are rated in the firms’ perception” (Tesfom & Lutz, 2008, p366). This thesis follows a similar logic in which the overall perceived contribution of a trade mission to the export objectives of firms is used as the indicator of a trade mission’s success.

The business-perspective is simultaneously also the consumer-perspective on trade missions. In most cases, businesses are required to pay a fee in order to join a trade mission. This makes the trade mission itself a product on which a certain amount of utility, or satisfaction, can be derived. This utility is not so much derived from the product itself but from the characteristics of the product (Lancaster, 1966,p133,). The characteristics of a trade mission are for example the fact that a participant of trade mission is part of a delegation, that it is organized and led by government officials or that it includes business meetings with potential partners in the host country. A certain amount of satisfaction can be gained from all these characteristics and different customers will derive utility from different characteristics of the product. A trade mission is, as a product, a lot more complex than for example an apple is, which means that the variance of characteristics on which utility can be derived is very great. Although, trade missions are organized by government; it is incorrect to classify them as ‘public goods’. The essential characteristic for public goods is namely their non-excludability, which entails that no one can be excluded from consuming the product and which is also the main reason government is tasked with providing this service (Conybeare, 1984, p6). So, trade missions are in some ways resembling private goods. Private goods are characterized by their rivalrous nature though, which means that one’s consumption of the good deprives other people’s consumption of the good (McNutt,1999, p927). Participation in a trade mission does

theoretically not hinder other potential participants to do the same or to get less utility out of the trade mission. Non-participants of trade missions cannot obtain utility from the trade

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mission directly though. As such, trade missions are best categorized as ‘club goods’. A characteristic of club goods is that utility is at least derived from 2 aspects of the good: -The good itself and all of the characteristics of the good, in this case the trade mission and all its characteristics.

-Being part of the club, in our case the delegation of a trade mission and all privileges that being part of this club entails.

Club goods generate the highest possible utility if they are coordinated (Sandler & Tschirhart, 1997, p338). Trade missions are an odd case because the members of the club are not the ones who decide whether the capacity of the club is reached, the government does. The maximum number of club-members is in the case of trade missions restricted by the recourses, time and political will of both the country of the delegation’s government as well as the host country’s government. The government in this regard has several interests, generating the highest possible utility per participant is one, but generating the largest possible delegation is another. Generating the largest possible delegation might make the largest amount of fees, but might deprive the utility per member of the club. Another example of why government might want to maximize the club’s size is for diplomatic reasons; a trade mission with a large delegation makes for a more credible diplomatic presence in the host country.

A model of Internationalization

A lot of research on trade missions that has been done from the perspective of businesses has hinted at trade missions being most useful in the earlier stages of entering foreign markets. Businesses in the earlier stages of internationalization are also hypothesized to have different needs than businesses in later stages of their internationalization processes (Moini, 1998, p1). Economists have developed several stage models of internationalization (Spence, 2003, p24). The stage-models describe the internationalization-process of companies in several stages, which follow each other up. These types of models have been widely used in empirical research (Madsen & Servais, 1997, p561). Leonidou and Katsikeas have formulated a couple of such models, two academics, that compared several stage models of internationalization (Wolff, 2000, p36). Whereas their respective models focused on recourses as the main driver of the internationalization process, the model used here focusses on knowledge. Market knowledge is a strong predictor for export success (Spence, 2001, p85). In line with this, a working paper from 2009 for example found that state trade visits were particularly important to establish contacts and to build experience in exports (Caiado, Africano & Teixeira, 2009, p1). Spence, who herself did research on the evaluation of several export promotion

programmes, argues that the most important inhibitor for companies to start exporting is market knowledge, which means that trade missions should have extra added value if it

successfully informs it’s participants about the market of the host country (Spence,2003, p19). Two forms of knowledge can be distinct that are important for the model of

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sub-divided into cultural, network and entrepreneurial knowledge (Mejri & Unemoto, 2010, p 6). These four types of knowledge are essential for the internationalization process of

businesses and can be defined and acquired as follows:

- Market knowledge is the information about for example market size, competitors and special regulations. Market knowledge is objective and can hypothetically be

presented on a factsheet on the host country’s market. Having market knowledge in pre-internationalization phase has proved critical for the early stages of

internationalization. This type of knowledge is acquired through all types of media, but most notable are databases, official documents and research. Organizations that can provide this kind of knowledge for businesses are for example export promotion agencies, business representative bodies, embassies and partners in foreign markets. Market knowledge is most important in the preparatory-phase of the participation in trade missions (Spence, 2001, p85). The importance of this type of research decreases, later in the internationalization-process (Mejri & Unemoto, 2010, p7).

Recent research has showed that businesses mainly learn through experience (Blomstermo et al, 2004, p357). Experiential knowledge can only be acquired through experience and has been proven essential for businesses to have export-success (Mejri & Unemoto, 2010, p7). This type of knowledge can, like market knowledge, start to be gathered in the

pre-internationalization phase, but is acquired mostly in the early phases of pre-internationalization. Experiential knowledge is acquired mostly in the early phases of internationalization, but becomes more and more important for long-term success in later phases of

internationalization (Mejri & Unemoto, 2010, p7). Experiential knowledge is seen as the most important determinant for the decision-making process of businesses to expand to foreign markets (Blomstermo et al, 2004, p356). Trade missions have the potential to give its participants this type of knowledge, where for example fact sheets or databases cannot. The term cultural knowledge is used to describe knowledge on values, manners and ways of thinking of people in the market that is targeted (Mejri & Unemoto, 2010, p8). This type of experiential knowledge can only be acquired in the internationalization-phases, not before, because it is acquired by interacting with people from the targeted market. Cultural

knowledge decreases psychological barriers an entrepreneur might have to enter a foreign market and it’s utility increases in later stages of the internationalization process.

Network knowledge refers to all information a business needs to have to know what actors are important for its internationalization process. Acquiring this type of knowledge starts in the pre-internationalization phase and can function as a ‘kick-starter’ to translate the intention to expand to foreign markets into an action (Mejri & Unemoto, 2010, p8). Therefore, this type of knowledge is particularly important in the very early phases of the

internationalization-process. ‘Actors that are important for the internationalization process’ both refers to potential partners in the targeted market as well as the network of the business in its own country of origin.The utility of network knowledge is also prevalent in later phases of the

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internationalization process as the network itself becomes a means of gathering market knowledge (Mejri & Unemoto, 2010, p9).

Lastly, entrepreneurial knowledge refers to the type of information necessary in order to identify economic opportunities. Often, the identification of an economic opportunity will work as the start of an internationalization process and push this process forward. This means that acquiring this type of knowledge starts in the pre-internationalization phase. Businesses get a feel of how to identify concrete opportunities in a foreign market in the early stages of the internationalization process (Mejri & Unemoto, 2010, p9). Trade missions can provide this form of knowledge by letting businesses interact with the targeted market. This type of knowledge is most important in later stages of the internationalization process, after

businesses have some experience and all necessary information and is comfortable in allocating recourses to exploit opportunities.

Trade missions should thus have added value for businesses, because they provide an experience that gives businesses the opportunity to acquire experiential knowledge. This experiential knowledge gives businesses strong push-factors to continue their

internationalization process, which is why policy makers deem trade missions an effective tool for export promotion. For this research, the stages of internationalization are grouped into the ‘early stages of internationalization’ and the ‘late stages of internationalization’. The distinction between these two is based around the concept of ‘market commitment’. An important aspect of market commitment is, simply put, the amount of recourses, for example financial investments, committed to a particular market (Johansson, 1977, p27) . This means that actions like closing contracts or investing in a particular market fall under the ‘late stages of internationalization’. Actions that require relatively little resources and do not require businesses to already be active in the market of the host country are grouped into the ‘early stages of internationalization’. Actions that fall under this stage are for example the

accumulation of market knowledge, building a network, contacting partners and getting a better sense of your business’ position on the market.

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-Part 3-

Factors that contribute to a trade mission’s success

There are a number of important factors that influence a trade mission’s success, the factors that are important for this research are discussed in the following couple of paragraphs.

Public officials and trade missions

A branch of literature on export promotion focusses on the physical presence of public officials on bilateral trade (Head & Ries, 2009, p1). Research on permanent economic presence of government officials seems to suggest that there is a positive effect of their presence on bilateral trade (Head & Ries, 2009, p2). Permanent representation is ofcourse not a guarantee that having public officials join trade missions helps, but other research on short visits by head of states and politicians seems to suggest a similar positive effect (Head & Ries, 2009, p2). Research on state visits, showed that there is a positive relationship between state visits and exports, with an average increase of 8 to 10 percent in exports (Nitsch, 2005, p2). So, even if the visit itself is not necessarily focused on economics, the results are still

favourable for exports. As such, what we would expect is that a similar effect occurs if trade missions take on aspects of a state visit by having the Royal family or the Prime Minister involved in the leadership of a trade mission. The addition of public officials as the Prime-Minister or the Royal family is seen as an extra characteristic of a trade mission on which utility can be derived and is such hypothesized to yield a higher perceived added value per mission.

Size of the delegation

The importance of a network to the internationalization-process of businesses is underpinned in several studies, of which recent ones have found the network of small- and medium-sized businesses to significantly influence the behaviour of these companies (Ojala, 2009, p1). The importance of network knowledge was discussed earlier and in this section it is argued that network knowledge can function as a ‘kick starter’ (strong push factor) for businesses to translate their intentions to internationalize into actions. Network knowledge does not only apply to the network in the targeted country, but also to the companies’ network in its own country of origin; its competitors, potential partners and agencies that can help them internationalize for example (Blomstermo et al, 2004, p357). Earlier research has also

established that a higher perceived usefulness of experiential network knowledge is correlated with higher export performance scores (Blomstermo et al, 2004, p367). A larger size of the delegation gives business the opportunity to:

Get a grasp of what the relevant network for this particular targeted market is. And

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In relation to other research; It is suggested by Silva that networking between large companies and smaller- and middle-sized companies influences the success of the overall trade mission positively in her concluding remarks (Silva, 2015, p40). A larger size of the delegation is also hypothesized to bring about a higher chance for participants of trade missions to find

meaningful partners that can help them by exchanging (market) knowledge. A larger size of the delegation is seen as an enlargement of the ‘club’, which membership alone provides the participant with privileges over non-members. Therefor, and for the reasons mentioned above is the size of the delegation hypothesized to be positively associated with perceived added value on a trade mission.

Large companies in the delegation

Research on the influence of large companies within a delegation during trade missions has, until recently, suggested that the size of companies doesn’t influence the outcome of trade missions (Seringhaus 1989, Spence 1996, Culpan 1989). Later research indicated that smaller companies have much more to gain from making use of export promotion programmes than large companies do (Silva, 2015, p11). This finding begs the question of why large

companies join trade missions in the first place and perhaps more important, what their

presence does to the overall success of trade missions. Recently, qualitative research was done on the role of large companies within a delegation, which suggests that large companies help smaller companies through their resources, network and experience in doing business abroad (Silva, 2015). This research showed through interviews with firms that participated in trade missions that: large companies serve to give a trade mission credibility, to attract local business people and to attract the interest of the media (Silva, 2015,p39). Another important conclusion from this research is that the participation of large businesses influences the overall success of the trade missions positively (Silva, 2015,p39). As such, it is also hypothesized that the perception on the added value of trade missions is better for trade missions where large businesses are involved.

Length of Trade Mission

The length of a trade mission is in this research seen as an extension of the product, which means that longer trade missions are seen as bigger and more impressive events than short missions are. The change in this case is to the good itself, the trade mission. Based on the internationalization-model of this research, it is hypothesized that longer trade missions give entrepreneurs more time to experience what the host country is like, which gives them, in addition to market knowledge far more experiential knowledge. The importance of experiential knowledge has been mentioned before. The relation between time and the accumulation of experiential knowledge is one that can be represented through a gradual learning-model (Blomstermo et al, 2004, p357). Organizations as such, learn through interaction with their environment by constantly adapting and fixing problems in this new environment (Blomstermo et al, 2004, p357). As such, a longer period of time in the host countries’ market should also yield valuable experiential knowledge, which significantly influences a firms behaviour to do business in this foreign market. Experiential knowledge is

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something a trade mission can offer over other forms of market exploration, which is why it is hypothesized that longer missions have higher perceived added value scores.

Country Characteristics

In the past country’s characteristics like remoteness, language differences, level of education, level of industrial development and geographical distance posed psychological barriers for entrepreneurs to expand their activities to far away markets (Andersen, 1992, p210). Nowadays, because of globalisation and the diffusion of knowledge, these sort of psychological barriers are made irrelevant (Spence, 2001, p86). Also, globalization has shaped new consumer markets overseas, full of potential buyers of modern products (Levitt, 1999, p2). The most effective competitive businesses sell the same products in all kinds of places, with no preference over what type of country they sell to (Levitt, 1999, p2). Cultural preferences like national tastes, standards and business institutions have largely faded (Levitt, 1999, p8). This means that these characteristics should not pose a hindrance for the success of trade missions and should thus not affect the outcome of trade missions significantly, nor in the perceived added value of trade missions. Not only has the global market place changed in favour of internationalization, but there are also more and more businesses now considered ‘born globals’. These ‘born globals’ are companies that are focused on doing business

globally, rather than the original format in which companies start by competing in a domestic market first (Knight & Cavusgil, 2004 , p124). These types of companies show a flexibility in their organizational processes that gives them advantages over more traditional businesses. Technological advances as well as the globalization of the international market has given rise to the phenomenon of ‘born globals’ (Knight & Cavusgil, 2004, p125). Based on the reasons mentioned above it is hypothesized that most psychological barriers for doing business abroad are insignificant in the success an export promotion programme like trade mission has.

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-Part 4-

Added value of the research

In general, it is important that activities for which substantial public resources are used, are subjected to periodic and systematic evaluation (Hibbert, 1990, p468). There are, according to Hibbert, two reasons why systemetic and periodic evaluations of export promotion

programmes are important:

- These evaluations ensure the flexibility and possibility for change of these policies, so that they are as legitimate and as effective as possible.

- There is an interest for the authorities in charge of these policies to implement these policies to a satisfactory level; evaluations are a means to achieve this level of performance.

Hibbert further remarks that more empirical research is necessary on the many variables that influence export promotion’s success (Hibbert, 1990, p482). Literature on the evaluation of trade missions specifically, also had a ‘gap’ up until 1999, with little knowledge on what factors contributed to the success of trade missions and the overall contribution of trade missions to businesses’ export (Spence, 1999, pI). Even in 2015, Silva still considered research on the role of trade missions as an export tool ‘not sufficient enough to generalize a conclusion’ (Silva, 2015, p11).

This research will tackle the evaluation of a public instrument from an interesting perspective, namely from that of a customer. Trade missions can be regarded as products, because they normally require companies to pay a certain fee. This means that trade missions, like any other product, can be evaluated based on the utility the product brings to its user, which is an interesting angle on policy evaluation, as this type of evaluation would be impossible for other goods produced by government like security and peace.

Furthermore, this research will help either validate or scrutinize some claims that have been made about the effectiveness of trade missions by testing previously conceived hypotheses. This thesis also functions as a follow-up on qualitative research. This research will

specifically follow up on Silva’s qualitative research from 2015 on the role of large companies within the delegation of trade missions. This thesis will test whether Silva’s observation that large companies have a positive influence on a trade mission’s performance is also true for the Dutch practice and whether this effect is significant. Silva, in particular, noted that further research could be done in other countries than Portugal, the country she did her research in, and that quantitative research could be useful to compare trade missions with high numbers of large companies with those that have low numbers of large companies (Silva, 2015, p41). Spence, in the closing remarks of her article on the evaluation of U.K. trade missions, makes a similar point as Silva in that she feels that research in other countries than the UK helps the advancement of knowledge on this particular subject (Spence, 2001, p101). As of now, I have not been able to find an academic evaluation of Dutch trade missions.

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Research Design

The following section will go into the design of this thesis’ research. The section ‘Research Design’ is divided into different parts:

Part 1:Goal of research Part 2:Type of research Part 3:Structure of research

Goal of research

The goal of my research is to test both previously conceived and new hypotheses on A. The perceived added value of trade missions and B. What factors contribute to the perceived added value of trade missions. The hypotheses for this thesis’ research are based on the literature on trade missions and follow logically from parts 1 and 2 of the literature review. A section of part 1 of the literature review was devoted to the business perspective on trade missions. This section details where the perceived added value of trade missions should lie. Namely, this perceived added value, should lie in the early stages of the internationalization process, when acquiring experiential knowledge is most important. As such, the first part of my research will focus on these 2 hypotheses:

Hypothesis 1: Trade missions have a perceived added value in the internationalization-process of businesses

This hypothesis will help establish whether trade missions have, according to businesses, a perceived added value in the first place.

Hypothesis 2: The perceived added value of trade missions lies in the early stages of the internationalization-process of businesses.

This part of the research aims to establish whether business perceive trade missions as a significant addition to their overall internationalization-strategy and if so, what goals within internationalization processes benefit most from participation in a trade mission. It is interesting what factors might influence the success of a trade mission. Therefor, after

establishing whether trade missions have a perceived added value, this research will focus on the influence of a number of variables on this perceived added value. The hypotheses in this part of the research follow logically from part 2 of the literature review. As such, I

hypothesize:

Hypothesis 3: The involvement of high public officials like ministers and the prime-minister or the royal family in the leadership of a trade mission has a significant positive effect on the perceived added value.

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Hypothesis 4: The size of the delegation has a significant positive influence over the perceived added value of a trade mission.

Hypothesis 4b: Trade missions in the optimal size-category of the delegation yield significantly higher satisfaction-scores than other trade missions do.

Hypothesis 5: The involvement of large companies in the delegation of a trade mission has a significant positive influence over the perceived added value of a trade mission.

Hypothesis 5b: Trade missions with roughly the optimal involvement of large companies in the delegation yield significantly higher satisfaction-scores than other trade missions do. All of the hypotheses above relate to factors that policy-makers concerned with the

organisation of the trade mission itself have some form of control over, which makes these factors the focus of the second part of my research. Factors like geographical distance, what region the host country is in, what type of economy the host country has and what type of regime is present in the host country will also be analysed in relation to overall satisfaction score of trade missions. These types of factors are of particular importance for the decision-making process of which countries to visit in the first place. Another goal of the second part of the research is to formulate a model that successfully explains the variance in the overall perceived added value scores, as well as the perceived added value for the early and late stages of internationalization. Based on the literature review it is hypothesized that country characteristics are mostly insignificant and that the factors policy makers have control over are significant in this model. To summarize all of the goals of this research mentioned above in two research questions:

Research question 1: Do trade missions have a perceived added value according to businesses and if so, in what stages of the internationalization process of businesses does this perceived added value lie?

Research question 2: What factors have a significant positive influence over the perceived added value of trade missions?

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Type of Research

The research will be quantitative in nature with a large-N sample. The choice to make this research quantitative in nature was made, because quantitative research is helpful in the attempt to make claims about trade missions that can be generalized. There is still debate amongst scholars on the effectiveness of trade missions, even after numeral comprehensive empirical studies have been conducted. This empirical research will thus add to the discussion by adding empirical findings that either support the claim that trade missions are effective or support the claim that trade missions are for the most part ineffective. Quantitative research also helps substantiate claims that have been made in previous qualitative studies. Because of its quantitative nature, this research will also follow the process in line with this sort of research (Bryman, 2012, p161):

Theory  Hypothesis  Research Design  Devise measure of concepts  Select research sites  Select research subjects  Collect Data Process Data  Analyse Data 

Conclusions  Write up conclusions

Thus far, this thesis has covered the theory in the literature review and the hypotheses were mentioned in the previous section of the research design. The general outline of the

quantitative research-process is reflected in this thesis in figure 1.

Figure 1: Outline of the quantitative research-process with the outline of this thesis Stage(s) within the quantitative research

process

Section of thesis

Theory Literature Review

Hypotheses, Research Design Research Design Devise measure of concepts, select research

sites, select research subjects, collect data

Research Method Process Data, Analyse Data Analysis

Conclusions, Write up Conclusions Conclusions and Discussion

Furthermore, this research is deductive in nature, because it is set up as an empirical investigation of theoretical ideas. The inspiration for this research comes from reading

literature on trade missions and indicating how an empirical study could benefit the academic discussion on the effectiveness on trade missions. The number of fifty-three cases gives this research enough cases to make conclusions on that can be generalized for Dutch trade

missions, especially when these conclusions correlate with findings of other empirical studies. This research uses government data, which means that the data was not designed initially to be a perfect fit for this particular research. Rather, it was designed to be an evaluation tool for both the export promotion agency in the Netherlands as well as for the Dutch parliament. This could be a potential risk for the internal validity of my research. As such, an explanation of how the data is linked to the literature in the literature review and the research question in general is given in the following section. Also, the origin of the data is explained in the ‘research method’ section of this thesis.

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Structure of research

My research will be separated into two parts. The first part of my research will tackle the question of what companies perceive to be the added value of trade missions in their own internationalization-process. Companies that participate in trade missions do so for different reasons. As such, the data that is used for this research gives information on 7 goals that businesses can have while participating in a trade mission:

1. Gain knowledge on the market 2. Position themselves on the market

3. Contact (foreign) partners 4. Expand their network

5. Close contracts 6. Remove trade barriers

7. Invest in the market

These goals mentioned above are formulated by RVO, the Dutch export promotion agency, in their evaluations. The first part of the research will thus examine what goals, mentioned above, have high satisfaction scores and which ones have lower satisfaction scores per mission and link this to what is established from the literature, namely that the perceived added value of trade missions is in the early stages of internationalization. Also, this part of the research will examine whether trade missions have a perceived added value in general by taking an aggregated satisfaction score of the 7 goals. The satisfaction-scores per goal and per mission will function as the dependent variable for the second stage of this research. The second stage of the research will correlate factors that policy makers have some form of control over, like size of the delegation, the number of large companies within the delegation and the involvement of high public officials and the length of the trade mission with the aggregate satisfaction scores and the satisfaction scores per internationalization goal. The same will be done for factors that policy makers have no control over, county characteristics, like the geographical distance, region that the host country is in, type of economy of the host country and regime type of the host country.

As such, this thesis’ research is represented in the following steps: Part 1 of Research:

Step 1: Establish the perceived added value per internationalization goal by calculating a satisfaction score per goal

Step 2: Establish an aggregated satisfaction score per mission that represents the perceived added value per mission

Step 3: Establish whether trade missions have a perceived added value and if so, what internationalization goals generate the most perceived added value

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Part 2 of Research:

Step 4: Establish the correlation between the 4 factors policy makers have influence over in relation to the perceived added value per mission

Step 5: Establish the correlation between the 4 factors policy makers have influence over in relation to the satisfaction score per goal

Step 6: Establish the correlation between the 9 country characteristics of the host countries in relation to the perceived added value for all missions

Step 7: Establish thecorrelation between the 9 country characteristics of the host countries in relation to the satisfaction score per goal

Step 8: Create a model based on the 4 factors policy makers have influence over plus the 9 country characteristics of the host country that successfully explains the distribution of the overall perceived added value-scores as well as for the early and late stages of

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Research Method

The following section will go into the method used to test the hypotheses of this research. The section ‘Research Method’ is divided into nine different parts:

Part 1: Central concepts Part 2: Measurement-method Part 3: The Case of Dutch trade missions

Part 4: Statistical Tests Part 5: The Dataset Part 6: Test for Normality

Part 7: Response Rates

Part 8: Absolute truths vs Practical use Part 9: Data Management

Central Concepts

The central concepts used in the analysis of our data are the following:

Satisfaction score: the score that correlates with the opinions of participants of trade missions. This score can be expressed on an individual goal per mission, the mission as a whole or all missions taken together. The satisfaction scores established in part 1 of the research will function as independent variables for part 2 of the research

Perceived added value: All satisfaction scores with positive connotations, or in other words: all satisfaction scores that resemble positive opinions on trade missions. A positive opinion, in this regard, is defined as all opinions expressed on the added value of trade missions, more positive than ‘neutral’. This perceived added value can be expressed on an individual goal per mission, the mission as a whole or all missions taken together. Establishing the perceived added value is the goal of part 1 of the research. The perceived added value per mission will be calculated using an aggregate of all seven goals.

The seven goals of the internationalization-process are used as a means of establishing the satisfaction score and the perceived added value. These seven goals are formulated in the data as: Acquiring knowledge, positioning on the market, contacting (foreign) partners, expanding network, closing contracts, removing trade barriers and investing in the market. The first four of these goals can legitimately be categorised as ‘early stages of internationalization’, because they require little resources and do not require a business to already do business in the

targeted market. The other three goals are categorised as the ‘late stages of

internationalization’, because they either describe an action to invest resources (closing contracts and investing in the market) or describe an action that entails some form of previous investment in the market (removing trade barriers). The scores for both two stages of

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Figure 2: the Early and Late stages of internationalization and their respective goals in the data

Early Stages of Internationalization Late Stages of Internationalization

Acquiring knowledge Closing Contracts

Positioning on the market Removing trade barriers Contacting (foreign) partners Investing in the market

Expanding network -

The four factors that policy makers have influence over will function as dependent variables in the second part of the research. These factors’ influence over the overall satisfaction scores per mission as well as per goal will be analysed to see whether they have a significant positive influence over the satisfaction scores.

The nine factors that policy makers who organize trade missions have no influence over, namely because these factors are depended on the host country, will also be analysed in relation to the satisfaction scores.

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Measurement-method

The data that is used in this research comes from a survey done by the Dutch government on the effectiveness of their own trade missions. In this survey, participants of trade missions are asked to give information on/characteristics of their company, to grade the contribution of the trade mission to the seven goals of the internationalization-process and to indicate the amount of money made from contracts that were closed during the trade mission. Other information on the characteristics of the trade mission can be found on factsheets that detail the results from the surveys. For this particular research, the information/characteristics of the

companies, the contribution of the trade mission to the seven goals of the internationalization-process, the characteristics of the host country and the characteristics of the trade missions themselves will be used as measurements of the variables outlined in the first part of this chapter.

Main variables of the first part of the research

The seven goals of the internationalization-process of businesses are the core of the first part of the research. These seven goals are expressed in satisfaction scores, as such the main variables of the first part of the research are:

Businesses are asked in the survey of the Dutch government to express to which extent the trade mission they participated in contributed to them accomplishing their goals. These goals are the seven goals of the internationalization process and the extent to which the trade mission contributed to these goals is expressed on a bipolar five-point Likert-Scale with the answer-categories: Very poorly, poorly, neutral, good and very good. Also, the category ‘not applicable’ is included in the survey as an option. The factsheets corresponding to the survey-results give percentages and absolute numbers off all respondents in each answer-category. Numerical meanings are attached to all answer-categories of the Likert-Scale in order to construct satisfaction-scores per goal, mission and for all missions. This means that the answer category very poor is linked to the numerical meaning of ‘1’, poor to ‘2’, neutral to ‘3’, good to ‘4’ and very good to ‘5’. The percentage of respondents in the answer-categories on the factsheets are multiplied with the numerical meaning of every answer-category on the Likert-scale to construct satisfaction scores per goal per mission. As such, Satis1 (S1), expresses the satisfaction score of businesses on the first goal of the internationalization process; acquiring knowledge. This variable can be expressed per mission or for all missions taken together. Figure 3 is a representation of all these variables and their labels in the dataset. Figure 3: The satisfaction-scores and their respective labels in the dataset

Satis1 (per mission or all missions) Satisfaction-score for the goal: Acquiring knowledge Satis2 (per mission or all missions) Satisfaction-score for the goal: Positioning on market Satis3 (per ‘’) Satisfaction-score for the goal: Contacting (foreign)

partners

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Satis5 (per’’) Satisfaction-score for the goal: Closing contracts Satis6 (per”) Satisfaction-score for the goal: Removing trade barriers Satis7 (per”) Satisfaction-score for the goal: Investing in the market

The satisfaction-scores per goal for all missions are calculated by taking the average of the aggregate of all satisfaction-scores per mission. The PerceivedAddedValue-variable (PAV) is all satisfaction scores over three. This variable is expressed per goal per mission, per mission, per goal for all mission and for all missions. The PerceivedAddedValue is calculated by taking the satisfaction-score for a goal per mission minus three. The PerceivedAddedValue for a mission is calculated by adding all satisfaction-scores up and dividing them by the number of internationalization goals (7). The PerceivedAddedValue for all missions is calculated by adding all the PerceivedAddedValue per mission and dividing this number by the number of missions (53). Establishing the PerceivedAddedValue for all goals and all missions is the core of part 1 of this research. This variable will function as the independent variable of part 2 of the research.

Main variables of the second part of the research

A characteristic of the companies that participated in the trade mission functions as an independent variable for the second part of the research. This characteristic is:

Businesses are asked in the survey to indicate whether they identify as either ‘small- or medium-sized’ or ‘large’. The % of the delegation that self-identifies as ‘large’ makes up the variable LargeCompany (LC), which is calculated by taking the absolute number of

business-participants in the delegation, dividing this number by hundred and squaring it with the number of companies that identify as large. The variable that reflects the absolute number of large companies in a delegation is LargeCompanyAbsolute (LCabso), which is included as an extra check to successfully test the hypothesis that involvement of large companies has a significant impact on the perceived added value. Both variables are continuous and considered scale-variables. Both LC and LCabso are further examined by categorizing trade missions into several categories based on the % of large companies that identifies as large company or the absolute number of companies that identifies as large company and the number of cases in each size-category. These categories’ means in perceived added value-scores are than

compared in independent t-tests to establish to what extent the inclusion of large companies is beneficial to the perceived added value-scores.

Characteristics of the trade missions themselves are also used as independent variables in the second part of the research. These characteristics are:

The sum of all organizations that participated in a trade mission and identified as either a small- or medium-sized business or as large business is regarded as the size of the delegation as a whole. Other entities like knowledge institutes are disregarded from the delegation, because this research is particularly interested in the effect of inter-business networking. The size of the delegation makes up the variable SizeDelegation (SD). SizeDelegation is a

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continuous variable and considered a scale-variable. SD is further examined by categorizing trade missions into several size-categories based on size of the delegation and the number of cases in every size-category, this is again done to establish the extent to which size of the delegation is beneficial to the success of a trade mission.

The factsheet of every trade mission mentions the length of that particular trade mission in number of days. The variable LengthofMission (LM) is formulated by taking the total

number of days mentioned at the very top of every factsheet. LengthofMission is a continuous scale-variable. This variable is also further examined by breaking this variable down into several length-categories. These categories are than compared to one another to establish the extent to which the length of a trade mission influences the perceived added value scores. The factsheet of every trade mission also mentions the highest public officials that lead the trade mission. The organization of trade missions can roughly be divided into three levels of trade mission leadership: ‘high ranking public servant and state-secretary’, ‘minister’ and ‘prime-minister’. These three levels of trade mission leadership all affect the success of trade missions. It is expected that a higher level of trade mission leadership corresponds with higher satisfaction scores. The level of trade mission leadership makes up the variable

LevelofLeadership (LL). Special cases are the trade missions lead by the Minster of

Development and International Trade, the minister responsible for trade mission policy. The effect of this minsiter’s involvement is expressed by the variable MinDevIntTrade (MDIT). Another set of special cases are trade missions where the royal family of the Netherlands are involved in the trade mission’s leadership. The involvement of the royal family of the

Netherlands in expressed by the variable RoyalHouse (RH). LevelofLeadership is considered an ordinal variable and all sub-variables that fall under the analysis of this variable are

considered nominal.

The relation between the independent variables LargeComany, SizeDelegation, LenghtofMission and LevelofLeadership with the dependent variable of the

PerceivedAddedValue per goal for all missions, and for all missions is the focus of the second part of this research. The characteristics of the host country are also taken into consideration in the second part of the research. These are grouped into the categories: economical, political and geographical. For economic factors 5 measurements are used and for political and

geographical 2 measurements are used to establish the effects of these three categories of factors. The 3 categories of country characteristics are expressed in the following variables: A characteristic of the host country is the type of economy the host country has. The host countries’ economies are in this research categorised as: High income, Upper-middle income, lower-middle income and low income. This typology stems from the official typology used in the datasets of the World Bank and will be used accordingly. The variable that expresses the type of economy of a country is Economy (ECO). The type of economy is considered an ordinal variable. The other economic factors are, also from data of the World Bank datasets, the following:

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The ease of doing busininess index or EaseofdoingBusiness (EaseBusiness). This index is calculated on the basis of the effect of government regulations on businesses; whether these regulations make it easier or harder for businesses to operate without hinderance of the government. A high score on this index means that it is very hard for businesses to operate and a score of 1 means that it is the easiest place for businesses to operate. The ease of doing business-index is considered a continuous scale-variable.

The GDP-growth per capita or GDPgrowthpercapita (GDP). This number is based on a comparison to the GDP-growth from the year before the trade mission and will thus differ for a country visited in 2014 and in 2015. Rather than a stable variable as type of economy is, growth per capita is meant to reflect the changing state of an economy. The GDP-growth per capita is considered a continuous scale-variable.

The days to start a business (DaystoBus) is a variable meant to work in cooperation with the EasofdoingBusiness-variable in showing that the experience and willingness a country has to incorporate new investors has an effect on the perceived added value of a trade mission. It is expressed in the absolute number of days. The DaystoBus-variable is considered a

continuous scale-variable.

The Corporate Tax-rate (CT) is expressed as the total tax rate in % on commercial profits. The corporate tax-rate should serve as a barrier to trade because it limits the number of opportunities in a country to make an absolute profit off. The Corporate Tax-rate variable is considered a continuous scale-variable.

The first measurement that represents geographical characteristic of the host country is actually more an expression of the relation between the host country and the country where the delegation comes from, expressed in geographical distance. The geographical distance will be calculated using the distance from Amsterdam to the capitol of the host country, except when it is specifically mentioned that the trade mission has visited other parts of the host country. The variable that expresses this geographical distance is called

GeographicalDistance (GD).The other variable related to geography is region. The region countries are in is based on the categorization that is also used by the World Bank. The variable Region (Reg) reflects the categorization of region a trade mission is in. These regions are based on the regions also used in the datasets of the World Bank with the

exception of the regions ‘East Asia” and ‘South-Asia and Pacific’, which have been merged into the region ‘Asia and Pacific’. The 6 regions a host country can be categorized in are: Europe and Central Asia, Middle-East and North Africa, Sub-Saharan Africa, Latin-America and Caribbean, North America and Asia and Pacific. Geographical distance is considered a continuous and scale-variable and the Region-variable a nominal variable.

The last characteristic of the host country, which is covered in this research, is the politics of the host country. The host countries in this case are grouped in regime types using a research from the Economist that categories regime types as: full democracies, flawed democracies, hybrid regimes and authoritarian regimes (Eiu.com, 2016). This variable is called Regime

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Type (RT) The variable that expresses the freedom-rate of the host country is called Freedom (Free). This variable is constructed through scores given on 25 indicators on political rights and civil liberties in countries all over the world, these countries are than graded through the grading system used by Freedom House (Freedom House, 2017). The second part of the research is focused on finding how the 12 variables mentioned above influence the PerceivedAddedValue-variable of trade missions. This is done through linear regression analysis, t-tests and statistical comparisons between groups of countries.

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The Case of Dutch trade missions

The Dutch practice of the organization of trade missions mainly revolves around two ministries: The Ministry of Foreign Affairs and The Ministry of Economic Affairs. Within the Ministry of Foreign Affairs specifically, the Directorate of International Enterprise (in short DIO) is responsible for trade mission-policy. The directors of this directorate, in cooperation with other high public officials and the minister determine what countries are visited by a delegation from the Netherlands in trade missions. The Directorate of

International Enterprise is part of the Directorate-General of International Economic Policy (DGBEB) and responsible for the coordination of trade missions and the economic aspects of state visits. This directorate is also responsible for the coordination between economic

attaches on embassies of the Netherlands and Dutch businesses. The directorate is in close cooperation with RVO, the Dutch export promotion agency, which is a part of the Ministry of Economic Affairs. DGBEB was in the past also a part of the Ministry of Economic Affairs, which is why it has a close relations with this ministry. RVO is the organisation behind the more practical organisation of the trade mission and the evaluation process. RVO is the organisation that has most influence over the factors concerning the delegation, but also over the recruitment and selection- process of businesses that will potentially join the delegation. Another group of important actors for the organization process are the permanent

representations that coordinate the program of the trade mission with the host country. The evaluation-process is conducted through a survey send out by RVO to the participants of the trade mission after a month or so after the event itself. The survey results are than

translated into factsheets on which policy makers can conclude whether the business

community was satisfied with the added value of a particular trade mission. These factsheets, which are also used to compile the datasheet for this research, are readily available for everyone. Namely, the ones used in this research are part of the regular evaluations between the Ministry of Foreign Affairs and the Dutch Parliament. The Dutch Parliament is

transparent in its communication with the Ministry of Foreign Affairs, which means that all factsheets can be found on the parliament’s website. It also means that all factsheets used in this research have been checked by public servants from both the Ministry of Economic Affairs and the Ministry of Foreign Affairs and have been scrutinized in discussions in the Dutch Parliament. The debates on these factsheets are regular and occur every half a year. The practice to have these half-a-year evaluations and to add these factsheets to the

correspondence for these debates was initiated in a debate between the Dutch Parliament and the Minister of International Trade and Development, miss Ploumen, on the 22th of May in 2014 (Nederlandse Grondwet, 2014).

Also, trade missions have been the subject of debate many times in the public debate In the Netherlands. These debates often involve talk about the role of the royal family in these missions, the role of corporate social responsibility in trade missions, working conditions and human rights in the host countries of the missions and the effectiveness of trade missions in general. In particular, the inclusion of a list of closed contracts of the factsheet in is a sign that there is a considerable level of scrutiny from the Dutch Parliament over trade missions. What

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has not been done, thus far, is to combine these factsheets into one over-arching analysis of how well the Dutch business environment is served by trade mission-policy. One Dutch academic in particular, Mr H. Ruel, has made television appearances claiming that trade missions are much less productive than portrayed in the media and that they need thorough follow-up and preparation in order to be successful (Volkskrant.nl, 2016).