Academic journal article Baltic Journal of Economics

Exporting by Latvian Companies: Vitality, Drivers of Success, and Challenges

Academic journal article Baltic Journal of Economics

Exporting by Latvian Companies: Vitality, Drivers of Success, and Challenges

Article excerpt


This paper sheds light on Latvian exporters - how active they are, what challenges they face, what makes them succeed or fail. Our study draws on a survey of 503 medium-sized Latvian companies. We find that most medium-sized Latvian companies are exporters (either directly or indirectly) and for a typical exporting company, export turnover constitutes more than half of its total turnover. Exporting companies tend to be larger, younger and faster growing than their non-exporting counterparts. They pay higher average wages, consistent with the notion that they have higher labour productivity or utilise more skilled labour on average. For a typical company, export activity has been stable over the past five years, with zero growth in export turnover and an average increase of one additional export destination; however, there is wide dispersion in export growth and success among exporting companies. Successful exporters tend to be larger, with higher productivity growth and greater innovativeness, proactiveness and risk taking, i.e., stronger entrepreneurial orientation. The main obstacle preventing non-exporters from commencing exporting is lack of international competitiveness. This is also the main reason why companies discontinue exporting, and should be the focus of policy aimed at promoting exporting.

Keywords: exports; Latvia; competitiveness; productivity; growth; entrepreneurial orientation

JEL classifications: F10; F14; L25

1. Introduction

Exporting has many benefits. For a company, exporting can generate growth and profitability beyond what is possible within the confines of its domestic market. This is particularly true for companies located in relatively small domestic markets such as Latvia. For an economy, successful exporting companies can raise the international recognition and image of the country, which can have positive side effects in a number of areas such as attracting foreign investment and tourism. High exporting intensity can also help raise an economy's productivity by pushing local producers to achieve international best practices and competitiveness, specialisation of production and economies of scale. For members of society, successful exporting companies can bring about a higher standard of living through gains from international trade (wider choice of goods and services at lower prices), new jobs from increased growth rates of companies and higher real wages from increased productivity. Exporting can also be a source of risk for an economy by transmitting economic shocks from other countries (e.g., Obiora, 2009).

Despite the importance of exporting for an economy, not much is known about Latvian exporters - how active they are, what challenges they face, what makes them succeed or fail.2 The purpose of this paper is to shed light on these questions, and in particular to:

* Provide an overview of export activity in Latvia by addressing questions such as howmuch do Latvian companies export, where do they export, and how successful are they at exporting?

* Describe the characteristics of exporting companies - provide a profile of the typical exporting company in terms of size, age, growth, productivity, ownership and entrepeneurial orientation.

* Identify what makes a successful exporter by examining the associations between export success and various company practices.

* Find out what barriers and obstacles constrain the exporting activities of Latvian copanies.

* Analyse the reasons why some companies do not export and why some companies cease exporting.

Given our aims of describing the export activity of Latvian companies and providing insights for potential exporters on what business processes are associated with export success, we choose to focus on medium-sized companies that have a somewhat established operating record. Therefore, we construct a random sample of companies registered in Latvia that: (i) have annual turnover between EUR 500 thousand and EUR 50 million; (ii) were registered in 2007 or earlier; and (iii) are not from the real estate or financial sectors. …

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