Predicting the entry of Estonian exporters into non-European markets using financial and internationalisation behaviour variables

Abstract

This thesis aims to assess how accurately financial and internationalisation variables are able to predict the entry of Estonian exporters into non-European markets (NEM). Building on several theoretical perspectives, including the Uppsala model, resource-based view and behavioural theory of firm, the research utilises indicators of firms’ prior internationalisation and financial performance. The analysis is based on Estonian exporting firms, drawn from the Estonian Business Registry, that either entered or did not enter non-European markets between 2010 and 2022. The methods applied include logistic regression, exploratory factor analysis, and artificial neural network modelling. The findings indicate that internationalisation variables, particularly export scale and scope, are more significant predictors of NEM entry than traditional financial ratios. In the case of entrants, the European export scale and scope increased shortly before NEM entry. Financial indicators, by contrast, are less significant, likely due to exporters’ generally healthy financial condition, which limits variation among firms. However, NEM entrants witnessed short-term financial strain before the event, portrayed by lower liquidity and solvency. NEM entry is predictable with excellent accuracy, especially when firms remain functional and have remarkable intensity on the NEM