Government Export Promotion Organisations and SME Internationalisation: A case study of Ghana’s Non-Traditional Export Sector. Edward Sasu Edinburgh Napier University Government Export Promotion Organisations and SME Internationalisation: A case study of Ghana’s Non-Traditional Export Sector. Edward Sasu Edinburgh Napier University September 2018 A Thesis Submitted in Partial Fulfilment of the Requirements of Edinburgh Napier University for the Degree of Doctor of Philosophy Declaration I declare that the work presented in this thesis was conducted by me, unless otherwise stated. Edward Sasu Edinburgh Napier University September 2018 Director of Studies: Dr Kenny Crossan 2nd Supervisor: Malcom Pettigrew 3rd Supervisor: Professor Simon Gao Internal Examiner: Professor Thomas Peisl External Examiner: Professor Paul Jones Acknowledgements I am grateful to God almighty for his guidance and strength to produce this thesis. I would particularly like to express my heartfelt appreciation to Dr Kenny Crossan, my Director of Studies, Malcolm Pettigrew and Professor Simon Gao, both supervisors. I would also like to express my sincere gratitude to the Chief Executive Officers (CEOs) of Ghana Chamber of Commerce and Industries (GCCI), Ghana Export Promotion Authority (GEPA), National Board on Small Scale Industries (NBSSI), Association of Ghana Industries (AGI), Ghana Free-zones Board and all those Exporters Associations and Federations who took part in the study. I am equally grateful to the owners of all the SMEs I interviewed and every institution that provided and allowed me access to information during my study. Finally, I want to express my indebtedness to my wife Mrs Evelyn Sasu and my children Ohene Adu Sasu and Maame Yaa Asor Sasu who were able to put up with my long absence during this programme. Abstract Internationalisation has been identified as one of the major dimensions of firm growth (Peng and Delios, 2006). Karadeniz and Gocer, (2007) argue that exporting activities, for instance, increase profitability, improve trade balances, and help eradicate poverty and unemployment in both developed and developing countries. SMEs are becoming increasingly international and have been reported to contribute between 25-35% of the world’s exports in manufacturing (Andersson and Flores, 2008). However, available literature suggests that there are still many SMEs in both developing and developed countries that do not export, or do not contemplate doing so. Although, it is worth pointing out that exporting is not that financially intense and involves fewer financial and commercial risks as a foreign markets’ entry mode compared to some forms of direct investment (Lages and Montgomery, 2004; Agndal and Chetty, 2007). In this regard, many researchers (Lu and Beamish, 2001; Oviatt and McDougall, 1994) have recognised the important role played by SMEs in international markets. There is strong advocacy for support for SMEs in the area of export assistance by a section of researchers’, policy makers and corporate entities. The European Commission report (2015) indicates resource constraints put SMEs at a disadvantage within international markets. The Commission maintains that few SMEs in Europe export beyond the EU. The Commission argues that increasing the internationalisation of SMEs and helping them to access markets outside the European Union is crucial for Europe’s competitiveness, economic growth and innovation. In Ghana and many developing countries, SMEs dominate the economic environment; hence, such assistance to small businesses will go a long way to boost the fortunes of the country. It is by this notion that governments all over the world implement export promotion programmes, (EPPs) in order to provide support to augment the internal capability of SMEs. However, a review of the theoretical and empirical literature reveals that, for various reasons most SMEs are not making use of the promotion services for various reasons, even though the service is actually instituted for them. Some researchers have argued that EPOs in developing countries such as Ghana do not have free hands to operate and that political party cronies and a few companies with government connections are those most able to access export promotion facilities and services. This study investigated and analysed 42 qualitative interviews conducted in Ghana to provide a clear understanding of the role of such assistance in the exporting activities of Ghanaian SMEs in the Non- Traditional Export sector. The qualitative data collected from 30 SMEs and 12 key organisations associated with export promotion and SMEs development in Ghana shows that export promotion has had a positive impact on SMEs internationalisation, performance and growth. However, the challenges faced by EPOs affect service delivery as well as the diversity of the service. Moreover, lack of effective coordination and integrated approach of rendering services by organisations such as the Ministry of Agriculture, the Ghana Standard Authority and the various EPOs has resulted in numerous challenges and sometimes prevention of fruit and vegetables from Ghana entering the international market. The study suggests that, effective coordination of these organisations and together with government commitment to support service providers are vital for annexing market share in the developed European Union (EU) and the US markets. Contents 1.0 Introduction 4 1.1 Introduction and Background 4 1.2 Research Aim and Objectives 5 1.3 Overview of Research Methodology 6 1.4 Structure of the Thesis 7 2.0 Ghana: Breaking through the International Markets, Social, Political and Economic Context 11 2.1 Introduction 11 2.2 National Context of the Study 12 2.2.1 Demographic and Socio-cultural Setting 14 2.2.2 Political/Legal Context 15 2.2.3 Economic Context 22 2.3 Small and Medium-sized Enterprises Development and Growth 24 2.3.1 Background 24 2.3.2 Definition of SME 25 2.3.3 The Ghanaian Situation 30 2.3.4 SMEs Financing and Economic Development. 33 2.3.5 Contribution of SME Sector in National Economies 35 2.3.5.1 Job Creation 36 2.3.5.2 SMEs and overall economic growth 37 2.3.5.3 Innovative capability 38 2.3.5.4 Poverty alleviation 39 2.3.6 Characteristics of SMEs in Developing Countries 40 2.3.6.1 Labour Force Characteristics 40 2.3.6.2 Sector of activity 40 2.3.6.3 Ownership Characteristics 41 2.3.6.4 Efficiency 42 2.4 SME in Ghana and the Non–Traditional Export (NTE) Sector 42 2.4.1 Non-Traditional Export (NTE) Performance by Sector 43 2.4.1.1 Processed/Semi-processed Sub-Sector 43 2.4.1.2 Agricultural Sub-Sector 44 2.4.1.3 Handicraft Sub-sector 45 2.4.2 Destination for Ghana’s Non-traditional Exports 46 2.5 Summary 48 3.0 Literature Review on Internationalisation theories and SMEs Internationalisation Behaviour 49 3.1 Introduction 49 3.2 Theories of Internationalisation of the Firm 49 3.2.1 The Configuration and “Gestalt-Oriented” approach 50 3.2.2 Real Options Theory 52 3.2.4 Competition-Oriented and Strategic Approach 53 3.3 Theoretical Approaches to SMEs Internationalisation 55 3.3.1 The Stage Approach 56 3.3.1.1 The Uppsala Model (U-Model) 56 3.3.1.2 Innovation-Related Internationalisation Model (I-Model) 58 3.3.2 The Network approach 60 3.3.3 The Born Global Firms 63 3.3.4 The International Entrepreneurship Theory 65 3.4 Factors Influencing the Initial Export Decision of the Firm 67 3.4.1 Demographic Characteristics of the Firm 70 3.4.2 Firm environment characteristics 71 3.4.3 Decision-maker Attributes and Attitudes 72 3.5 Attention Evoking Factors 74 3.6 Export Success Factors 75 3.6.1 Marketing Factors 76 3.6.2 Strategic Management Factors 77 3.7 Barriers or Challenges to Successful Exporting Activities 78 3.8 Internationalisation and SMEs Performance 80 3.9 Migration and Internationalisation 83 3.9.1 Entrepreneur 87 3.9.2 Organising and Strategic Capacity 88 3.9.3 Environment 88 3.10 Cultural distance and SMEs Internationalisation 89 3.11 Conclusion from the Internationalisation Literature 91 4.0 Review of Literature on Government Policies and Assistance to SMEs 94 4.1 Introduction 94 4.2 Export Promotion Programmes and SMEs Internationalisation 97 4.3 Evaluation of Empirical Evidence of Export Promotion Programmes on SMEs Internationalisation 99 4.4 Awareness of Export Promotion Programmes 108 4.5 Usage of Export Promotion Services 109 4.6 Perception of Export Services 110 4.7 Summary and Conclusion 112 5.0 Developing a Conceptual Framework 114 5.1 Introduction 114 5.2 Conceptual Framework, Research Objectives and Questions 114 5.2.1 Process of SMEs Internationalisation and export initiation 115 5.2.2 Internationalisation and Firms’ Performance 117 5.2.3 Export promotion and SMEs internationalisation and growth 118 5.2.4 Challenges of Export promotion agencies 120 5.2.5 Export Promotion services; firms’ awareness, perception and usage 122 5.3 Summary of the chapter 125 6.0 Research Methodology 126 6.1 Introduction 127 6.1.1 Research aim, objectives and questions 127 6.2 Research Strategy 128 6.2.1 Issues surrounding the choice of a research method and Philosophy 128 6.3 Overview of Research Strategy 132 6.3.1 Qualitative research methods 132 6.3.2 Limitations of qualitative Methods 134 6.3.3 Quantitative research methods 135 6.3.4 Combing both qualitative and quantitative methods 138 6.4 The use of Qualitative Research Methods for this Study 140 6.5 Reflexivity in Qualitative Research 141 6.6 Research Design 143 6.6.1 Exploratory, Descriptive and Explanation Research 145 6.7 Fieldwork Strategies 146 6.7.1 Choosing