Firm size and export performance : evidence from Uruguayan manufacturing SMEs

Abstract

Small and medium-sized enterprises (SMEs) are recognized as an important driving force in economic development, both in industrialized and developing countries. However, and despite their increasing active role in foreign markets, evidence drawn mainly from developed economies indicates that several obstacles constrain SMEs’ international activities, affecting these firms’ ability to seize opportunities and confront threats emanating from the globalization process. This paper provides a developing country perspective on this issue, empirically evaluating the determinants of Uruguayan manufacturing firms’ involvement in export markets, with a focus on firm size. Using firm-level panel data covering the period 1997-2005, this study investigates four dimensions of firms’ export performance: export propensity, export intensity, product scope, and export survival. The results obtained show that SMEs underperform large enterprises in the four export dimensions considered, suggesting that the inherent resource constraints that characterize smaller firms would hamper their participation in export markets. Estimates also indicate that SMEs would be differently affected by some of the factors determining firms’ export performance. These findings provide support for the argument that policymakers should develop specific initiatives regarding internationalization of SMEs. Given the important role played by SMEs in the Uruguayan economy, the improvement of their international insertion is crucial for strengthening the country’s export performance, as well as for enhancing the impact of exports on the rest of the economy