Internationalization of Estonian Enterprises: The Market Dimension
University of Tartu Economics and Business Administration Working Paper No. 14
37 Pages Posted: 1 Oct 2003
Date Written: 2003
The main aim of this working paper is to analyze the target market patterns of Estonian internationalizing companies. Since foreign direct investments are believed to have significantly influenced the internationalization process of Estonian enterprises, the study tries to ascertain whether these processes differ in case of enterprises based on Estonian capital and those with foreign participation. The data of four surveys that were carried out among Estonian exporters and foreign investors, and firms involving foreign investments were used for testing the hypotheses proposed. It can be said that inward foreign direct investments have not contributed much to the internationalization of Estonian companies in the sense that they have mostly concentrated their activities on the Baltic markets or exported their production to the home market of the foreign parent. Additional knowledge of foreign markets gained owing to such international activities is often marginal. Somewhat unexpected was the result that there are no clear differences in target market patterns between firms with differing shares of export in their turnover. Two case studies presented in the last part of the paper suggest the existence of some inter-firm differences that are determined by the motivation of foreign expansion. As Sylvester has been internationalized step by step, but has not followed all the principles suggested by the previous empirical studies. Namely, it did not set up its foreign subsidiary in the market to which it exported the largest share of its production, but selected the market, proceeding from the availability of suitable resources and the distance to the target market. The internationalization of As Baltika has been carried out mostly in line with the ideas of incremental internationalization processes, but the expansion has been faster and the spectrum of foreign market entry modes has been wider than those of As Sylvester.
Keywords: internationalization, market dimension
JEL Classification: F23
Suggested Citation: Suggested Citation