The Estonian Economy Current Status of Competitiveness and Future Outlooks. Estonia in Focus.

What are the actual Estonian economic outlooks? By what does Estonia differ from rich and successful countries? These topics are dealt with in the report written by researchers from the University of Tartu. This report has been commissioned by the Estonian Development Fund from the University of Tartu based on the contract for services from 28 June 2007 and completed by Tartu University Faculty of Economics and Business Administration on 29.11.2007.Estonia

The Impact of Outward FDI on Home-Country Employment in a Low-Cost Transition Economy

The current extensive literature on the home-country employment effect of FDI focuses almost exclusively on the case of investments from high-income and high labour cost home countries. In our paper we analyse the home-country employment effect in Estonia as a lowcost medium-income transition economy. The data from the population of Estonian firms between 1995 and 2002 was studied with regression analysis and propensity score matching in order to construct an appropriate counterfactual for the firms that have invested abroad. The results indicate that in general, outward FDI had a positive impact on the home-country employment growth. Concerning direct investors (domestic firms investing abroad) and indirect investors (foreign-owned firms investing abroad), the former group had a stronger homecountry employment effect due to their smaller pre-investment size and because the subsidiaries of indirect investors are served from other locations rather than from Estonia. The positive employment effect was much stronger in the case of investments made after 1999 due to the better macro-economic performance of Estonia from the year 2000 onwards. Services firms demonstrated a stronger home-country employment effect than manufacturing firms. Our results imply that the logic of the outward investments from low-cost transition and developing economies differs from that of high-income countries.http://deepblue.lib.umich.edu/bitstream/2027.42/57253/1/wp873 .pd

Financial Constraints in Investment - Foreign Versus Domestic Firms. Panel Data Results From Estonia, 1995-1999.

Using data from Estonian manufacturing firms during the period 1995-1999 we apply panel data techniques, in particular the Arellano-Bond (1991) method to investigate the investment behaviour. We employ the model of optimal capital accumulation in the presence of convex adjustment costs. We find that the domestic companies seem to be more financial constrained than those with the presence of foreign investors. Furthermore we find that smaller firms are more constrained than their larger counterparts.http://deepblue.lib.umich.edu/bitstream/2027.42/40034/3/wp648.pd

Autonomy and Performance of Foreign Subsidiaries in five Transition Countries

The paper analyses the link between the autonomy according to business function and the performance of foreign subsidiaries in Slovenia, Poland, Hungary, Slovakia and Estonia. The novelty of the paper is in the deeper investigation of the multidimensionality of autonomy. Using the method of principal components, four business function factors relating to autonomy were obtained (technology, marketing, management, finance). The results supported the argument that the relationship between autonomy and performance depends on the type of autonomy. Marketing and finance are the most powerful dimensions of autonomy. Higher autonomy in marketing is negatively linked with technology upgrading, measured by productivity level, improvement of technological level of production equipment, and quality of products. The higher the financial autonomy of the subsidiaries the bigger the positive changes in all fields of performance.http://deepblue.lib.umich.edu/bitstream/2027.42/40166/3/wp780.pd

Foreign direct investment and innovation in Central and eastern Europe : evidence from Estonia

A growing literature is trying to analyse the productivity gap between domestic and foreign firms with differences in innovation indicators. In our paper we analyse the relationship between inward and outward FDI at either company or industry level and the innovation behaviour of companies in Estonia. We use company-level data from three waves of the Community Innovation Surveys, which are combined with financial data from the Estonian Business Register and FDI data from the balance of payments statistics. For the analysis we apply a structural model involving equations on innovation expenditure, innovation outcome and productivity, and also innovation accounting and propensity score matching approaches. Our results show that the higher innovation output of foreign owned companies vanishes after various company characteristics are controlled for, but there were significant differences in innovation inputs such as the higher use of knowledge sourcing and the lower importance of various impeding factors. Outward investment has a positive influence on innovativeness among both domestic and foreign owned companiesinnovation, internationalisation, foreign direct investments, catching-up countries

Autonomy and Performance of Foreign Subsidiaries in five Transition Countries

The paper analyses the link between the autonomy according to business function and the performance of foreign subsidiaries in Slovenia, Poland, Hungary, Slovakia and Estonia. The novelty of the paper is in the deeper investigation of the multidimensionality of autonomy. Using the method of principal components, four business function factors relating to autonomy were obtained (technology, marketing, management, finance). The results supported the argument that the relationship between autonomy and performance depends on the type of autonomy. Marketing and finance are the most powerful dimensions of autonomy. Higher autonomy in marketing is negatively linked with technology upgrading, measured by productivity level, improvement of technological level of production equipment, and quality of products. The higher the financial autonomy of the subsidiaries the bigger the positive changes in all fields of performance.international technology transfer, FDI effects on the host economy, subsidiary autonomy, subsidiary performance, transition countries

Financial Constraints in Investment - Foreign Versus Domestic Firms. Panel Data Results From Estonia, 1995-1999.

Using data from Estonian manufacturing firms during the period 1995-1999 we apply panel data techniques, in particular the Arellano-Bond (1991) method to investigate the investment behaviour. We employ the model of optimal capital accumulation in the presence of convex adjustment costs. We find that the domestic companies seem to be more financial constrained than those with the presence of foreign investors. Furthermore we find that smaller firms are more constrained than their larger counterparts.Investment, Cash Flow, Foreign Ownership, Firm Size, Estonia

The Impact of Outward FDI on Home-Country Employment in a Low-Cost Transition Economy

The current extensive literature on the home-country employment effect of FDI focuses almost exclusively on the case of investments from high-income and high labour cost home countries. In our paper we analyse the home-country employment effect in Estonia as a lowcost medium-income transition economy. The data from the population of Estonian firms between 1995 and 2002 was studied with regression analysis and propensity score matching in order to construct an appropriate counterfactual for the firms that have invested abroad. The results indicate that in general, outward FDI had a positive impact on the home-country employment growth. Concerning direct investors (domestic firms investing abroad) and indirect investors (foreign-owned firms investing abroad), the former group had a stronger homecountry employment effect due to their smaller pre-investment size and because the subsidiaries of indirect investors are served from other locations rather than from Estonia. The positive employment effect was much stronger in the case of investments made after 1999 due to the better macro-economic performance of Estonia from the year 2000 onwards. Services firms demonstrated a stronger home-country employment effect than manufacturing firms. Our results imply that the logic of the outward investments from low-cost transition and developing economies differs from that of high-income countries.outward foreign direct investments, employment effects of FDI, Central- and Eastern Europe, transition.

How to Improve the Supportive Role of Estonian Innovation System toward Launching New Products by High Technology Companies?

The purpose of the study is to evaluate how supportive is Estonian national innovation system toward the launching of new innovative products by high technology firms. The article intends to combine two broad areas of research – national innovation system approach and the different models of the new product launching. Based on the literature review and in-depth analysis of three case studies of Estonian high-tech company’s major barriers as well success factors of highly innovative product launches were identified. The barriers of the new product launching were linked with the systemic failures of the national innovation system. The most relevant failures of Estonian national innovation system inhibiting the new product development are capability and networking failures. The sources of innovation of high-technology firms are too narrow, linkages with domestic firms and higher education institutions as well with foreign firms are poorly developed. High-tech firms have also serious capacity problems due to the extremely weak support mechanism by national innovation system on the seed funding stage of product development and prototype building stage as well. Paper argues that resources needed for the innovation should not be looked too narrowly following linear innovation model approach. Instead interactive approach is needed, which combines capability building, network development, interactive learning with direct investments into fundamental research

Benchmarking of Governmental Support Measures for University-Industry Cooperation

This paper aims to benchmark Estonian governmental support measures targeted toward enhancing university-industry collaboration to European best practice and make suggestions for the development of these measures. The intensity and scope of university-industry cooperation support measures varies heavily in Europe. The survey of European University-Business Cooperation, Pro Inno Europe and Erawatch database of policy measures, and Community Innovation Survey reveal that Finnish, German and Austrian support systems are best balanced and provide good university-industry cooperation intensity. The cooperation measures in Estonia are weak and improvement should be made by increasing the Estonian governmental funding, mandatory cooperation in support measures, networking and applied research in universities, on-going application possibilities, reducing the bureaucracy, and improving the timing of measures