This paper explores the competitiveness of exporters from Croatian manufacturing industry. A dynamic panel system GММ technique is applied to the sample of firms distributed across all sectors of manufacturing industry and observed over period between 1999 and 2007. The competitiveness of firms is modelled as function of their activities, characteristics and features of their environment. The results of investigation are in line with theoretical predictions about behaviour of price competitive firms. In building their international position, Croatian exporters rely on cost reductions and improvements in labour productivity. The sensitivity of these firms to wage increases suggests that labour costs still play a major role in their success on international markets. In overcoming barriers to exporting these firms rely on own resources, previous experience and cost and knowledge sharing agglomeration externalities. The positive and significant relationship between export intensity and the firms’ location in small urban areas or free trade zones suggest that some of policies undertaken by Croatian government in analysed period such as investment in infrastructure or development of export-targeting policies may have produced beneficiary effects on the competitiveness of exporters
