Internationalization and failure risk patterns: Evidence from young Estonian manufacturing exporters

Abstract

Purpose

This paper aims to find out what kind of export and failure risk patterns exist among young Estonian manufacturing exporters and explore their interlinkages.

Design/methodology/approach

The sample consisted of 208 young Estonian manufacturing exporters. Based on internationalization literature, export patterns were detected with a consecutive three-stage clustering of export sales share from total sales, outside-Europe sales share from export sales and number of target markets, while failure risk patterns were detected by clustering failure probabilities obtained from a universal prediction model. The interconnection of export patterns with financial ratios and failure risk patterns was studied with statistical tests.

Findings

Six main internationalization patterns existed. In all, 49 per cent of firms exported to a single European market and their export share was constantly very low, while even most of the firms with high export shares (39 per cent of the sample) were also active on one European market. In terms of failure risk patterns, 49 per cent of firms had constantly very low failure risk, while 51 per cent of firms had medium risk. Higher export engagement did not lead to better financial performance or lower failure risk.

Originality/value

This study is the first to find out if firms following different export patterns are also characterized by specific financial performance and failure risk. In addition, studies encompassing young exporters’ specific target markets and failure risk development are rare. While exporters’ and non-exporters’ financial performance differences have been frequently documented in favor of the former, this study found no such differences for different types of young exporters.

Citation

Lukason, O. and Vissak, T. (2018), "Internationalization and failure risk patterns: Evidence from young Estonian manufacturing exporters", Review of International Business and Strategy, Vol. 29 No. 1, pp. 25-43. https://doi.org/10.1108/RIBS-06-2018-0054