THE COMPARISON OF EXPORTING AND NON-EXPORTING ENTERPRISES IN LATVIA

Transcription

1 THE COMPARISON OF EXPORTING AND NON-EXPORTING ENTERPRISES IN LATVIA Anna Pluta Baltic International Centre for Economic Policy Studies National Research Programme Innovation and sustainable development: Latvia s post-crisis experience in a global context (SUSTINNO) New Challenges of Economic and Business Development 017 May 19 0, 017, Riga, University of Latvia

2 Background, motivation for the study and research aim Exporting and non-exporting enterprises differ in the various measures of performance. This research is aimed at exploring the differences between exporting and non-exporting enterprises in Latvia from several aspects. The research is aimed to answer the following research questions: 1. Are there any differences in factors expected to effect the productivity between exporting and non-exporting enterprises?. Are there any differences in ways of fundraising? 3. Are the Latvian exporting enterprises more innovative? 4. Are there any differences in an attitude to tax evasion and barbering?

3 Marketing and Public Opinion Research Centre SKDS survey data 00 Latvian enterprises of 015. The target group of the survey is economically active enterprises registered in Latvia. Respondents are the business owners, managers and leading specialists. The survey method is Computer assisted telephone interviews (CATI). The random sample Focus on medium sized enterprises Enterprises having annual turnover between EUR500 thousand and EUR 50 million Enterprises were registered in 007 and earlier Enterprises are not from real estate or financial sector

4 1. Export opportunities

5 176, % The sample: the breakdown of the enterprises by the type of trade Direct Export Indirect Export Domestic trade Direct Indirect Both direct and indirect exporters 54, 7% 19, % 551, 69% Note: base is all enterprises, n=00 Fig.1. Breakdown of the enterprises by the type of trade % 0% 40% 60% 0% 0% Note: base for 015: all respondents, n=00. Base for 0: respondents which answered the question, n=767 Fig.. The contribution of the domestic trade, direct and indirect export to the turnover of the enterprise, % Enterprise exported in the past, but now is not exporting 0% 0% 40% 60% 0% 0% 4 5 Enterprise has never exported, but is not willing to export Enterprise has never exported, but is willing to export Note: base is the enterprises, not engaged in export, n=551 Fig.3. ` intentions about export

6 The characteristics of non-exporting enterprises Good or service is not suitable for export Sufficient demand for goods or services in the local market Great competition in the potential export market Competition from other enterprises in the foreign market Legal /customs problem Growing production costs (e.g., wages in Latvia) Legal /customs problem 3 Competition from other exporters 15 The lack of contacts / information in the foreign market The lack of contacts / information in the foreign market 3 Other reason 5 Other reason 4 Note: base is the enterprise not engaged in exports and are not considering to export,, n=430 Fig.4. The reasons for not-willingness to export, % Note: Base is the enterprises not engaged in export, but exported their goods or services in the past, n=34 Fig.5. The reasons for stopping exporting, %

7 As a major barrier to exporting for the exporting enterprises is the fierce price competition in the foreign market A major barrier Medium barrier A small barrier Difficult to say / NA Is not a barrier Fierce price competition in the foreign market The necessity for the working capital (e.g., commercial Foreign enterprises do not trust the Latvian enterprises Difficulties in finding information on foreign markets or The initial costs of exporting Unreliable foreign enterprises Cultural differences or language barriers Legal barriers in the foreigh market or customs The lack of export guarantees and the lack of insurance Lack of knowledge about the export process The quality of products produced by the enterprise is Note: Base is the enterprises engaged in the direct export, n=195 0% % 0% 30% 40% 50% 60% 70% 0% 90% 0% Fig.6. The barriers to export

8 The major barriers to start exporting is the necessity for the working capital, the fierce price competition in the foreign market and the initial cost of exporting. A major barrier Medium barrier A small barrier Difficult to say / NA Is not a barrier 0% % 0% 30% 40% 50% 60% 70% 0% 90% 0% The necessity for the working capital (e.g., commercial Fierce price competition in the foreign market The initial costs of exporting Difficulties in finding information on foreign markets or Lack of knowledge about the export process The lack of export guarantees and the lack of insurance Foreign enterprises do not trust the Latvian enterprises Legal barriers in the foreign market or customs Unreliable foreign enterprises Cultural differences or language barriers The quality of products produced by the enterprise is Fig.7. The barriers to start exporting Bāze: enterprises, not engaged in exports, but are considering to start exporting, n=

9 . Productivity

10 The importance of factors affecting the productivity in the operation of the enterprises The comparison of exporting and non-exporting enterprises regarding the following factors: (1) Staff training and skills improvement () the financial bonuses and non-financial incentives to motivate the employees (3) The use of the latest machinery and equipment (4) Research and development and the desire to bring innovations

11 Staff training and skills improvement: there are relatively more exporting enterprises which are investing significantly in training new employees and existing staff () Existing employees (1) New employees % % 0% 30% 40% 50% 60% 70% 0% 90% 0% 7 = strongly agree = neither agree nor disagree 3 1 = strongly disagree Hard to say Fig.. Rating of the attitude to the statements: (1) The enterprise is investing significantly in training new employees () The enterprise is investing significantly in training / education of the existing staff to enhance their capacity in carrying out their tasks

12 (1) Financial incentives () Nonfinancial incentives Roughly the half of exporters and only every fifth non-exporter is widely using the financial bonuses and non-financial incentives to motivate the employees % % 0% 30% 40% 50% 60% 70% 0% 90% 0% 7 = strongly agree = neither agree nor disagree 3 1 = strongly disagree Hard to say Fig. 9. Rating of the attitude to the statements: (1) The enterprise is widely using the financial bonuses and the increase in the remuneration to reward employees' good performance () The enteprise is widely using the non-financial incentives to motivate employees

13 The use of the latest machinery & equipment: exporting enterprises are tended to introduce the latest equipment in the production process to a greater extent than non-exporters () Actively invest in installation (1) Introduce the latest equipment % 0% 40% 60% 0% 0% 7 = strongly agree = neither agree nor disagree 3 1 = strongly disagree Hard to say Fig.. Rating of the attitude to the statements: (1) The enterprise is trying to introduce the latest equipment in the production process () In order to reduce production costs, the enterprise has actively invested in installation of machinery and equipment

14 (1) R & D of new products () The cost effective methods Research and development and the desire to bring innovations: Latvian exporters report themselves as more innovative than non-exporters % 0% 40% 60% 0% 0% 7 = strongly agree = neither agree nor disagree 3 1 = strongly disagree Hard to say Fig.11. Rating of the attitude to the statement: (1) The enterprise invests considerable resources in research and development of new products () The enterprise invests significant resources in research and development in order to find the cost effective production methods

15 Reforms in the business environment: the productivity level would be improved in case of simplified bureaucracy in dealing with the public authorities, improvement of the health care system, fair tax payments and reforms in the vocational training system Fig. 1. The proportion of entperprises which believe that the reforms in the following areas would greatly or moderately improve the productivity level, % of exporting and non-exporting enteprises

16 3. Fundraising

17 3.1. Fundraising 43% 57% 0% 0% Below EUR3, ,000-99,999 EUR , ,999 EUR 1 Above 500,000 EUR Fig. 14. Number of the enterprises by the level of funding (quartiles) attracted in the last 3 years Base: all exporting (n=97) and nonexporting enterprises (n=93), replied to the question Yes No Yes No Fig. 13. The proportion of exporting and non-exporting enterprises which attracted funds in the last 3 years, % Base: all exporting (n=49) and non-exporting enterprises (n=551) Bank overdraft, loan, credit EU programs Funds of existing owners Loans from other sources Investments from the new Latvian government Fig. 15. The average proportion of funding by type of funding source, % Base: respondents, which attracted funds in the last 3 years, n=1

18 3.. Availability and adequacy of the attracted funding Was the amount of financing raised sufficient to fund new projects / investments / development or it was not enough, and you were not able to attract more money? "Did your enterprise want to raise funds for new projects / investment / business development but did not manage to get it (in the last 3 years)? Non-exporter 71 9 Non-exporter 14 6 Exporter 76 4 Exporter % 0% 40% 60% 0% 0% Was sufficient Was not sufficient Fig. 16. The proportion of enterprises which find the attracted funds sufficient and not sufficient, % 0% 0% 40% 60% 0% 0% Yes No Fig. 17. The proportion of enterprises which did not managed to attract funding or did not try to, % Note: Base is the respondents, which attracted funding in the last 3 years, n=1 Bāze: respondents, which have not attracted funds in the last 3 years, n=5 1

19 4. Innovations

20 are more innovative (in relative terms); the most common type of innovation is a new or significant improved good or service that is new for the represented market New or significantl y improved goods or services that were new in the represente d market Logistics supply or distributio n methods... new only for your enteprise Production methods In the last 3 years have the enterprise introduced new or significant improved?" Base: all respondents, n= Were introduced Were not introduced Difficult to say Fig. 1. 0

21 5. Taxes and attitude toward taxation

22 5.1. Satisfaction with the tax policy and the quality of business legislation Tax Policy Quality of business law Fully satisfied or satisfied Neither satisfied nor dissatisfied Not at all satisfied or not satisfied Difficult to say Fig. 19. The proportion of enterprises by different satisfaction level (of their leaders) with tax policy and the quality of business legislation, % of exporting and non-exporting enterprises Both exporting and non exporting enterprises are more satisfied with the quality of the business law, than with the tax policy in Latvia. There are approximately times more respondents, which are not at all or not satisfied with the tax policy design comparing with the proportion of respondents not satisfied with the quality of business law. The composition of exporting and non exporting enterprises by the satisfaction level with the tax policy and the quality of business is very similar.

23 5.. The statements regarding the shadow economy 0% 90% 0% 70% 60% 50% 40% 30% 0% % 0% Tax evasion is a common practice 5 = strongly agree 4= agree 3 = neither agree nor disagree = disagree 1 = strongly disagree Difficult to say Bribery is a commom practice Fig. 0. The proportion of respondents by different level of agreement with the statements regarding the tax evasion and bribery in Latvia, % The views of the leaders of exporting and nonexporting enterprises on the tax evasion and the bribery are similar. Respondents believe that bribery is less common practice in Latvia

24 To conclude 1. There are differences in factors expected to effect the productivity between exporting and nonexporting enterprises: There are relatively more exporting enterprises which are investing significantly in training new employees and existing staff Roughly the half of exporters and only every fifth non-exporter is widely using the financial bonuses and nonfinancial incentives to motivate the employees Exporting enterprises are tended to introduce the latest equipment in the production process to a greater extent than non-exporters Latvian exporters report themselves as more innovative than non-exporters. There are numerous differences in ways of fundraising: the share of exporting enterprises attracted additional funds for the development of the enterprise is times larger. The importance of funding sources in the total funding is similar. Exporting enterprises attracts larger funding than non-exporting ones. 3. The Latvian exporting enterprises are more innovative (in relative terms); 4. The views of the leaders of exporting and non-exporting enterprises on the tax evasion and the bribery are similar. The composition of exporting and non exporting enterprises by the satisfaction level with the tax policy and the quality of business legislation is very similar.