The development of small and medium-sized enterprises (SMEs) has a significant impact on the overall economy. However, the small businesses are often more vulnerable to all kinds of external factors. For instance, the number of employed decreased by almost 60,500 people in the years 2008 to 2010 which is approximately 17% of the total workforce of SMEs. The aim of this study is to identify the hold or pull factors for the development of SMEs. For this we specified their profile in order to compare them basing on the size, field, location and key economic indicators.

„Estonian enterprises confront a shortage of funds and professionals, export performance has weakened and their willingness for cooperation is low. However, the entrepreneurs are confident in their competitive advantages and have positive expectations for the future.“ – Risto Kaarna

On the basis of the results it can be concluded that the factors affecting small and medium-sized businesses are very closely linked to the general economic development and challenges. In the opinion of businesses the economic issues that inhibit their development are high tax burden, finding the market, non-payments of bills by customers, the availability of financial resources and a little less the situation on the labour market.

It appeared that:

  • In the context of weakened financial environment there are a growing number of businesses who would need additional financing in order to develop their corporate activity. In previous years, one third of the SMEs needed additional funding, but in 2011, already two thirds.
  • As in previous years, the will to cooperate is low and the desire to maintain independence is brought out as the main reason for it.
  • It is said that it is still difficult to find highly qualified professionals and specialist which is an important barrier to development.
  • SMEs are less focused on the export than large firms; however, the SMEs have a large share of the economy, so their export forms a major part (over 75%) of the total volume of export.
  • Companies that exported in the recent past but have finished it by now are in all regions of Estonia. However, most of them are in Central Estonia (15%).

Some suggestions for businesses and policy makers:

  • Measures which alleviate the shortage of qualified labour should be developed and implemented via collaboration of the government and private sector.
  • It is important to introduce distant export markets, local conditions, business practices, taste, and culture to Estonian entrepreneurs in order to encourage them to move onto new markets.
  • Companies should intensify their cooperation with the public sector in order to find a solution to the problem of the shortage of qualified labour.
  • We encourage companies to seek more partners and develop the sectoral and international relations. This would provide an opportunity to learn from the experiences of others and to expand their business.