What can the government do in order to reduce the threshold for small and medium-sized enterprises (SMEs) to enter the world market?

In this report we present the results of three studies and a working paper written under this project, including policy conclusions based on all four studies.

The obove issue is analysed from the following perspectives:

  • What distinguishes SMEs that export, what markets do they trade with and what role have different trade barriers for their decision?
  • What are the effects of export on business growth, employment and productivity?
  • What effects have government sponsored export promotion programs?
  • What can we learn from the promotion of other countries in Europe?
  • Exporting through wholesalers. An alternative for SMEs?

The government´s export strategy

Most countries have some kind of export promotion programs financed wholly or partially through taxes. The objective is to create jobs and growth by helping firms to overcome the barriers to trade.
The objectives of the Swedish government's export strategy adopted in December 2015 can be summarized in five bullet points:

  • Swedish exports must strengthen the position in emerging markets.
  • More SMEs must be enticed to export.
  • Swedish exports must move upward in the global value chain.
  • Sweden's attractiveness for investments, skilled labour and tourism must increase.
  • The global trade system must be kept open.

The strategic goals were reformulated somewhat in December 2019. One element of the new strategy is to provide good conditions for the export industry in all parts of Sweden through regional export centres that bring together all export promotion activities. Another novelty is the alignment of the export strategy with the sustainability objectives of Agenda 2030 and the Paris climate accord.

Stylized facts about SMEs exports

Our survey of SMEs suggests that relatively few firms export. And most of them stay within the EU and Norway where the market access are basically the same as in Swedish home market due to the common market of the EU and extension to Norway through the EEA.

Firms that begin exporting grow faster than firms in the same sector that remain in the home market. Well-designed export promotion programs may therefore spur the growth rate of the economy.

The proof of the pudding is in the eating. How well does export promotion programs fair in reality?

The following export promotion programs have been evaluated in this project:

  • Business Sweden, basic export training (Steps to Export)
  • The Swedish Growth Agency, business development checks for internationalization
  • Almi Företagspartner, export loans
  • Enterprise Europe Network, international business consulting and partner search

Estimating the effects of these programs is challenging because we can only evaluate the effects on the companies that have applied for and been granted support, not a random selection of companies. One assumption may be that the support mainly reaches the most motivated companies.

The estimated effects may then be confounded with differences in the abilities of firms. To address the problem of self-selection, we use a matching method. It means that every company that has taken part in the promotion is matched against the five most comparable companies that have not taken part in any promotional efforts.

The evaluation shows that:

  • Firms that receive support from export promotion agencies are more likely to export.
  • Firms that already export record higher export volumes after the treatment.
  • Combining different programs gives the best result.
  • But the positive effects are limited to companies that export less than expected at the outset, i.e., companies that have all attributes to become successful exporters with the right support.
  • No significant effects are recorded for companies that perform better than average.

Sweden's export promotion compared to other countries in Europe

A comparison of export promotion in Sweden, Norway, Denmark, Finland, Germany, the Netherlands and the UK reveals both similarities and differences:

  • Sweden has a larger number of export promotion agencies than the other.
  • Collaboration between different agencies are encourage in all countries.
  • Basic export information is provided by all countries, and some also offer publically supported in-depth counseling.
  • The cost of in-depth counseling varies.
  • All countries except Norway and the Netherlands offer export financing for SMEs.
  • All countries except Germany and the UK offer SMEs the opportunity to apply for financial grants to develop exports. However, what the grants can be used for and how large they are varies.
  • All countries have started to evaluate their export promotion programs with modern matching methods. Most evaluations show overall positive effects of the programs.

What can the government do in order to reduce the threshold for small and medium-sized enterprises (SMEs) to enter the world market?

Serial number: Rapport 2020:03

Reference number: 2018/215

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