Small Business

Research Summary

United States Small Business Administration

RS Number 125

May 1992

State Export Promotion and Small Business

by Charles Cadwell

National Small Business United, Washington, D.C.

Completed under award no. SBA-5659-ADV-90

Purpose

The growing internationalization of the marketplace is increasingly important to U.S. business and provides an important area of growth and expansion for many small firms. This study examines an important avenue of assistance for the small firm looking to expand their markets abroad; state export promotion programs. Every state government in the nation has an export promotion program and learning more about the important features of those programs can help federal policymakers assist the small exporter, as well as increase the effectiveness of those programs for small business.

Scope and Methodology

Nine case studies of export promotion programs were conducted to assess the common characteristics, assistance strategies, and relative effectiveness for small business of the programs. The states were selected in consultation with the U.S. Small Business Administration to reflect a mix of programs, state size, and export activity. The study does not attempt to rank the export promotion success of the nine states.

In each of the states-California, Colorado, Illinois, Maryland, Michigan, Nebraska, New York, Rhode Island, and Texas-program officials and a small group of small business owners were interviewed on the following topics:

1. What goals do states have for small business export programs, and how are these goals articulated?
2. What are the most effective ways of achieving these goals?
3. How does the state assess whether they are succeeding?

Highlights

State Goals

States generally have ambitious and broad goals for export promotion. The goals set by legislatures tend to have multiple objectives that leave decisions on allocating scarce resources to program managers. These legislative directions are also more in the nature of licenses than mandates or limitations. Goals set by program managers tend to target levels of trade promotion activity more than export sales results.

According to Exporter magazine, only a small number of firms (about 3,600) export more than 250 shipments per year. Of the 104,000 U.S. exporters, 78 percent export less than $250,000 per year, averaging only six shipments per year with an average value of $43,000. These "infrequent" exporters are also the smaller firms. This stratification of export capability and activity suggests dramatically different assistance needs among exporters and potential exporters. State program goals tend not to take explicit account of this. Designing, marketing, and measuring assistance to the smallest exporter is a different task from developing assistance for firms that have never exported at all or that export only to a narrow market.

Most state program officials acknowledge that the ultimate measure of their success is export sales, but efforts to introduce new firms to exporting or to reach the smallest exporters are not likely to be the shortest route to this goal.

Beyond the stated goals, certain characteristics suggest goals that are implicit in the way states run their programs. Among these are an emphasis on existing exporters; state programs that are provided free of charge, and states that depend on a network of governmental and private entities for cooperation in marketing and delivering export assistance, particularly as they attempt to serve locations away from capital cities. It is less common, however, for these relationships to extend to formal contracting out. Instead, the state offices and local organizations will share responsibilities for a broad package of services.

Successful Programs

One-on-one counseling is seen as the most helpful program, although officials in several states acknowledge that it is beyond their resource capability. Admittedly expensive, both overall and per firm, this assistance is provided without clear standards for rationing this benefit.

Export promotion was seen as an important state function and a cost effective way of exposing large numbers of people to the idea of exporting. Conferences and seminars promote states' services, educate exporters, and sort out those individuals interested in more intensive-and more expensive-counseling.

Measuring Results

There is a widespread absence of measurement of outcomes; every state measured activity but no systematic review of the impact of that activity occurred. It is impossible to relate state export promotion activity to overall state exports or to exports by the firms that have been helped. Attempts to measure outcomes have been loosely fashioned and aimed at producing politically useful indicators of satisfaction with the program. They do not usually focus on future efforts on particular types of assistance or determining relative outcomes per state dollar expended. One exception is an Urban Institute Report prepared for the state of Illinois in 1989. A 1990 publication, Monitoring Economic Development Performance, also by the Urban Institute, is an excellent starting point for states interested in improvement in this area.

Summary

The study makes the following recommendations:

1. State legislatures should establish explicit goals for export promotion programs and should distinguish between the goals of this export programs:

Goals for programs aimed at increasing the number of small business exporters should be stated in terms of the number of firms, thereby focusing on the long-term export capability of a broader number of firms.

Goals for programs aimed at increasing the dollar value of exports should focus on existing but infrequent exports, thereby focusing on shorter term results.

1. Program managers should understand the limitations of export assistance and avoid overambitious promises of dramatic economic effects from a state export assistance effort.
2. Once states distinguish their promotion mission from their assistance mandate, they should allocate resources explicitly.
3. States should implement fees for services:

Intensive counseling programs, such as Maryland's, should be provided on a commission basis.

Seminars and training should have modest participation fees.

1. States should articulate the comparative advantage of various state-supported export assistance providers and increase coordination and joint publicity about resources.
2. The biannual National Association of State Development Agency survey of states should be modified to ask states to identify goals for which they actually measure progress, how they measure that progress, and how the information is used.
3. States should identify specific feedback mechanisms for export promotion activity to evaluate the effectiveness of specific programs. These mechanisms could include user surveys; frequent budget reviews; and targets for specific activities and staff, measured against results.
4. States should survey users both at the time of assistance and after some time period-perhaps a year.

User surveys should identify not only whether a service was useful, but how it was useful or why it was not.

User surveys should ask specific facts, such as the number of leads or number and value of sales, rather than projections about future sales or jobs-judgments the individual respondent may be unqualified to make on behalf of the firm.

For more information, contact Advocacy's Office of Economic Research at (202)205-6530.

Ordering Information

The complete report is available from:

National Technical Information Service

U.S. Department of Commerce

5285 Port Royal Road

Springfield, VA 22161

(800)553-6847

Order Number: PB92-168657

Cost: $26.00 (paper); $12.50 (Microfiche)