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Archive 2000

  • 06.10.2000

    Export Orientation and its Impact on Enterprise Restructuring in Ukraine

    (Code:2)

    On the micro-economic level international integration means that enterprises should move in a direction which is characteristic of companies participating in a market economy, i.e. they should undertake the necessary restructuring measures and participate in international trade. The involvement in export and import activities provides an enterprise with better access to international markets, and facilitates the introduction of international standards regarding product quality, product innovation, cost levels and marketing strategies. In fact, in developed countries, exportoriented enterprises usually demonstrate better performance compared to firms that operate only within the domestic market. In the transitional context, export orientation is expected to play an important role in encouraging enterprises to restructure. However, most recent empirical literature on the restructuring of large industrial enterprises, following privatisation, has focused only on the role of privatisation and on the hardening of budget constraints. Competition and human capital aspects are sometimes considered as well. Some studies on trade re-orientation of enterprise in transition economies have found little evidence of a relationship between the enterprises’ export orientation and conventional measures of performance (Peters and Claessens, 1996). This might be due to a time lag between changes in export orientation and the related effects on performance.

    We focus first on an analysis of the impact of export orientation (and especially orientation towards non-CIS markets) both on the restructuring activities of Ukrainian enterprises and on their performance. We consider the export orientation of a firm as a proxy for economic openness and international integration at the micro-economic level. Next, we test the hypothesis that a higher level of export orientation (particularly towards non-CIS markets) is associated with a higher probability of undertaking restructuring measures (and strategic activities in particular), which should eventually result in better performance.

    Our second research aim is to investigate what forces drive companies to orient their trade towards exports. We expect that increased levels of export sales and a re-orientation of sales towards non-CIS markets are associated with private ownership, increased competition, hardening of budget constraints and improved managerial quality.

    The paper is structured as follows: Section 2 briefly outlines the present Ukrainian economic environment. Section 3 discusses the links between restructuring and its driving forces (namely export orientation, ownership changes, hardening of budget constraints, increasing competition, and changes in human capital). It also develops various hypotheses, which will then be tested. Section 4 describes the data used in the analysis. Section 5 presents the equations, which will be used, and describes the variables employed in the analysis. Section 6 discusses the regression results, and Section 7 presents policy implications derived from the foregoing.

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    Authors:  Akimova Iryna
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