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BestMasters

Sophie Brown

Impact of Business
Association Services
and Training Programs
on Export Performance
Evidence from Bangladesh IT and
ITES Sector
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Sophie Brown

Impact of Business
Association Services
and Training Programs
on Export Performance
Evidence from Bangladesh IT and
ITES Sector
Sophie Brown
Etoy, Switzerland

ISSN 2625-3577 ISSN 2625-3615 (electronic)


BestMasters
ISBN 978-3-658-30466-9 ISBN 978-3-658-30467-6 (eBook)
https://doi.org/10.1007/978-3-658-30467-6

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The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany
Abstract
This thesis analyzes the impact of the Bangladesh IT association (BASIS)
on firm export performance, using unique cross-sectional data from the
Bangladesh Evaluation Survey 2016. The aim is to build on existing
literature and provide empirical insight into the effect of an export
association in a developing country in the IT and ITES sector. The
hypotheses that BASIS services and training programs positively impact
firm export performance, defined as export propensity and export share,
are empirically tested using the propensity score matching method. The
empirical methodology was chosen to address the self-selection bias. The
results show a positive link between BASIS and firm export performance.
However, the empirical evidence, from the available data, is not robust
enough to claim a clear causal relationship for all services and training
programs offered. Nevertheless, several insights can be made: The
services, such as financial services seem to favor an expansion of firms’
export share while training programs, such as the marketing and technical
training are associated with an increase of export propensity.

Keywords: Export Promotion Agency; Firm Export Performance;


Propensity Score Matching Method; Bangladesh; IT and ITES Sector

V
Table of Contents
Abstract.......................................................................................... V
Table of Contents ........................................................................ VII
List of Tables and Figures ............................................................ IX
Acronyms.................................................................................... XIII
1 Introduction .................................................................................. 1
2 Literature Review......................................................................... 5
2.1 Determinants of Export Performance .................................... 5
2.2 The Role of Export Promotion Agencies ............................... 9
3 BASIS and Research Hypothesis .............................................. 13
4 Data Characteristics .................................................................. 19
4.1 Survey Characteristics ........................................................ 19
4.2 Descriptive Data.................................................................. 19
4.2.1 Explanatory Variables .................................................. 19
4.2.2 Outcome Variables ....................................................... 25
4.2.3 Control and Matching Variables ................................... 25
5 Empirical Design........................................................................ 29
5.1 Ordinary Least Squares ...................................................... 29
5.2 Potential Methods ............................................................... 32
5.3 Matching Method ................................................................ 34
5.3.1 Basic Model and Quantities of Interest ......................... 34
5.3.2 Assumptions ................................................................. 36
5.3.3 Propensity Score Matching Method ............................. 37
6 Results....................................................................................... 49
6.1 Impact on Export Propensity ............................................... 49
6.2 Impact on Export Share ...................................................... 51
6.3 Discussion........................................................................... 53
7 Limitations ................................................................................. 55
8 Conclusion ................................................................................. 57
Bibliography .................................................................................. 59
VII
List of Internet Resources............................................................. 65
Appendices ................................................................................... 67
A. Services and Training Awareness and Usage Ratio ...... 67
B. Detailed Summary Statistics .......................................... 70
C. Overview Propensity Score Estimation Steps ................ 73
D. χ2 test............................................................................. 74
E. Detailed Overview of Results - Export Propensity ......... 75
F. Detailed Overview of Results - Export Share ................. 77
G. Robustness Check ......................................................... 79
Acknowledgements ...................................................................... 85

VIII
List of Tables and Figures
Figure 4.1: Reasons for not Participating in BASIS Training
Programs ................................................................... 20
Table 4.1: Training participation Rate by Exporter Status ........... 20
Figure 4.2: BASIS Training Participation ...................................... 21
Table 4.2: Usefulness Perception of Training Programs ............. 22
Table 4.3: Service Awareness, Usage Ratio and Satisfaction
Rate ........................................................................... 23
Table 4.4: Classification of BASIS Services ................................ 24
Table 4.5: Coraviate Mean by Export Status ............................... 27
Table 5.2: Normalized Difference Between Control and Treatment
Groups for each Covariate ......................................... 32
Figure 5.1: Overlap of Propensity Score for each Treatment ....... 40
Table 6.1: Treatment Effect of Training Programs on Export
Propensity .................................................................. 50
Table 6.2: Treatment Effect of Services on Export Propensity .... 50
Table 6.3: Treatment Effect of Training Programs on Export
Share ......................................................................... 52
Table 6.4: Treatment Effect of Services on Export Share ........... 52
Table A.1: Service Awareness, Usage Ratio and Satisfaction Rate
Index for Exporter Firms ............................................ 68
Table A.2: Service Awareness, Usage Ratio and Satisfaction Rate
for Non-Exporter Firms .............................................. 69
Table B.1: Covariates Summary Statistics with Treatment
Training ...................................................................... 70
Table B.2: Covariates Summary Statistics with Treatment
Marketing Training ..................................................... 70
IX
Table B.3: Covariates Summary Statistics with Treatment
Management Training ................................................ 70
Table B.4: Covariates Summary Statistics with Treatment
Technical Training ...................................................... 71
Table B.5: Covariates Summary Statistics with Treatment
Executive Training ..................................................... 71
Table B.6: Covariates Summary Statistics with Treatment
Services ..................................................................... 71
Table B.7: Covariates Summary Statistics with Treatment
Financial Services ...................................................... 71
Table B.8: Covariates Summary Statistics with Treatment
Promotion Services .................................................... 72
Table B.9: Covariates Summary Statistics with Treatment Network
Services ..................................................................... 72
Table B.10: Covariates Summary Statistics with Treatment Other
Services ..................................................................... 72
Table E.1: Detailed Overview of Treatment Effect of Training
Programs on Export Propensity ................................. 75
Table E.2: Detailed Overview of Treatment Effect of Services on
Export Propensity ....................................................... 76
Table F.1: Detailed Overview of Treatment Effect of Training
Programs on Export Share ........................................ 77
Table F.2: Detailed Overview of Treatment Effect of Services on
Export Share .............................................................. 78
Table G.1: Alternative Classification of BASIS Services ............. 79
Table G.2: Treatment Effects of Alternative Services Indices on
Export Propensity ....................................................... 80

X
Table G.3: Treatment Effects of Alternative Services Indices on
Export Share .............................................................. 80
Table G.4: Treatment Effect of Training Programs on Number of
Export Markets ........................................................... 81
Table G.5: Treatment Effect of Services on Number of Export
Markets ...................................................................... 82
Table G.6: Linear Regression of the Impact of BASIS Training and
Services ..................................................................... 84

XI
Acronyms
ATE Average Treatment Effect
ATET Average Treatment Effect of the Treated
EPA Export Promotion Agency
BASIS Bangladesh Association of Software and Information
Services
BDT Bangladeshi taka, currency of the people’s republic of
Bangladesh
GNI Gross National Income
NTF III Netherlands Trust Fund phase III
OLS Ordinary Least Squares
ICT Information and Communication Technology
IT Information Technology
ITC International Trade Center
ITES Information Technology Enabled Services
IV Instrument Variable
PMP Project Management Professional
R&D Research and Development
SQL Structured Query Language
SME Small and medium-sized enterprise
TPO Trade Promotion Organization

XIII
1 Introduction
The relationship between exports and economic growth has attracted
much attention in recent decades. Neo-classical theory, strengthened by
the Asian Tigers and the general success of the free-market, suggests that
exporting leads to growth (Sampathkumar and Rajeshkumar, 2016, p. 33).
Three main arguments support the export-led growth theory. The first dates
back to David Ricardo, who put forward the benefits of specialization and
comparative advantage. By focusing on the industries which present a
comparative advantage and by importing the other goods, countries will
end up with a higher total amount of goods than if they produced everything
themselves (Ricardo, 2004, p. 83). The second argument emphasizes the
advantages of economies of scale. Through exports a firm is not
constrained by country-markets and can produce to the maximum of its
capacity (Krugman, 1979, p. 479). The final argument relates to technology
change. Firms learn from foreign markets, improve their production
methods and update their technologies through exports. Inefficiencies are
eliminated to be able to compete in fierce global markets (Rivera-Batiz and
Romer, 1991, p. 536-537).
Thus, international trade has been largely promoted (Alvarez and Crespi,
2000, p. 226; Bond et al., 2005, p. 15). Consequently, governments have
been pouring their resources into export promotion programs as the
continuing existence of trade barriers inhibits exporting. The complexities
of administrative procedures and compliance requirements, asymmetric
information, missing links to foreign clients, and the lack of experience or
resources are some of the obstacles that discourage local companies from
seeking expansion through foreign markets. Trade promotion agencies,
which are often part of the government export promotion programs, aim to
reduce these barriers.
The International Trade Center (ITC) was founded with the mission to help
countries foster international trade. As a subdivision of the United Nations
and the World Trade Organization, ITC builds the bridge between
developing countries and the global economy and promotes trade as a
means for economic growth.

1
© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020
S. Brown, Impact of Business Association Services and Training
Programs on Export Performance, BestMasters,
https://doi.org/10.1007/978-3-658-30467-6_1
One of ITC’s key projects –the Netherlands Trust Fund phase III (NTF III)
program– is conducted in partnership with the Dutch Centre for the
Promotion of Imports from developing countries and aims to improve
export competitiveness in key sectors of four developing countries,
Bangladesh, Kenya, Myanmar and Uganda. The aim of the program is to
ensure that the beneficiary sectors increase their export sales and/or
volumes as well as secure new clients and markets in order to reach the
program’s overarching mission: Generate and maintain jobs in the selected
sectors and ultimately reduce poverty (ITC, 2017). NTF III provides a
framework for helping to improve the capacities and performance of trade
support agencies, which in turn provide services to export-oriented
enterprises. By building the capabilities of export promotion agencies, ITC
helps to foster economic growth in a sustainable manner (Pamuk et al.,
2015, p. 4).
In Bangladesh, the focus of NTF III is on the IT and IT Enabled Services
(ITES) sectors. The Bangladesh Association of Software and Information
Services (BASIS) is the primary IT export promotion agency, which helps
SMEs connect to foreign markets and promotes entrepreneurship. NTF III
aims to improve the services offered by BASIS to better support the local
SMEs in increasing their export competitiveness (Pamuk et al., 2015, p. 4).
Through this Master’s thesis I aim to assess the existing impact of the
export promotion agency, BASIS, on Bangladeshi IT and ITES firms.
Currently, empirical research on the effectiveness of export promotion
agencies is inconclusive (Ayob and Freixanet, 2014, p. 38). Due to the
different methodologies used in studies and the different sectors and
countries investigated, it is difficult to generalize findings. This study
therefore complements existing research by investigating the IT and ITES
sector in a developing country. Furthermore, I go further than most
empirical literature by evaluating the impact of the individual training
programs and the cluster of services offered by BASIS on export
performance, measured as export propensity and export share. In order to
statistically test the impact on Bangladeshi firms, I apply the propensity
score matching method. This method was chosen primarily to reduce the
self-selection bias present with non-experimental data.

2
The thesis is structured as follows: Chapter 2 provides a literature review
of the determinants of export performance and the role of export promotion
agencies. Chapter 3 introduces the government trade promotion agency,
BASIS and the two research hypotheses. In chapter 4 the dataset is
described. Chapter 5 presents the econometric methods used to test the
research hypotheses. Section 5.1 presents the OLS method and its
limitations, section 5.2 briefly describes potential methodologies to account
for self-selection and section 5.3 describes the matching method applied.
The results and implications are shown in chapter 6. Chapter 7 highlights
the limitations and chapter 8 concludes.

3
2 Literature Review
In the first section of this chapter, I give an overview of the determinants of
export performance. I investigate the internal characteristics of firms to
determine which of these characteristics distinguish exporters from non-
exporters on a theoretical level. The findings are used to determine the
covariates to include in the econometric design. In the second section I
summarize the role of export promotion agencies and the current findings
from research on their impact on firm export performance.

2.1 Determinants of Export Performance


The number of firms taking advantage of the global market is restricted as
barriers impede firms in engaging in “full-of-potential” but risky international
trade (Freixanet, 2012, p. 1065; Williams, 2011 p. 153). Researchers
distinguish between two types of barriers: external environmental factors
and company specific internal barriers (Wilkinson and Brouthers, 2006, p.
235; Leonidou, 2004, p. 281). External barriers are industry and country
specific. Leonidou (2004), who provides an analysis of 39 export barriers,
defines external barriers as procedural, governmental, economic, political-
legal or sociocultural characteristics of host and home environments (p.
283). Firms wishing to export need to be familiar with country specific
government restrictions such as tariffs on imported goods, bureaucracy or
subsidize local production, which increase costs on traded products and
are out of a manager’s control (Baldauf et al., 2000, p. 62). Internal barriers,
on the other hand, are firm specific characteristics. Every firm possesses
capabilities and weaknesses. Duenas-Caparas (2007) argues that “all
firms face the same macroeconomic condition but respond and perform
differently in their export activities. This suggests that there must be firm-
specific characteristics that significantly influence a firm’s capability to
perform in the world market” (p. 88).
The resource-based theory is the main theoretical framework used by
researchers to determine and justify the firm-specific characteristics that
are likely to be linked to a firm’s internationalization through exports
(Westhead et al., 2004, p. 503; Wilkinson and Brouthers, 2006, p. 233;

5
© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020
S. Brown, Impact of Business Association Services and Training
Programs on Export Performance, BestMasters,
https://doi.org/10.1007/978-3-658-30467-6_2
Williams, 2011, p. 155; Rentala et al., 2014, p. 4; Beleska-Spasova, 2014,
p. 66). The theory suggests that the resources a firm possesses can
provide a competitive advantage. The bigger the stock of resources the
better the performance and the better endowed a firm is to enter new
markets (Wernerfelt, 1984, p. 173-174; Barney, 1991, p. 101). The
Resources can be defined as tangible or intangible elements owned and
controlled by a firm. Human capital (employment, skilled labor and
management characteristics), physical capital (machinery) and financial
assets are tangible while knowledge as well as brands are intangible
assets (Wernerfelt, 1984, p. 172).
Several of these resources have been studied in the literature as
determinants of export performance. Among them are firm size, firm age,
productivity, R&D competencies, technological capabilities, financial ratios,
international experience and orientation of managers, management
perception, foreign ownership and training undergone by employees.
However, due to the many different methodological approaches and the
varying measures of export performance, the literature is inconclusive as
to the impact of each determinant (Baldauf et al., 2000, p. 62). The most
important determinants, according to economic theory and literature, are
discussed in detail below and justified in line with the resource-based
theory.
Firm size
Often captured as the number of employees, the firm size can be used as
a proxy for resources, to reflect the ability a firm has to export (Williams,
2011, p. 157). The resources-based theory suggests that larger firms are
more capable of exporting. They possess various managerial and financial
advantages as well as better production capacity (Baldauf et al., 2000, 65).
Firstly, larger firms tend to have more employees and management with
specialized skills. Williams (2011) states “if a firm has a large number of
employees, it will have access to a wider pool of human capital resources
and should, therefore, be better able to design effective competitive
strategies” (p. 155). Secondly, larger firms can take advantage of
economies of scale and benefit from purchasing in bulk, lowering their
costs (Wagner, 1995, p. 33; Sarpong and Wolf, 2008, p. 17). Finally, larger
6
firms usually have more financial resources, thus can invest more in
research and development and pay the fixed costs associated with exports
such as establishing an export department, creating export marketing
material, conducting market analysis, obtaining certificates, etc. (Dijk,
2002, p. 4). Subsequently, larger companies are more capable of
withstanding the financial risk of entering new markets (Wagner, 1995, p.
33; Williams, 2011, p. 157). There are limits, however, to the theoretical
positive effect of firm size. As coordination costs increase, further
expansion may cease to be profitable (Sterlacchini, 2001, p. 451; Dijk,
2002, p. 4).
The findings of empirical research regarding the impact of firm size are
rather consistent. Analyzing various markets and countries, most studies
find a significant and positive impact of firm size on export (Sarpong and
Wolf, 2008, p. 9; Dijk, 2002, p. 15; Williams, 2011, p. 166; Fakih and
Ghazalian, 2014, p. 687; Rentala et al., 2014, p. 15; Alvarez, 2007, p. 384).
Nevertheless, there are studies (Duenas-Caparas, 2007, p. 93), which do
not find a significant impact (see Freixanet, 2012 p. 1073; Baldauf et al.,
2000, p. 62).
Firm age
The second most researched characteristic is the age of a firm. The
resource-based theory indicates that with more experience and know-how,
firms are better equipped to enter international markets (Williams, 2011, p.
158). Younger firms lack the accumulated experience that older
counterparts have gathered over time. They may be less well prepared to
deal with challenges and consequently are less willing to take the risk of
exporting. Addressing the value of know-how, Johnson and Vahlne (1977)
highlight the distinction between objective knowledge that can be taught
and experiential knowledge that is gained through individual experience
alone. They emphasize that internationalization is a gradual process of
acquisition and incorporation of knowledge and skills. Such experiential
knowledge is vital and can only be acquired with time (p. 28).
In contrast, there exists a tendency of “born global businesses”, which
suggests that new firms are more likely to export directly, rendering the
age an inconclusive variable for export prediction (Brush et al., 2002, p. 2;
7
Freixanet, 2012, p. 1073). Younger firms may have a lower risk perception
and be more flexible in dealing with challenges (Dijk, 2002, p. 10). Younger
firms with more flexible structures may also be more capable of
assimilating foreign knowledge (Autio et al., 2000, p. 913).
The impact of age found in empirical studies is inconclusive (Dijk, 2002, p.
10). Few researchers find a positive and significant impact suggesting that
older firms are more likely to export (Fakih and Ghazalian, 2014, p. 679).
Most studies find no significant impact of firm age (Williams, 2011, p. 169;
Sarpong and Wolf, 2008, p. 26; Duenas-Caparas, 2007, p. 93). While
Westhead et al. (2004) find significant estimates for younger firms (p. 512).
These results suggest that the impact might be country and industry
specific.
International experience
The resource-based theory suggests that international orientation,
knowledge and skill of managers or foreign owners are a driving force in
the internationalization of a firm through exports (Shamsuddoha and Ali,
2006, p. 95). Studying abroad, international work or travel experience
endows managers with network opportunities. The network and previous
international experience can provide essential insights into the workings of
foreign markets such as business practices, customs procedures and
peculiar challenges. Additionally, they can facilitate contact and
communication with foreign markets. Finally, they reduce uncertainty and
improve management perception of the potential of foreign markets
(Williams, 2011, p. 160).
The empirical literature supports the theory with most studies finding a
positive and significant impact of international experience and foreign
ownership on the export performance of firms (Dijk, 2002, p. 13; Williams,
2011, p. 165; Fakih and Ghazalian, 2014, p. 678; Duenas-Caparas, 2007,
p. 104; Filatotchev et al., 2008, p. 1008).
Productivity
Productivity is defined as a measure of production efficiency and the theory
suggests that highly productive firms are more likely to enter and survive
in foreign markets. The idea is that, as international markets tend to be

8
fierce, more efficient firms will be more willing to compete (Alvarez, 2007,
p. 377). Although this self-selection phenomenon creates an initial
difference in productivity between exporters and non-exporters, the
learning-by-exporting theory suggests that subsequent increase in the
productivity of exporters is caused by the benefits of exporting (Aw et al.,
2007, p. 83-84; Sarpong and Wolf, 2008, p. 18).
The bidirectional relationship of productivity and export performance make
a clear analysis difficult, and the empirical findings of productivity as a
determinant of export performance are inconclusive. Alvarez (2007) finds
a positive impact of productivity on export performance and stresses the
importance of increasing productivity to increase export success (p. 390),
while Bernard and Jensen (2004) find no significant impact (p. 16).
Filatotchev et al. (2008), who analyze the export performance of high
technology SMEs in emerging markets, suggests that the impact of firm
performance might be country and industry specific (p. 1007).

To conclude, firm specific characteristics help determine the export


performance of firms. As previous studies show, larger, more productive
firms with international and skilled managers are more likely to export and
survive in foreign markets (Shamsuddoha and Ali, 2006, p. 94).
Consequently, firms could benefit from external support in acquiring
missing capabilities and developing their resources (Ayob and Freixanet,
2014, p. 39).

2.2 The Role of Export Promotion Agencies


Export Promotion Agencies (EPAs), which are often part of larger Trade
Promotion Organizations (TPOs), are government bodies with the mission
to promote exports. Export agencies are mandated to help firms overcome
barriers and close the information gap related to foreign markets (Ayob and
Freixanet, 2014, p. 39; Olarreaga and Lederman, 2010, p. 2). Conducted
in home and sometimes host countries, the activities offered by EPAs are
numerous and vary depending on the needs of domestic firms. Four main
areas of export support can be distinguished. The first concerns product
and foreign market research, offering knowledge of international markets
and foreign business practices. The second relates to services that provide
9
information on industry and country specific trade, which includes
information on bureaucracy, economic and legal specifications abroad.
The third includes all services and facilities provided by EPAs that support
firms which lack resources for export activities. The final area of support
encompasses marketing opportunities, networking possibilities and
promotional activities abroad through trade missions and trade shows for
example (Ahmed et al., 2002, p. 831; Jaramillo, 1992, p. 18).
Based on their findings relating to the determinants of firm export,
researchers offer insights into appropriate policies, training programs and
services to enable firms to engage in exporting activities. Williams (2011)
stresses that policy makers should focus on helping firms grow before
offering other export services. He suggests policies that facilitate mergers
or cooperation between firms. He also emphasizes that foreign travel and
international experience are strong determinants of export performance,
advocating that emphasis should be put on trade shows and international
events to reinforce networks and foster an international mindset. Leonidou
(2004), on the other hand, finds that information barriers related to foreign
markets (competitiveness, customer characteristics, etc.) are key in
dissuading firms to export. Therefore, he suggests governments offer
educational training such as market research, marketing strategy and
export procedures. EPAs should focus on providing specific knowledge on
foreign markets and help to promote local firms abroad (p. 296).
Current research related to the impact of EPAs is limited and inconclusive.
There is a need for specific studies to show the relationship between
certain training programs and services and export performance (Ayob and
Freixanet, 2014, p. 38; Freixanet, 2012, p. 1065). While the body of
literature for developing countries is growing, most research focuses on
developed countries (Durmusoglu, 2012, p. 682; Baldauf et al., 2000, p.
62). Both firm-level data and country-level data are used in the literature to
examine the impact of EPAs. Studies that take a macroeconomic
perspective, however, have been criticized for only measuring the
aggregate impact on the country’s exports and, thus, lack clear firm
implications (Ayob and Freixanet, 2014, p. 38). By analyzing the impact of
programs at the firm level, more targeted results and recommendations

10
can be provided. Additionally, certain studies examine the overall impact
of EPAs without distinguishing each individual service or training offered
(Genctürk and Kotabe, 2001, p. 58, Ayob and Freixanet 2014, p. 39;
Olarreaga and Lederman, 2010). Other studies have focused on the
impact of specific programs such as sponsored foreign trade shows, trade
missions, seminars for potential exporters, foreign trade offices, export
financing, sales leads, market analysis and information programs
(Freixanet, 2012, p. 1066; Wilkinson and Brouthers, 2006, p. 242;
Olarreaga and Lederman, 2010, p. 2).
Differing results may arise because of a discrepancy in the measurement
of export performance. Most studies measure export performance using
financial outcomes such as export sales, market share and export
profitability. This characterization only provides a limited view of the export
potential (Olarreaga and Lederman, 2010, p. 2). Due to the qualitative
nature of additional export benefits, only few studies address other export
goals such as knowledge about the export market or skill acquisition
(Durmusoglu, 2012, p. 685-686; Alvarez and Crespi, 2000, p. 230).
Durmusoglu et al. (2012) for example investigate both objective financial
outcomes and alternative export dimensions such as stakeholder
relationship, strategic achievement, organizational learning and find a
significant impact of export promotion services on all the outcomes
investigated (p. 685-686). Other researchers (Wilkinson and Brouthers
(2006); Volpe Martincus and Carballo (2008)) also find a positive and
significant effect of EPAs on the export performance of firms.
Previous research conducted in Bangladesh finds a positive and significant
impact of EPAs. Shamsuddoha and Ali (2006) investigate the direct and
indirect effects of EPAs on firm export performance in Bangladesh in three
industries: garment, leather and specialized textiles. The indirect effects
investigated are management perception of export market environments
and export commitment. Their findings support the theory that managers’
export knowledge and positive perception of the export market
environment is enhanced by the use of EPAs with the manager’s
commitment to export, export strategy and consequently their export
performance subsequently being increased (p. 103-105).

11
However, not all studies find a significant impact. The results from Alvarez
(2007), who studies the impact of EPAs in Chile, are inconclusive (p. 384).
He suggests that “export promotion policies may not be very successful if
they are not accompanied by complementary policies aimed to improve
firm characteristics, such as productivity” (p. 390). The government
programs that seek to increase exports through trade fairs, marketing and
foreign knowledge need to be accompanied by policies that help the
development of structural factors. Alvarez stresses that the “traditional
instruments are useful in reducing exporting entry costs, thus facilitating
the entry of new firms, but they may not be enough to sustain firm
competitiveness in foreign markets” (p. 390).

In conclusion, EPAs play a vital role in countering market imperfections on


a theoretical level. The combination of EPAs and key firm characteristics
are shown to enable successful export performance. The impact of such
agencies, however, varies widely across countries and industries. It is
difficult to generalize results obtained from research on particular EPAs as
results may differ depending on an agency’s performance (Ayob and
Freixanet, 2014, p. 38). The aim of this thesis is to build on existing
literature in an attempt to provide empirical insight into the effect of EPAs
in a developing country in the IT and ITES sector. Using unique firm-level
data from Bangladesh and by investigating the impact of specific services
and training programs, this study complements other research that has
examined the use of export agencies on export performance. The
motivation for an in-depth evaluation is the need to help EPA improve
program offers and the importance of improving credibility of such agencies
in the view of governments and firm managers.

12
3 BASIS and Research Hypothesis
Bangladesh gained independence in 1972 and, although the country still
counts 47 million people living below the poverty line, it has shown a strong
economic performance in terms of growth and development in the last
years1. After following a socialist approach to economic policy in the 1970s,
the government introduced a series of de-regulation reforms and, under
the auspices of the World Bank and IMF, proceeded to trade liberalization
at the beginning of the 1990s (The World Bank, 2016). Despite its efforts,
however, Bangladesh still ranks among the lowest countries in the trade
openness indices (The World Bank, 2016) and is considered a relatively
closed economy2 (The Global Economy, 2016).
While still small in size, the IT and ITES sector has grown by 40% in the
last five years (Digital World 2016, 2016). The nation’s vision is to become
a technologically driven economy and it is a core focus of current Prime
Minister, Sheikh Hasina, who wants to increase Internet penetration
significantly by 2021 (Government of Bangladesh, 2017).
With the ambition to develop Bangladesh’s IT and ITES industry, the
government created the Bangladesh Association of Software and
Information Services (BASIS) in 1997. BASIS is “the national trade body
for Software and IT Enabled Service industry of Bangladesh” (BASIS,
2016) and is one of the seven offices of the Export Promotion Bureau, the
official trade promotion body of Bangladesh with the mandate to promote
and develop exports, investments and tourism (Trade Promotion
Organizations Directory, 2015, p. 57; Government of Bangladesh, 2017).
The association was founded with the mission to develop and industrialize

1
The economy has seen a yearly increase of its GDP by 6 percent on
average over the last ten years, resulting in the reduction of poverty in the
country by one third, and improving life expectancy and the literacy rate
(World Bank, 2016)
2
The export of goods and services as a percentage of GDP is currently at
18.99, with an average annual growth rate of 9.02 from 1961 to 2014.
Export to GDP rates below 15 percent are considered as closed economies
(see The Global Economy, 2016)
13
© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020
S. Brown, Impact of Business Association Services and Training
Programs on Export Performance, BestMasters,
https://doi.org/10.1007/978-3-658-30467-6_3
the software and IT services sector in Bangladesh. Over the past years,
BASIS has grown substantially, going from 17 to nearly 1000 member
firms. Together these members generate the majority of the total revenue
of the software and IT services sector in the country.
The organization has six specific goals to achieve its vision. The first goal
is to develop the domestic market by creating awareness and establishing
fair markets within the local software and the ITES industry. Secondly,
BASIS aims to develop the international market for local firms through
networking events and international branding of the Bangladesh IT
industry. The third goal is to build the capacity of member firms through
training programs and resource sharing. Fourth, BASIS offers its members
a variety of services in operational and business areas to improve firm
capabilities. The fifth goal is to work as advocates for the software and
ITES industry ensuring fair government policies directed at the healthy
growth and development of the sector. Finally, BASIS seeks social
contribution with a focus on the younger generation to become a
technology leader in the future (BASIS, 2016).
Although not all of BASIS’ offers are directly tailored to exports, the training
programs and services provide key resources that can be leveraged for the
firm’s international expansion. BASIS offers four training programs each
providing specific business skills: technical training, project management
training, export marketing plan training and executive level training. The
management and executive level training offer a PMP certificate3 and the
possibility of learning a variety of management skills in leading and
managing projects with timing, budget and resource constraints. These
training programs intend to increase firm productivity. Through an increase
in productivity a firm is more capable to compete in international markets.
The technical training program provides advice and skills in many different
IT areas including IOS Development, Java, software development, SQL,
design and many more. This training provides specific know-how, which
can be used as a competitive advantage in global markets. The export

3
Project Management Professional Certification, a world-wide recognized
certificate
14
marketing plan training provides knowledge of foreign markets and
marketing advice and helps firms improve communication with foreign
clients. As previously mentioned in the literature review, knowledge of
foreign markets is key in determining export success.
In addition to the training programs, BASIS provides the following services:
1. Advocacy for Software and ITES sector: BASIS presents a strong
lobby section to protect the interest of the industry and its clients,
supporting firms vis-a-vis the government and offering to voice the
members’ interests for policy reform.
2. Corporate tax exemption: Members of BASIS benefit from
corporate tax exemption until June 2019.
3. Discounted participation fee for events. SoftExpo, for instance, is
considered Bangladesh’s biggest event for software products,
ITES and ICT system solutions. It is attended by a multitude of
business organizations offering network opportunities and insights
into the latest technologies.
4. Office space rent reduction: Through a partnership with the
Ministry of Science, BASIS can offer its IT and ITES members
office space at a reduced rent. It also offers power supply and high-
speed Internet bandwidth.
5. BASIS/BRAC credit card: Members have the opportunity to get a
co-branded credit card to facilitate online foreign exchange
transactions.
6. Company profile in Software and IT catalogue: As part of its
marketing services, BASIS offers to enter firms in their IT
catalogue. The service catalogue contains a wide range of
information on services, products and company details.
7. SCB ERQ account service: BASIS and the Standard Charted Bank
offer a Foreign Currency Exporter’s Retention Quota account for
firms involved in service export in non-physical form such as
business services, research services, web and software

15
development. The facility allows the customer to keep the received
payments in both foreign (USD) and local (BDT) currencies and
allows for an unimpeded money transfer abroad.
8. Virtual card for DBBL: In partnership with the Dutch-Bangla Bank
Ltd, BASIS provides online payment facilities for firms involved in
mobile app and game development, enabling the payment of
license fees for reputed online marketplaces such as Google and
iTunes, other license fees and training fees relating to mobile
application and game development, domain registration and
hosting/cloud solutions.
9. Import remittance: Under the current legal processes in place,
Bangladeshi firms are faced with a huge barrier in financial
transactions, hindering their possibilities of importing directly.
BASIS helps make the importing process smoother by reducing
some of the bureaucracy. Import remittance is a means of payment
and minimizes the risk of non-compliance with the obligations as
stipulated in the contract established with the exporter.
10. E-commerce Alliance Activity: BASIS provides networking
opportunities with international stakeholders.
The financial instruments and services provided by BASIS facilitate the
export procedures for firms, making it easier to perform foreign financial
transactions. BASIS also supports firms to find new export markets by
offering networking services though participation in international events
and connecting firms with international stakeholders. Communication
channels are improved by promoting local firms in IT catalogues and
through the endorsement of the BASIS image. BASIS also helps firms
increase their financial resources by providing office space, and offering
tax redemptions, alleviating the administrative barriers.
In theory, BASIS should have a positive impact on exports through different
channels. The training programs help firms improve productivity, know-
how and their knowledge of international markets, while the BASIS
services help firms find new export markets, improve firm financial

16
resources and facilitate administrative procedures. Subsequently, the
following two hypotheses are investigated4:

Hypothesis 1: A firm that takes advantage of BASIS services or training


programs will on average have a higher export propensity.

Hypothesis 2: A firm benefiting from BASIS services or training programs


will on average have a higher export share.

4
Although I will statistically test for a causal relationship the hypothesis do
not claim a causal relationship to escape the causality trap.
17
4 Data Characteristics
In this chapter, I present the characteristics of the empirical data. The first
section describes the nature of the data and the sampling characteristics.
The second section describes the explanatory variables: services and
training programs, and gives an overview of the dependent and control
variables.

4.1 Survey Characteristics


The cross-sectional data is from the NTF-III Bangladesh Evaluation Survey
2016, which was collected between April and May by the Wageningen
University and Research in collaboration with ITC and BASIS. The data
consists of 541 face-to-face interviews that were conducted with CEOs or
high-level managers of the IT and ITES companies. The sample is
restricted to the IT and ITES companies that are registered to BASIS and
are located in Dhaka. More than 90 percent of the total companies
registered with BASIS answered the survey, which includes information
relating to firms’ characteristics, firm export and the relationship with
business support organizations. The sample size is similar to that of other
studies (Ayob and Freixanet, 2014, p. 41). However, the sample is strongly
reduced after eliminating observations with missing values. The sample
size for the different estimates therefore varies significantly.

4.2 Descriptive Data


This section shows descriptive graphs and statistics to provide an overview
of the data and a first visualization of the relationships.

4.2.1 Explanatory Variables


The explanatory variables of interest are the services and training
programs offered by BASIS. Out of 541 firms more than two thirds
benefited either from a BASIS service or a BASIS training program. 387
firms, which represent 71.53% of the interviewed firms, took advantage of
at least one of the BASIS opportunities and 30.8% participated in both
training programs and services.

19
© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020
S. Brown, Impact of Business Association Services and Training
Programs on Export Performance, BestMasters,
https://doi.org/10.1007/978-3-658-30467-6_4
Another random document with
no related content on Scribd:
P. brevicaudatus Ehlers. Hab. North Sea and Baltic, from ten fathoms.

P. tuberculato-spinosus Baird. Hab. Falkland Islands.

Halicryptus.—No caudal appendages. Introvert ⅒ to 1⁄12 of the total body length,


with numerous spines arranged in close circles. Retractors numerous and all
attached to the body-wall anteriorly.

H. spinulosus v. Sieb. (Fig. 219). Hab. North Sea, Arctic Ocean, and Baltic, in
from two to fifty fathoms.

It will be noticed that with the exception of P. tuberculato-spinosus, described by


Baird from a single specimen, the whole family is confined to northern seas.

Habits.—The newly-captured specimens of both P. caudatus and H. spinulosus are


of a flesh colour, with a somewhat metallic sheen. According to Apel, the latter lived
in an aquarium for more than five months, whilst the former died during the first
month. When first introduced into the aquarium they immediately began to busy
themselves in the mud or sand at its bottom, and very seldom showed themselves
above it. They forced their way into the sand by alternately contracting and
extending their introvert, and the Priapulus arranged itself so that a portion, often a
very small one, of its caudal appendage was exposed to the water; this fact
supports the view that the appendage is respiratory in function. When the animal
buries itself deeply, the appendage does not relinquish its position at the surface of
the sand, but stretches itself until it in some cases surpasses the length of the body.
On the other hand, Halicryptus (Fig. 219), according to the same observer, lies with
the anterior end, the mouth, projecting from the surface of the sand, or else it curves
itself, so that both ends project into the water.

Fig. 219.—Halicryptus spinulosus v. Sieb. × 6. a, Dark line indicating the position of


the ventral nerve-cord; d, mouth surrounded by spines.
Leckenby, who described specimens of P. caudatus which were found by fishermen
searching for worms for bait in the outer harbour at Scarborough at half tide, states
that they live in sandy clay in U-shaped tubes, at a depth of about 9 inches, the
tubes opening at each end on to the surface of the sand. The fishermen of this
district call them "sea mushrooms."

Halicryptus casts its cuticle in May and September; it becomes loose first at the
hinder end, and the split between it and the skin grows forward until the animal lies
free in a cuticular mantle. After some days this is split, and the animal frees itself
from it; the cast-off cuticle includes for a short distance the lining of the mouth, the
anus, and the two generative pores.

III. Order Echiuroidea.

Anatomy.—The most striking peculiarity of the Echiuroidea, as opposed to the other


two families of the Gephyrea, is the presence of a solid dorsal outgrowth of a portion
of the head, forming the proboscis. The nature of this proboscis is something quite
different from that of the introvert of the Sipunculoidea; it would appear to
correspond to an extension, in the members of the last-named Order, of that part of
the head which is dorsal to the mouth and is covered by a peculiar pigment-
epithelium, often in continuity with the brain. In its outgrowth this portion of the body
has carried with it the nerve-ring and the vascular ring, which both surround the
mouth. The proboscis is found in all the genera with the exception of the aberrant
genus Saccosoma.

Fig. 220.—A, Bonellia viridis Rol., ♀ ; B, B. fuliginosa. Both nat. size. a, Grooved
proboscis; b, mouth; c, ventral hooks; d, anus.

The body of the female Bonellia viridis, one of the best known species of Echiurids,
is shaped like a small sausage, and is usually about 2 inches long. The proboscis
arises from the anterior end, and is extremely extensible. At the distal end the
proboscis splits into two short arms, which are often recurved; along the whole
ventral surface runs a groove lined with cilia, which by the approximation of its
edges can be converted into a tube. At the bottom of the proboscis the groove
opens into the mouth. Echiurus; Thalassema, and the female Hamingia have short
proboscides, which do not bifurcate but otherwise resemble those of the female
Bonellia.

Fig. 221.—View of a female Bonellia viridis Rol., opened along the left side, × 2. a,
Proboscis cut short; b, a bristle passed through the mouth into the pharynx; c,
convoluted intestine; d, anal tufts or vesicles; e, ventral nerve-cord; f, ovary
borne on ventral vessel running parallel with e; g, position of anus; h, points to
position of external opening of nephridium; i, nephridium. This line is on a level
with the internal funnel-shaped opening.

The green colour of B. viridis is due to a special pigment, "Bonellein," which at one
time was thought to be identical with chlorophyll. A similar green colour is found in
Hamingia arctica, Thalassema baronii, and the larvae of many forms.

A short distance behind the mouth, on the ventral surface, the female Bonellia and
both sexes of Thalassema and Echiurus bear two incurved stout chitinous hooks;
these gave the name Gephyrea Armata to the above-mentioned genera. In addition
to these, Echiurus has a row of chitinous bristles surrounding the posterior end of
the body; the row is single in E. unicinctus, double in E. pallasii. These bristles are
formed, like the hooks on the introvert of the Sipunculoidea, by epidermal cells;
those of B. minor and of the posterior rings in Echiurus are said to arise each from a
single cell, just as the bristles do in Chaetopods.

The skin consists of very much the same layers as does that of Sipunculus; the
cuticle is thin, the epidermis is modified into numerous glandular cells, papillae, and
pits, from which the bristles arise. A third layer of oblique or circular fibres is usually
found inside the longitudinal muscle-layer. The proboscis is solid, and contains
much connective-tissue and numerous muscle-fibres running in all directions; the
ventral groove is ciliated.

The alimentary canal in the Echiuroidea consists of a long thin-walled tube with
numerous convolutions; it is not coiled as in Sipunculids, but the loops are
irregularly arranged, and are supported by numerous fine muscular strands which
run from the skin. There is a ciliated groove running along one side of the intestine,
as in the Sipunculids. The anus is terminal. The most striking peculiarity of the
alimentary canal of the Echiurids is the existence of a collateral intestine or "siphon."
This is a narrow tube which arises from the main canal not very far from the mouth,
and re-enters it again lower down. A similar structure occurs in some Echinids, and
in the Capitelliformia (pp. 272, 305). Its function is not certainly known.

Another characteristic feature of the Echiurids is the presence of "anal vesicles,"


branching structures which unite into a common stem opening into the intestine
close to the anus. The free end of each of the branches terminates in a ciliated
funnel-shaped opening. The function of these structures may be excretory, or they
may control the amount of fluid in the body-cavity.

A closed vascular system exists in Echiurids, consisting of a contractile dorsal


vessel running along the dorsal surface of the anterior end of the alimentary canal,
and continued along the axis of the proboscis. At the tip of the proboscis it
bifurcates, and each branch descends along the edge until it reaches the base
where, having encircled the oesophagus, the two unite, and are continued as the
ventral vessel which runs along the dorsal surface of the nerve-cord, and eventually
ends blindly. There is also a vessel which passes from the ventral vessel and
encircles the intestine, opening into the posterior end of the dorsal vessel. In
Echiurus the same vessel encircles a stout muscle which runs from the base of one
of the ventral bristles to the other. In Thalassema Lankester states that the fluid
within the vessels is colourless, and does not contain corpuscles similar to those in
the body-cavity fluid.

The "brown tubes" or nephridia vary in number in the Echiurids. In the female
Bonellia there is but one; in B. viridis the right, in B. minor the left usually persists. In
shape, colour, contractility, and minute structure they closely resemble those of
Sipunculus. Hamingia is said to have a pair of brown tubes; Echiurus has two pairs,
except E. chilensis, which has three; their internal openings are produced into long
coiled slits in some genera. Thalassema gigas has one pair; Th. neptuni, Th.
baronii, Th. formosulum, and Th. exilii, two; whilst Th. vegrande, Th. moebii, Th.
erythrogrammon, Th. caudex, and Th. sorbillans have three pairs.
The nervous system consists of a ventral cord lying in the body-cavity, as in the
Sipunculoidea, but attached to the skin, and of a circumoesophageal ring. With the
growth of the proboscis this ring is drawn out, and the two branches run along the
sides of the proboscis and unite at the tip. There is no specialisation of brain, nor
are any special sense organs present, but the ventral cord gives off paired nerves at
regular intervals, which, uniting dorsally, form rings in the skin in some and probably
in all species.

The perivisceral fluid is of a dark brown colour in Thalassema, containing numerous


spherical corpuscles deeply impregnated, according to Lankester, with
haemoglobin, and also containing granules of a brown pigment. Haemoglobin is
also found in certain of the muscles and in part of the epithelial lining of the body-
cavity. Lankester also describes the presence of haemoglobin in the corpuscles of
the perivisceral fluid in Hamingia.

The genital glands are, like those of the Sipunculoidea, formed by a special
development of the cells lining the body-cavity. These cells are massed together
along the wall of the ventral blood-vessel. In Echiurus and in Thalassema the cells
break off and float in the body-cavity, developing into ova and spermatozoa. In
Bonellia each cell does not become an egg, but a mass of cells breaks off, one of
which increases in size at the expense of the others and forms the ovum. The
mature sexual cells leave the body through the nephridia.

Fig. 222.—An adult male Bonellia viridis Rol. The original was 1.5 mm. long. The
nervous system is not shown. (After Selenka.). a, Generative pore with
spermatozoa coming out; b, anterior blind end of intestine attached to the
parenchymatous tissue by muscular strands; c, green wandering cells containing
chlorophyll; d, parenchymatous connective-tissue; e, epidermis; i, intestine; j, vas
deferens; l, internal opening of vas deferens; m, the left anal vesicle; n,
spermatozoa in the body-cavity.
Bonellia and Hamingia present very interesting cases of sexual dimorphism. In both
genera the female is an animal of considerable size with the normal structure of the
Echiuroidea, but the male (Fig. 222) is a microscopic Planarian-like animal, which
lives in the mouth and in the nephridia of the female. Both in Bonellia[486] and in
Hamingia the male is provided with a pair of hook-like ventral bristles; these are
wanting in the female Hamingia. The surface of the male is ciliated, and the skin
contains circular and longitudinal muscle-fibres. The body-cavity is developed, but
does not reach to either end of the body. The alimentary canal is closed, neither
mouth nor anus existing; it is supported by regularly arranged dorso-ventral muscle
strands. A nerve-ring and a ventral cord exist. There are also two rudimentary
organs corresponding with the anal vesicles of the female, and a single nephridium
which acts as a duct for the spermatozoa; the latter arise from modified cells lining
the body-cavity.

In both sexes the larvae develop to a certain stage without showing any trace of
sexual differentiation, but after this stage, the development of the male is to a
certain extent arrested; in some respects, indeed, it undergoes retrogressive
changes. At this time it is found clinging to the proboscis of the female, thence it
makes its way to the mouth, where it undergoes its final change; and then creeping
out, finds its way into the nephridium of the female, and spends the rest of its life
there in a special recess cut off by a fold from the excretory part of this organ. In
Hamingia, however, Lankester, who first described the male, did not find any in the
nephridia, but found five specimens, each 1⁄12 inch long, within the dilated pharynx
of the female.

Development.—In Bonellia and Hamingia it seems probable that the ova are
fertilised in the nephridium of the female; in the other genera they are fertilised in
the water after leaving the body of the mother.

In Thalassema and Echiurus the growth of the embryo results in the formation of a
typical Trochosphere larva, a type widely spread in the animal kingdom, being found
in the Chaetopoda (Fig. 145, A), Polyzoa (p. 510), and Mollusca. The large prae-
oral lobe persists in the Echiuroidea as the proboscis; the mouth is ventral in
position, with usually a ring of cilia encircling the body in front of and behind it; the
anus is posterior and terminal. A pair of larval excretory organs are present, and a
special nervous aggregation of cells at the apex of the prae-oral lobe is usually
indicated by the presence of a bunch of long cilia.

The trunk of the Trochosphere is unsegmented, and in certain groups of animals it


remains so, but in Chaetopods, and in Echiurus and Thalassema, it elongates and
becomes divided up into a series of somites or segments. Of these there are fifteen
in Echiurus, and apparently eleven in Th. mellita; in this stage the Gephyrean larvae
have again so close a resemblance to the segmenting Chaetopod larvae as to be
easily mistaken for them. The segmentation is shown in the following way: (i.) the
middle layer of cells or mesoblast is typically segmented, and forms septa, which
separate each segment from its neighbours; (ii.) the ventral nerve-cord arises as
segmentally-arranged thickenings of the epiblast, which fuse together, but retain
their segmented appearance for some time; (iii.) the skin shows the segmentation of
the body both by the arrangement of the pigment and by bands of cilia. The latter
are replaced in the adult by rows of spines, and on the fourteenth and fifteenth
segments in Echiurus pallasii by the two peri-anal circles of bristles. Each bristle,
like those of Chaetopods, originates from a single cell.

The anal vesicles arise quite late in the development; when they have acquired their
openings into the body-cavity, they seem to take in water. In Thalassema, as
described by Conn, this is accompanied by remarkable changes, amounting almost
to a metamorphosis. The body increases in bulk fourfold, the cilia of the prae-oral
ring disappear, and the animal now moves only by means of its proboscis; the
pigment is absorbed, and all traces of segmentation disappear. A similar intaking of
water is described by Spengel in Bonellia. In this genus the larva, which is coloured
bright green, and has two brown eye-spots, is not such a typical Trochosphere as is
that of Echiurus and Thalassema.

Fig. 223.—Echiurus pallasii Guér. × ½. a, Mouth at the end of the grooved proboscis;
b, ventral hooks; c, anus.

Nothing is known of the development of Hamingia or of Saccosoma.

Species of Echiuroidea.—Echiurus. Proboscis not bifurcated at the end. Two


ventral hooks and a single or double peri-anal ring of bristles. The body is to a
varying extent marked by rings bearing spines. Two or three (E. chilensis) pairs of
nephridia, their external orifice often lengthened and spirally coiled. Both sexes
alike.

Greef[487] mentions six species of Echiurus, viz. E. pallasii, E. forcipatus, E.


sitchaensis, E. chilensis, E. carabaicus, and E. chrysacanthophorus; to these must
be added E. unicinctus. It seems probable that E. forcipatus of Reinhardt is identical
with E. pallasii, although bigger, whilst E. sitchaensis, E. carabaicus, and E.
chrysacanthophorus are inadequately described. The distribution of the remaining
three species is as follows:—

E. pallasii Guérin (Fig. 223). North Sea, Atlantic, English Channel.

E. unicinctus Drasche. Japan.

E. chilensis Max Müller. Chili.

Thalassema.—Proboscis rather pointed at the end, not bifurcated. No peri-anal


bristles, but two ventral hook-like bristles placed anteriorly. One to three or four pairs
of nephridia. The sexes resemble each other.

Greef mentions eight species of Thalassema and Rietsch thirteen; three of these,
however, Th. grohmanni, Th. lessonii, and Th. pelzelnii, were not seen by either
author, and their description is taken from Diesing. There is some reason for
thinking that the two first-named species are identical with Th. neptuni. Conn has
established a new species for the specimens whose embryology he worked out at
Beaufort, Virginia, and Selenka described a new species from the Challenger
material.

With the exception of the three doubtful species mentioned above, the list of species
of Thalassema is as follows:—

Th. neptuni Gaertner (Fig. 224). English Channel (Devonshire coast),


Concarneau, Mediterranean (Gulf of Marseilles), Irish coast (Dungarvan).

Th. gigas Max Müller. Trieste.

Th. vegrande Lampert. Philippine Islands.

Th. baronii Greef. Canary Islands (Lanzarote).

Th. formosulum Lampert. Shanghai and Philippine Islands.

Th. exilii Fr. Müller. Brazil (Desterro).

Th. moebii Greef. Mauritius.

Th. erythrogrammon Max Müller. Red Sea and East Indies (Billiton).
Th. caudex Lampert. Red Sea and Indian Ocean.

Th. sorbillans Lampert. Philippine Islands.

Th. mellita Conn. West Atlantic (Beaufort).

Th. faex Selenka. North of the Faroe Islands.

Bonellia.—Proboscis very extensible and bifurcated at the end. The body and
proboscis are coloured a bright green. Two ventral hook-like bristles, but no peri-
anal ring. A single nephridium. The above applies to the female; the males are
degenerate, and live in the nephridium or pharynx of the female.

Three (or four?) species of this genus are known.

B. viridis Rolando (Fig. 220). Mediterranean, Adriatic, North Sea (Bergen).

B. minor Marion. Mediterranean (Gulf of Marseilles, Naples).

B. suhmii Selenka. Off Nova Scotia. Male not known.

B. fuliginosa Rolando? (Fig. 220). Mediterranean (Naples).

Hamingia.—Proboscis not bifurcated, about as long as body. No ventral hook-like


bristles. One or two nephridia, which open at the apex of one or two well-marked
papillae. The above applies to the female; as in the genus Bonellia, the male is
minute and parasitic. It has two well-marked hook-like bristles situated behind the
genital pore.

This genus was first described by Koren and Danielssen as H. arctica. Two
specimens were afterwards described by Horst as H. glacialis. Later Lankester
described two other specimens; he was the first to find the male in the pharynx of
the female. He is of the opinion that all three descriptions apply to the same
species, and for this the original name H. arctica must be retained.

Hamingia arctica K. and D. Two hundred miles north of North Cape and in the
Hardanger Fjord.

Saccosoma.—No proboscis. The body is flask-shaped. The mouth and anus are
terminal. The ovary is anterior, and there is only one nephridium. No bristles.
Our knowledge of this remarkable Gephyrean is very incomplete, but such as it is, it
is due to the careful investigations of Koren and Danielssen, who had only a single
specimen at their disposition.

Saccosoma vitreum K. and D. North of the Faroe Islands.

Habits of the Echiuroidea.—As a rule the members of this group conceal their
bodies in clefts and fissures of rocks and stones, keeping up communication with
the outer world by means of their proboscis. Rietsch[488] describes a specimen of
Bonellia minor, which he placed in an aquarium, exploring with its proboscis the
nature of the bottom; when the animal had found a convenient crevice, it fixed its
proboscis in it by means of the bifurcated end, and by its contraction drew the body
up, and entered the hole, proboscis first. It then turned round, and during this
operation doubtless the ventral hooks came into play; and then stretching out its
proboscis, it began to explore the neighbourhood. The proboscis is evidently very
sensitive, and in addition to being a locomotor organ, it is also used for the
prehension of food. If cut off near the mouth, the animal does not long survive, but if
a considerable portion is left the scar heals, and the lost part is probably
regenerated. In captivity the animals frequently change their place of residence.

Eisig some years ago described the great extensibility of the proboscis of B. viridis
when confined in the tanks of the Zoological Station at Naples. When contracted the
proboscis was but a few inches long, but at times it was extended till it reached the
length of 1½ metre, shining through the water as a transparent green thread. The
body of the Bonellia was hidden under stones, but the proboscis could be seen
seizing between its two ends the bodies of certain Ascidians which covered the
inside of the tank, tearing them off the walls, and conveying them to the mouth along
its grooved ventral surface.

The food of the Echiuroidea consists of organic matter, in the main of animal nature,
but the group differs from the Sipunculoidea in not eating sand.

Rietsch describes Thalassema neptuni as being more active in its movements and
less sedentary than B. minor. The proboscis is still the chief organ of locomotion,
but the trunk plays a greater part in the movements of the animal than it does in the
last-named species. Th. neptuni is found in cavities of stones or in the chambers
worn out by the Mollusc Gastrochaena; when withdrawn from its house the body is
found to be covered by a thick layer of tenacious viscid mucus.
Fig. 224.—Thalassema neptuni Gaert. × 2. A, The animal lying on its
ventral surface. B, Ventral view of the anterior end, showing the
grooved proboscis ending behind in the mouth, and the ventral
hooks.

Th. mellita was so named by Conn because it is found sheltering in


the Echinid Mellita. "It enters the shell at the oral opening while yet
very small, but once within its house it grows to its adult size, and is
obliged therefore to remain during the rest of its life a prisoner." Each
shell thus inhabited acquires a reddish brown horse-shoe-shaped
marking, which affords a conspicuous signal that the shell contains a
Thalassema.

Thalassema is seldom found living in sand, and Bonellia never, but


Echiurus is almost always found in U-shaped tubes or passages in
the sand, which it digs out for itself by the rapid contractions of its
body-wall aided by its bristles. It, like the other two genera named
above, does not long remain in the same hole, but frequently
changes its home. As a rule the Echiurus sits near the mouth of its
tube, which is often a foot or even two in depth, and sends out its
proboscis in every direction; at the least sign of disturbance it
withdraws into the deeper recesses. The walls of the tube are kept
from falling in by a layer of mucus, which makes a smooth lining to
the passage. The peri-anal bristles, which can be withdrawn or
protruded at will, enable the animal to fix itself at any level in the
tube.

The Echiuroidea are sometimes used by fishermen as bait. In


Echiurus pallasii Greef found three parasites, all of them new
species. One, a Gregarine, he named Conorhynchus gibbosus; the
others were Platyhelminthes, and were named by him Distomum
echiuri and Nemertoscolex parasiticus respectively.
IV. Order Epithetosomatoidea.

This Order includes the single Family Epithetosomatidae, which was


established by Koren and Danielssen to contain the remarkable
Gephyrean they described in 1881 under the name Epithetosoma
norvegicum (Fig. 225).

Unfortunately only two specimens were at their disposition, and


these were badly preserved, so that many details of their structure
could not be made out. The animals are of an olive-green colour, and
consist of a trunk about 12 mm. long, and of a proboscis 30 mm. in
length; the latter differs essentially from the proboscis of the
Echiuroidea inasmuch as it is hollow, and seems to be a whip-like
tubular extension of the skin. Its lumen opens into the body-cavity.
Ventral to the base of the proboscis is the mouth; the intestine is
straight, and terminates in the anus, which is posterior. The nervous
system lies between the circular and the longitudinal muscles of the
body-wall, and contains a tube, the nature of which is obscure. No
vascular system is known. The ovary is attached to a mesentery
ventral to the anterior part of the alimentary canal, and there is a
single nephridium. No anal vesicles exist.

The most remarkable feature of the genus is a series of pore-like


openings, which are stated to lead from the outside into the body-
cavity (Fig. 225, a). These are arranged four on each side, at the
bottom of two slit-like depressions in the skin, which lie one on each
side of the base of the proboscis, slightly dorsal to it.

These remarkable structures are without parallel amongst the


Gephyrea, and, together with the peculiar character of the proboscis,
justify the Norwegian naturalists in adding a new family to the group.
Fig. 225.—A, Epithetosoma norvegicum K. and D., magnified. a, a,
Right and left slits leading to the pores; b, mouth; c, proboscis: B,
the same animal opened dorsally; a, pores; b, oesophagus; c,
proboscis; d, brown tube. (After Danielssen and Koren.)

Affinities of the Gephyrea.

Before considering to what other groups of animals the Gephyrea


may be allied, it is advisable to discuss the relationship of the four
Orders which compose the group.

Quatrefages, in the year 1865, divided the Gephyrea into I.


Gephyrea Armata, with which he included the Echiuroidea and
Sternaspis,[489] and II. Gephyrea Inermia or Sipunculoidea. The
Gephyrea Inermia, sometimes called the Achaeta, have been
extended to include the Order Priapuloidea, and opposed to the
smaller sub-group the Gephyrea Armata or Chaetifera. In my
opinion, however, these names now are no longer in accordance
with our knowledge of the structure of the animals they attempt to
describe, and they should be given up. Both names had reference to
the presence or absence of the two hook-like bristles described on
the ventral surface of some of the Echiuroidea, but of the five genera
of this family, two, Saccosoma and Hamingia (the latter in the female
or normal form), are without these bristles, and can therefore be
described neither as Armata nor as Chaetifera. On the other hand,
hook-like chitinous bristles of somewhat the same nature, though
smaller in size and varying in position, are very common on the
introvert of Sipunculoidea and on the body of the Priapuloidea.

Again, the association of the two last-named Orders in one sub-


group is, to my mind, an error. The Priapuloidea have little in
common with the Sipunculoidea; almost the only real point of
resemblance is the power of protruding the anterior part of the
alimentary canal, and withdrawing it by the aid of retractor muscles.
But in the Priapuloidea this power exists to a very small extent, and it
is a power shared by very many animals besides the Gephyrea. The
terminal anus of the former is a feature shared by the Echiuroidea
and by Epithetosoma, but these have little else in common with the
Priapuloidea. On the other hand, the entire absence of any head
appendages, such as the proboscis of the Echiuroidea and the
tentacles or tentacular membrane of the Sipunculoidea, the absence
of a vascular system, of nephridia or anal vesicles, taken together
with the straight intestine which occurs elsewhere only in
Epithetosoma, the persistent connexion of the nervous system with
the epidermis, the unique character of their excretory system and of
the reproductive organs, are all features in which the Priapuloidea
differ from the more normal members of the other three Orders.
These constitute a list of peculiarities which are at least as important,
and probably even more important, than those which characterise
the Sipunculoidea and the Echiuroidea. Thus the Priapuloidea
should, I think, be regarded as a distinct Order, which occupies a
very isolated position in the group.

Until we know something about the development of Halicryptus and


of Priapulus, it will be difficult to say whether the Order is more
nearly allied to one or the other of the two great Orders of Gephyrea,
whether it is very primitive or very specialised. The connexion of the
entire nervous system with the epidermis and the absence of a
vascular system are both rather primitive features, and so is the
Platyhelminthine character of the excretory organs. With regard to
the vascular system, however, it should be pointed out that it arises
very late in the larva of those Gephyrea whose development is
known, and that it does not seem to correspond with the vascular
system of other animals; it has no fine vessels or capillaries
connected with it, and apparently does not act so much as the
channel of the circulatory medium, but more as a mechanism for the
expansion of the head appendages, the tentacles in the
Sipunculoidea and the proboscis in the Echiuroidea; moreover, it is
absent in some genera of the former, such as Onchnesoma,
Tylosoma, and Petalostoma, where there are no tentacles.

The conclusion of the whole matter seems to be that the


Priapuloidea are an isolated Order retaining many primitive features,
and having no closer affinities to the Sipunculoidea than to the
Echiuroidea.

Hatschek came to the conclusion, from his work on the development


of Echiurus, that the Echiuroidea are true "Annelids," and from the
presence and mode of formation of the bristles, that they are related
to the Chaetopods. In this view he is confirmed by Conn, who
worked out the development of Thalassema. This relationship is
further confirmed by the discovery of Sluiter's that Sternaspis, the
genus of Chaetopods which in other respects most nearly resembles
the Gephyrea, has in one of its species (S. spinosa) a well-marked
bifid proboscis, which, like that of the Echiuroidea, is thrown off at
the least disturbance. Thus it seems fairly well established that the
Echiuroidea are closely connected with the Chaetopoda, for although
the only traces of segmentation they retain in the adult are the
serially-repeated nephridia of Thalassema and Echiurus pallasii, and
the two rows of peri-anal bristles in the latter, and possibly the
circular nerves given off from the ventral cord, yet the larva is fully
segmented, and in other respects is almost typically Chaetopodan.

The relationship of the Sipunculoidea to the Echiuroidea is a more


doubtful point. Hatschek is inclined to separate them, and in this he
is again supported by Conn. Embryology unfortunately does not help
us much. The early stages and larvae of Sipunculus nudus and of
Phascolosoma elongatum have been investigated by Hatschek and
by Selenka respectively. In neither genus is there any trace of
segmentation or of Annelid features, with the possible exception of
the bristles on the larval Phascolosoma. On the other hand, it must
be remembered that the development of Sipunculus is remarkably
abbreviated, and that such stages may have dropped out, the larvae
hardly differing more from the Trochosphere of Echiurus and
Thalassema than does that of Bonellia, an undoubted Echiurid. Still
the facts that there is never a head-kidney present, that there is no
trace of segmentation, and that at no stage is the anus terminal,
must have a certain weight.

If we leave out of account the larval history, which, although pointing


to a difference in the nature of the two families, is by no means
decisive, and consider the adult structures, we find very considerable
evidences of affinity. Taking firstly the main points of difference, we
find these to be (i.) the nature of the cephalic appendages, either a
proboscis or some modification of tentacles; (ii.) the position of the
anus; (iii.) the presence of anal vesicles; (iv.) the number of the
nephridia, never more than one pair in Sipunculids; and (v.) the
difference in origin of the chaetae. Of these most undoubtedly the
first is the most important. The Echiuroidea have retained the prae-
oral lobe of the larva in the form of a solid outgrowth of the body,
which outgrowth has carried with it the nerve-ring and vascular ring
which surround the mouth. This has been lost in the Sipunculoidea,
but is, I think, represented by a modified patch of epidermis which
lies dorsal to the mouth and just above the brain. A solid extension of
the skin in this region, which involved the nervous and vascular
systems, would bring about the same relation of parts as is found in
the Echiuroidea. The tentacular membrane or tentacles of the
Sipunculoidea have such a variety of form and arrangement, whilst
all subserving the same end, that I am inclined to believe that they
have originated within the limits of the family.

The position of the anus in the Sipunculoidea is one common to very


many animals which live embedded in sand or in tubular holes; it is
probably not primitive, as in the larva of Sipunculus it is near the
posterior end, and becomes more dorsal as the larva elongates.

The anal vesicles of the Echiuroidea probably have no


representative in the Sipunculoidea. In appearance and position they
are very like the little tufts which are found on the rectum of
Sipunculus, but since these open neither into the body-cavity nor into
the alimentary canal, it is hardly fair to compare them.

The resemblances between the Orders seem to me, on the whole, to


outweigh the differences. The general structure of the skin, the
coiled alimentary canal, with its ciliated groove, supported by strands
of muscles, the vascular system which gives off no capillaries, the
structure of the brown tubes, the existence of chitinous hooks or
bristles, the nervous system with its single unsegmented ventral
cord, the formation of the generative organs, all point to a sufficiently
close resemblance to justify us in classing the two Orders together.
In addition to these there are considerable histological resemblances
which cannot be discussed here, but which have a certain weight.

To sum up, it seems probable that the Echiuroidea are derived from
the Chaetopoda, and that their nearest ally in this group is
Sternaspis; and that the Sipunculoidea are allied to the Echiuroidea,
but have further departed from the Annelid stock, and have lost even
those traces of affinity with the parent group which have been
preserved in the development of Echiurus and Thalassema.

So little is known of Epithetosoma that it is difficult to discuss its


affinities. The presence of the hollow proboscis and the pores
leading into the body-cavity undoubtedly justify its being placed in a
separate Order, but beyond the presence of a terminal anus, in
which it resembles the Echiuroidea, there is nothing in its structure
which connects it more nearly with one than with the other of the
three larger Orders of Gephyrea.
List of Gephyrea found in the British Area as defined by Canon
Norman.

Phascolosoma vulgare English Channel and North Sea.


Blainv.
" English Channel.
elongatum Kef.
" English coast.
papillosum Thom.
" eremita North Sea.
Sars
" Bass Rock.
procerum Moeb.
Phascolion strombi English coast (Plymouth).
Mont.
Sipunculus nudus L. North Sea, English Channel (Paignton,
Teignmouth).
Golfingia macintoshii East coast of Scotland (St. Andrews
Lank. Bay).
Petalostoma minutum English Channel (Plymouth).
Kef.
Priapulus caudatus Scarborough, Outer Hebrides.
Lam.
Echiurus pallasii Guérin Coast of Scotland, English Channel.
Thalassema neptuni English Channel (Coast of
Gaertner Devonshire).

CHAPTER XVI

PHORONIS

HISTORY—HABITS—STRUCTURE—REPRODUCTION—LARVA—
METAMORPHOSIS—LIST OF SPECIES AND LOCALITIES—SYSTEMATIC
POSITION.

This interesting genus was discovered and first described by Dr.


Strethill Wright of Edinburgh, who in the year 1856 found specimens
of it living on a stone with Caryophyllia sent to him from Ilfracombe.
He christened the form Phoronis hippocrepia,[490] the generic name
being apparently taken from an epithet applied to Io, the specific
name having reference to the beautiful horseshoe shape of its
tentacular crown. Two years later a closely allied or identical form
was described by Professor P. J. van Beneden under the name of
Crepina gracilis.[491]

Phoronis is a sedentary animal living in "colonies," but each member


of the colony is distinct, and has no organic connexion with the
others, from which it is isolated by the presence of a tube in which it
lives, and into which it can be completely withdrawn. The tube is
formed from a secretion which probably has its origin from the
anterior end of the body-wall. The secretion hardens and forms at
first a transparent coating, but it soon becomes opaque, and
numerous sand particles, small pieces of shell, sponge spicules, and
other marine objects adhere to the outside of the tubes, giving them
a very characteristic appearance, and doubtless serving to protect
the inhabitants from predatory animals.

What little we know about the habits of Phoronis is in the main due to
the observations of Cori,[492] who studied Ph. psammophila at Faro,
an inlet of the sea near Messina. The least disturbance causes the
animal to withdraw its head with lightning rapidity into the tube, from
which after a time it re-emerges very slowly, and does not expand its
tentacular crown until its body is completely extended. Cori states
that not unfrequently individuals are found either without the crown of
tentacles or with the latter in process of regeneration. These may
have been bitten off by fish, etc.; but, on the other hand, van
Beneden describes in Crepina gracilis (Ph. hippocrepia) the throwing
off and regeneration of the crown of tentacles; and Cori confirms his
observation, at any rate as far as concerns those individuals kept in
captivity, and whose surroundings were presumably somewhat
unfavourable. He further observed the interesting fact that the cast-
off crown of tentacles continued to live, and suggests that possibly it
may develop a new body, in which case the phenomenon would be
an interesting case of binary fission producing two new animals.

Fig. 226.—A piece of a matted colony of Ph. kowalevskii Cald. Slightly


magnified. In most cases the tentacular head is protruding from
the tube.

With regard to the habitation of Ph. australis, the largest species


known, some discrepancies have crept into the literature of the
genus, and to prevent their recurring again it may be worth while to
quote the statements of its discoverer, Mr. Haswell.[493] He says:
"Phoronis australis occurs in communities of twenty to thirty, in
spaces in the substance of the wall of the tube inhabited and formed
by a species of Cerianthus. Each worm has a tube of its own, very
delicate and transparent, made up of several layers, the mouth
opening on the outer surface of the tube of the Cerianthus. The
Cerianthus tubes sometimes come up empty, as we should naturally
expect, the animal having dropped out; but a sufficient number of
occupied tubes are found to show that, under ordinary
circumstances, a living Cerianthus occupies the interior of the tube
and a community of Phoronis live in its wall. This species of Phoronis
is never found anywhere else, and the species of Cerianthus is very
rarely found without the Phoronis."

Ph. australis is sluggish in its movements, but other species are


capable of very active movement, and withdraw their heads in a
moment at the approach of danger. A Neapolitan species, Ph.
kowalevskii—known to the fishermen of that place as "Ficchetelli
bianchi" or "Vermi di ceppa"—lives chiefly on submarine posts and

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