Influence of Global Competitive Capability on Global Performance of Distribution Industry in South Korea

Abstract

Purpose: Purpose of this study is to empirically analyze influence of global competitive capability on global performance of distribution industry in South Korea. Also based on the empirical results, give managerial implication to distribution industry and contribute to academies of management. Research design, data and methodology: This study focuses on relationship analysis between global competitive capability and global performance. This study measured global competitive capability with three concepts; human capability, network capability and product/service capability. And measured global performance with export performance. To empirically analyze relationship between variables, this study used 2,316 data of GCL Test by KOTRA and Kdata. This study used SPSS26 and analyzed frequency, reliability, correlation and stepwise regression analysis. Results: Result shows that, in control variable, business period and business field give significant positive influence on export performance. Among antecedents, human capability and network capability give significant positive influence on export performance. However, product/goods/service was not significant. Due to significant influence of business field which is categorical variable. This study additionally analyze relationship by business field group to confirm whether relationship differ by group or similar. Conclusions: Based on the results, this study try to give implication to distribution industry management and contribute to academic.

1. Introduction

As development of internet and as world e-commerce increase, so it the connection and linkage of the world economy and business. According to GCI (global connectivity index) 2017, gap between starters and frontrunners’ average GDP (gross domestic product) per capital is US$3, 000 to $50, 000 and average GCI score is between 20-34 to 56-85. Also, according to HCC (Huawei Cloud Congress) analysis report, 1% increase in GCI increase GDP per person 1.4% to 1.9%. For the foreseeable future, development and usage of global connection is and will increase and dispersion more. GVC (global value chain) has been one of key concept in business, now due to COVID-19, reorganization seem evitable. Therefore, reshaping the connection is upcoming. Also, according to UNCTAD's global review on COVID-19 and e-commerce shows that online retail grew from 14% to 17% in 2020. As connection and linkage of the world economy and business and growth of e-commerce, the importance and value of distribution industry increasing. Academic studies increased as importance of distribution industry increase, however most studies were focus on specific area of distribution (Puertas, Marti, & Garcia, 2013; Coo, 2017; Than, Nguyen, & Nguyen, 2021; Kim, Kim, Chang, & Park, 2021) or case (Won, 2018). However, more research of distribution industry is in need. As in Korea 2019, distribution industry included 4.94 of total sales, 4.9 of employment, 7.25 of business by KOSIS (Korean Statistical Information Service) data. However, since COVID-19 pandemics, distribution industry seem grown due to untact condition and economy. On the other hand, weakness and problems of distribution float in Korea and over the world. Nowadays it seems the world and in Korea, too are suffering from overburdened workload and delay in delivery to halted, etc. Therefore, more research of distribution industry is in need.

Global performance has been one of the main focus in business and in academic. Previous studies of determinants of global performance have generally been conducted based on four theories; industrial organization, resource-based, relational perspective and eclectic paradigm. And this study is based on resource-based and relational perspective theory. Purpose of this study is to statistically analyze relationship between global competitive capability and global performance of distribution industry in Korea. Especially, this study measured global performance as export performance, since Korea is a country that promotes economic growth centered on trade. Aim of this study to answer two research questions. First, what global competitiveness capability is important in increasing export performance? Second, does firm characteristic difference differentiate relationship or is it similar? This study considered three global competitive capability; human, network, and product/goods/service capability. To empirically analyze, this research used GCL data of KOTRA which is opened in Kdata. This research used 2, 316 distribution industry firms which are executing direct export. Analysis of this research used SPSS26 of frequency, reliability, correlation and stepwise regression are analyzed. Base on the empirical results, this research will try to give managerial implication to distribution industry.

2. Theoretical Background and Hypotheses Setting

2.1. Literature Review

Global performance of firm is generally measure by export performance concept. Export performance can be shown in diverse index, according to Sousa (2004), index of export performance includes measuring with objective and subjective index. Objective index includes such as market share, export sum, export intensity, export intensity growth, export sales growth, export profitability, etc (Leonidou, Katsikeas, & Sammiee, 2002). Subjective index includes such as, usually measure by 5-point or 7-point Likert scored, overall export performance, satisfaction of export performance or goal fulfillment, bran/firm awareness and export sales growth and export profitability, etc. Therefore, in this study global performance was measured with export sum. Previous studies of determinants of global performance have generally been conducted based on four theory based. First, industrial organization theory based, situation of environment(S)-strategy(S)-performance(P). This view focus on link between global market environment and strategy on global performance (Cooper & Kleinschmidt, 1985; Koh & Robicheaux, 1988; Cavusgil & Zou, 1994).

Second, resource-based theory based, firm's internal resources and capabilities influence global performance (Dhanaraj & Beamish, 2003; Morgan, Kaleka & Katsikeas, 2004). Third, relational perspective theory which is driven from resource-based theory, this relational perspective focus on relation of investment company, overseas importer and overseas buyer on global performance (Leonidou et al., 2002; Styles & Ambler, 2000; Styles, Patterson & Ahmed, 2008). Fourth, eclectic paradigm theory, this focus on mixed and complex relation between oversea local characteristics and specific firm owned asset. Also, other theories like social exchange theory, transaction cost theory, knowledge based theory and integrated frameworks. However, even though various studies and efforts have been made to identify factors that determine global performance. Nevertheless, both theoretically and empirically, there is not yet a common perspective that everyone agrees with. Therefore, more study is in need. And the explanatory power of individual studies based on each theory point of view was not high. Therefore, in this study mix of two theory approach is taken, resource-based theory and relational perspective theory.

2.2. Hypotheses Setting

Global competitive capability has something in common with global competitiveness and competency. It is source of new business development, adapt to changing and integrate skills, technologies and knowledge streams to increase customer value (Prahalad & Hamel, 1997). In the end, it is internal capacity for a firm to grow, therefore in this study took both resource-based and relational perspective were used. In resource-based theory, firm is made up of resources and capabilities, and firm's unique tangible and intangible resources as sources of sustainable competitive advantage (Barney, 1991). Examples of tangible and intangible resources include assets, capabilities, processes, managerial characteristics, knowledge, and information, etc (Barney, 1991). And relational perspective theory derives from resource-based theory and uses relationships with corporate stakeholders as a source of competitive advantage. Among diverse global competitive capability, this study uses three global competitive capability concepts; human, network, and product/goods/service capability. This study establishes and verify research hypotheses based on relation between global competitive capability and global performance.

Human is key element of competitiveness in all industry and business (Pfeffer, 1994). Efficient creation and utilization of knowledge is essential condition of competitiveness and human resource is recognized as knowledge embodied. Therefore, firms strive to possess, develop and secure human resource with expertise (Ranft & Lord, 2000). The knowledge, skills, and experience of each member of the organization is mainly intangible asset therefore it is not easy to imitate or replace and this character provide competitive advantage (Barney, 1986). Many of the tangible and intangible resources and capabilities are integrated and embodied in human. Therefore, human resource is unique to firm which is difficult for competitors to imitate therefore it is source of company's long-term competitive advantage (Hatch & Dyer, 2004). Therefore, in this study, meaning of human capability refers to the global capabilities possessed by human resources. Following hypothesis is formulated based on literature, hypothesis is derived in to the following.

H1: Human capability give significant positive influence on global performance.

Network is a strategic link and partnership of independent organizations or companies to achieve and maintain their goal (Jarillo, 1988; Powell, 1990). Therefore, by forming and participating a network and by linking their management resources with external management resource, firms create and add value (Lee, Lee & Pennings, 2001). A company's network can be an important resource for a company and a source of competitive advantage. By close relationships, bridge and exchange of resources, channel of knowledge and obtaining technology and intangible asset (Dyer & Singh, 1998). Also network capabilities allow companies to discover business opportunities in overseas market. and help competency of company to enter overseas markets (Oviatt & McDougall, 2005). Therefore, in this study, meaning of network capability refers to the network's contribution in global business and overseas traders’ global competitiveness. Following hypothesis is formulated based on literature, hypothesis is derived in to the following.

H2: Network capability give significant positive influence on global performance.

Product/goods/service(P/S) capability is broad and diverse therefore there is no opinions in accord. P/S capability refers to company's competitiveness in market. It is major measure that leads to commercial performance in the market (Forker, Vickery, & Droge, 1996). However, P/S capability can be interpreted from the perspective of corporate strategy. Corporate strategy is means of securing or maintaining a comparative advantage over competitor (Porter, 1985). And corporate strategy includes setting of relationships with customers. In the end, whether or not to realize the opinions and ideas of customers is related to performance of company. Therefore, the performance of companies is closely related to exchange of information with customer (Middleton, 1983). Therefore, in this study, meaning of P/S capability refers to global demand and customer's reflection in business. Following hypothesis is formulated based on literature, hypothesis is derived in to the following.

H3: P/S capability give significant positive influence on global performance.

3. Methodology

3.1. Research Model and Measurement

This study is, based on literature, analysis of relationship between global competitive capability and export performance. And research model of this study is summarized in Figure 1. As model show this study included three global competitive capability; human capability, network capability and product/service capability.

Figure 1: Research Model

This study used KOTRA (Korea Trade-Investment Promotion Agency) surveyed GCL (Global Competence Level) Test survey 2019 which actual data set is offer by Kdata. As for dependent variable measurement, this study used export performance. KOTRA graded each firm's export performance and scored from 2 to 10(more exported) based on firm's export performance. This score is given by KOTRA's closed-door criterion measurement. As for independent variable, global competitive capability includes three capability concepts; human capability, network capability and product/service capability. Human capability is measured with 3 items like how many manpower does firm have to consult export in foreign language, how many top management manpower have overseas degree and how is your firm's overseas marketing manpower capability.

Network capability is measured with 3 items like how is firm networking with global enterprise, how much does current overseas client contribute to export activity and how is current overseas client's global competitiveness. Intensive capability includes two concepts; market strategy and product/goods/service. P/S (Product/Goods/Service) capability is measured with 3 items like in developing export product how global market (or customer) demand (or need) is reflected, how often does regular mass order happen by global client's and how is global market product development activity. As for control variables, this study includes three, business period, firm type and business field. Business period is calculated basis on year 2019 to firm's business starting year which GCL Test survey asked. As for firm type, survey asked whether firm is SME (small and medium enterprise) or other. As for business field, survey asked whether firm is only doing export-brokerage (trade agency, Agent, etc.) or firm includes manufacturing/ service activity.

3.2. Research Sample

To statistically analyze relationship between global competitive capability and export performance of distribution industry in Korea. This study used KOTRA surveyed and offer by Kdata' s 2019 GCL Test. Among 2019 GCL Test service gathered 31, 862 data (1, 7532 of domestic (not exporting) and 1, 4330 of exporting firm), this study only included SISS (standard industry classification code) code G (Wholesale/Retail & Trade Industry) and H (Distribution Industry) of firm enforcing direct exporting. Therefore, this study included 2316 firms and sample characteristic is summarized in Table 1. As for business period, mean is 13.97 years, middle is 11 years, minimum 1 year and maximum 81 years. As for firm type, 2195(94.8%) are SME and others are 121(5.5%) meaning, in this study, most of Wholesale/Retail & Trade Industry and Distribution Industry firms are SME. As for business field, survey asked whether firm is only doing export-brokerage (trade agency, Agent, etc.) only or firm includes manufacturing/service. Sample show 1271 (54.9%) are export-brokerage and 1045(45.1%) are manufacturing/ service included. KOTRA scored each firm's export performance based on KOTRA's closed-door criterion and scored 2 to 10(more exported). This study includes 818(35.3%) of score 2, 234(10.0%) of score 4, 206(8.9%) of score 6, 238(10.3%) of score 8, 458(19.8%) of score 9 and 362(15.6%) of score 10. Also, KOTRA graded firm's GCL (beginner, promising, leading and hidden champion) and this study include Global Beginner Firm (GBF) 313(13.5%), Global Promising Firm (GPF) 1172(50.6%), Global Leading Firm (GLF) 542(23.4%) and Global Hidden Champion Firm (GHCF) 289(12.5%).

Table 1: Characteristic of Sample

4. Analysis Results

4.1. Factor and Reliability Analysis

First, factor analysis is analyzed to construct validity and reliability analysis to confirm internal consistency and results are summarized in Table 2. This study analyzed each variable's factor analysis separately). As results show higher than 0.50 KMO & Bartlett's Test results meaning each factor are useful in this study. Result show that squared loading of human capability (1.761), network capability (2.153), P/S capability (1.) and total variance explained of human capability (58.711), network capability (71.777), P/S capability (63.581). Also, in Cronbach's alpha(α) result human capability (3 item) 0.644, Network capability (3 item) 0.803 and P/S capability (3 item) 0.712.

Table 2: Factor Analysis and Reliability Results

4.2. Correlation Analysis

Correlation analysis is conducted before regression analysis and result is summarized in Table 2. The highest correlation is 0.667 between Network capability and P/S capability. However, all the VIF score was lower than 3.6 therefore multicollinearity issue is safe.

Table 3: Correlation Results

Note: ⁑< 0.01, * <0.05, 1 Business Year, 2 Firm Size (SME or Others), 3 Industry (Export-brokerage Business or Others), 4 Professional Manpower, 5 Networking, 6 Product/ Goods/Service, 7 Export Performance

4.3. Regression Analysis

To statistically analyzed relationship between global competitive capability and export performance. This research suggested two research questions. One is, what global competitiveness capability is important in increasing export performance? Two is, does firm characteristic make difference or is it similar?

This study used stepwise regression analysis to confirm the relationships among variables and results are summarized in . Two step analysis are executed. First, in Model 1(M1) only the firm characteristics were included. Second, in Model2(M2), with firm characteristics, competitive capabilities were included.

 

Table 4: Regression Results

Note: ⁂< 0.001, ⁑ < 0.01, * <0.05, ⁺ <0.1

As results show, explanatory of export performance increase from M1(11.6%) to M2(23.9%) meaning export performance is explained better with global competitive capabilities than only by firm characteristics. Among firm characteristics, only firm type was not significant. Business period (.168) and business field (.173) show statistically positively significant on export performance. Meaning, longer the business period better the export performance. Therefore, to increase export performance, bearing and enduring in business survival seems work. As for business field, export-brokerage business firm export more than other (manufacturing/service included) firm. Therefore, as business field mattered on export performance this study analyzed additional export performance analysis with business field compassion as shown in Table 4. Result of export performance with business field companion will be disclosed latter. Among three global competitive capabilities, P/S capability was not significant and human capability (.206) and network capability (.182) were statistically positively significant. Therefore, to increase export performance, improve, increasement and develop of human capability and network capability are necessary.

As mentioned above, business field significantly mattered on export performance therefore this study analyzed additional export performance analysis with business field companion as shown in Table 4. Result shows that significant direction of influence was same yet level of influence was shown difference. In both export-brokerage business and others, business years (.233, .126), human capability (.212, .211) and network capability (.170, .198) give positive significant influence on export performance. These results mean that to increase export performance, both in export-brokerage business and others, need to improve both human capability and network capability. Human capability positive influence was almost similar in both export-brokerage (.212) and others (211). However, business network capability shows bit low influence in export brokerage (.170) than in others (.198).

5. Conclusions

5.1. Result Summary

This study focuses on analyzing relationship between global competitive capability and export performance of Distribution Industry in Korea. And this study considered three global competitive capability; Human capability, Network capability and P/S capability. And three firm characteristics (Business Period, Firm Type, Business Field). To do that, this study use KOTRA surveyed and Kdata offered GCL Test Data (2019). Two research questions were asked. First, what global competitiveness capability is important in increasing export performance? Second, does firm characteristic make difference or is it similar? Empirical results are summarized in three ways. First, export performance was statistically significantly influence by human capability and network capability which were positive. From highest to lowest influence, human capability and network capability. Second, business period and business field were statistically significantly positive on export performance. And business field comparison results in Table 4 shows same significant positive directional influence of human and network capability, just level of influence difference were shown. To Export-brokerage and in others, human capability's influence was really similar. However, network capability' influence was lower in Export-brokerage than in others.

5.2. Contribution and Implication

This study has a few academic contributions and managerial implications. As for academic contribution, first, this study filled the gap in academy. Although importance of distribution industry increases in economy and business, still academic studies were limited. Therefore, this study offered statistically analyzed academic study in field. Second, this study expand application of GCL Test data. Although KOTRA have been collecting massive and concrete GCL Test data, there was lack of use in academic field. Therefore, this study tried to increase availability and efficiency of data using GCL Test data in academic

As for managerial implication, based on the result, three implications could be made. First, to increase export performance, managing human capability is necessary. To improve human capability, firm need to increase manpower who can consult export in foreign language, increase top management manpower who have overseas degree and increase firm's overseas marketing manpower capability. Second, to increase export performance, managing network capability is necessary. To improve network capability, firm need to increase firm's network with global enterprise, increase overseas client contribute to export activity and increase overseas client's global competitiveness together or form a connection with overseas client who have high global competitiveness. Third, reflecting difference in managing export performance by business field is necessary. As result show human capability and network capability's positive direction in both business field, just level of influential difference was shown. Therefore, managers of different business field should consider relative importance.

5.3. Limitation

Even though there are two academic contribution and three managerial implications, there are limitations of this study. Two limitations and suggestion of future study is summarized. First, this study includes common method bias threat exist. This study analyzed each variables’ factor analysis separately. This methodology cannot overcome or confirm common method bias threat. Therefore, in future study resolving common method bias is needed. There are ways like Harman's single factor test analysis or use of mixed measured variable or differently collected independent and dependent variables are possible ways. Second, this study included three independent variables (human capability, network capability, P/S capability) and one dependent variable, export performance. However, there are more factors influencing export performance. Therefore, in future study influence analysis like international marketing or R&D capability (Zou, Fang, & Zhao, 2003) need to be consider. Also, this study measured export performance in category variable. Therefore, in future study financial approach of financial number-based performance (Cho, Leem & Shin, 2008) is needed.