Export Potential Index for Textile Industry (EPIT) model proposal with structural equation modelling and application

Abstract

PurposeThe aim of this study is to develop a new multidimensional index to measure export potential of textile firms by using firm-level data.Design/methodology/approachAfter a conceptual model, a structural equation model is developed with five dimensions and 27 observed variables based on resource-based view theory. The measurement model is solved by Linear Structural Relations (LISREL) with maximum likelihood algorithm by using data collected from 454 textile firms in Türkiye.FindingsIn this study, a new multidimensional index that measures export potential of textile firms is developed. With the proposed model, the export potential of textile firms can be calculated numerically with the five dimensions: Resources, Dynamism, Knowledge, Innovation and Sustainability. The comparison of the output of the proposed model with the control variable, firm’s actual export values, shows a significantly high success ratio of 90.76%.Research limitations/implicationsThe model is applicable for textile firms at different export levels, regions and sub-sectors. The Export Potential Index for Textile Industry model is verified by using Turkish textile industry data. The robustness of the model may be increased by verifying the model by using some other countries data. This model can be implemented to other industrial sectors with some modification of the dimensions and variables.Practical implicationsThe proposed model will contribute to the firms by calculating their export potential in five dimensions with their own variables numerically. The model will help firms to develop strategies to increase their export potential and to the governmental and industrial organizations to develop incentives policies.Originality/valueThis paper fills the gap in the literature by proposing a multidimensional index that determines a firm’s export potential numerically by using firm-level data.