Effects of publically funded support for the internationalisation of SMEs
– a literature review of evaluation methods
Swedish enterprise and industry has access to a wide range of government funded programmes and activities that aim to promote the internationalisation of firms. However, knowledge on the effects of these programmes – at the firm-level and on society in general – is limited. This memorandum is part of a government assignment (N2013/5656/KLS) to the Swedish Agency for Growth Policy Analysis, Growth Analysis. The background to this assignment is the Swedish National Audit Office’s report “På väg ut i världen – statens främjandeinsatser för export” [On the way out into the world – government export promotion efforts] (Riksrevisionen, 2013), in which this knowledge gap was identified. Growth Analysis has been asked to develop and propose methods and indicators for evaluating the effects of government funded support for the internationalisation of small and medium-sized enterprises (SMEs).
Growth Analysis has previously published an interim report (Tillväxtanalys, 2014) within this assignment which included surveys of the government funded programmes to promote internationalisation of firms, the aims of the programmes, as well as previous monitoring and evaluation of programmes in Sweden and in six other European countries.
The objective of this memorandum is to provide a review of methods used within the disciplines of economics and business administration to study the effects of government funded programmes to promote of exports and internationalisation of SMEs. The literature review describes which types of promotion programmes have been studied, as well as the outcome variables and measurement methods that have been used. It does not, however, include results from the research literature concerning effects of different types of promotion programmes. This literature review is intended to provide background information for Growth Analysis’ final report within the current government assignment and to contribute to well-considered and supported recommendations.
Research scope and emphasis
From our literature review, a few general conclusions can be drawn as regards the scope and focus of the research literature. Firstly, it is clear from both the economics and business administration literature that the research in this area is primarily focused on studying and estimating the effects of export promotion programmes – rather than other forms of internationalisation such as international investments and partnerships.
Secondly, from our literature review, it is clear that the research is generally limited to estimating effects of promotion programmes on the firm-level. Attempts to estimate the broader effects of promotion programmes on society as a whole are very rare, and reliable calculations are judged to be difficult or even impossible to make.
A final conclusion that can be drawn, as regards to the studies’ scope, is that the focus is normally on estimating the effects of one specific promotion programme or organisation. It is rare that studies aim to address the effects of a country’s public export/internationalisation promotion system as a whole.
Greater access to micro-data and more multidimensional measurements of export performance
Two different trends are clear in the economics and business administration research. Within economics, greater access to detailed and disaggregated data on countries’ public support to firms has had an impact on the kind of studies published. Studies that not only estimate the effects of support on, e.g., a country’s total export volume, but also explore, for instance, how the effects are distributed over the intensive and extensive margin or over different groups of exporters have become more common.
A clear trend in the business administration literature is that researchers have, in recent years, begun using more multidimensional measurements of “export performance” to study the effects of promotion programmes. Traditional financial measures, such as the proportion of sales, profitability and sales increases from exports, have been called into question as they are considered to have a number of limitations and, in some regards, to be unreliable. Several researchers have therefore begun supplementing these measurements with, e.g., non-economic measurements and various subjective measurements such as skills acquisition and satisfaction with the company’s position and internationalisation efforts.
Methods used within economics and business administration should be seen as complements
The economics research on the effects of government promotion of firms’ internationalisation can be divided into studies that have a macroeconomic perspective and studies that have a microeconomic perspective. In the former, it is common that the researchers use a so-called gravity model of international trade to study, on an aggregate level, budget effects or the effects of a specific activity on bilateral trade flows. A common microeconomic approach is to calculate the average treatment effect on the firms that have participated in a programme using the method matched difference-in-differences. This provides knowledge about the effects on a disaggregated level and also enables studies of distribution effects.
In business administration studies on the effects of export promotion programmes, the most common method used is survey-based studies. Cross-sectional studies are most common although there are some examples of studies with a longitudinal approach, which can provide information on e.g. social processes. Besides surveys, more qualitative methods such as interviews have also been used. Qualitative approaches may be especially suitable when the focus is, for example, organisational learning.
Different methods are more or less suitable for evaluating different types of activities and programmes. In addition, the data availability and the research question of interest are also relevant for selecting appropriate methods. To provide as complete a picture as possible of the effects of the range of Swedish government funded programmes and organisations that aim to promote the internationalisation of SMEs, studies with different research approaches and methods of data collection and analysis should be seen as complements to each other.