SMEs and Exports: Firm Level Evidence from Developing and Emerging Economies
This paper examines the factors that facilitate the export propensity of Small and Medium sized Enterprises in developing and emerging economies by using firm-level data from the most recent Business Environment and Enterprise Performance Survey (BEEPS). The working sample analysed in this paper includes 9801 manufacturing firms from 41 emerging and transition countries. The findings of the paper suggest that economies of scale is more important than learning economies for SMEs to overcome barriers to participating in export activity. Whilst innovative firms are more likely to participate in export activity (export propensity), the impact of innovation on incremental increase in the ratio of exports to total turnover (export intensity) is not significant. On the other hand, the findings have confirmed that financially less constraint SMEs are more likely to participate in export markets as well as benefit from higher export intensity than SMEs with financial constraints. The findings of the paper may shed some light on designing and formulating strategic decisions and SME related policies to promote export participation. The results of the paper suggest it is important to support young SMEs to grow quickly since economies of scales is more important than learning economies in emerging economies. One policy implication could be for governments to focus on designing their industrial policies to remove barriers to expansion in order to support SMEs’ export potential. Policy makers should also create a business environment which supports innovative firms. It is also important to implement necessary policies to provide liquidity assistance and financial reforms that encourage banks and financial institutions to provide loans to innovative SMEs.