Exporting companies in Europe: a comparative analysis
Analysis of the number and share of foreign turnover of European companies as determinants of a country's export propensity
Published by Silvia Brianese. .
Export Foreign markets Foreign market analysis
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The opening of an economy to foreign markets depends on a multitude of factors that differ depending on whether imports or exports are considered. Focusing on the latter, the export propensity of a country can be broken down into two determinants:
- the number of companies that have initiated export projects. The intensity of this phenomenon can be measured through the share of exporting companies out of the total number of active companies;
- the share of revenue generated in foreign markets by companies that have consolidated their position abroad.
It is evident that the same "propensity" can be the result of a high number of exporting companies and a modest share of foreign revenue, or the result of the opposite situation: a limited percentage of exporting companies with a high share of revenue realized in foreign markets.
Referring to the above-described framework, it can be useful to analyze the two identified components for the main exporting countries of the European Union (Germany, France, Italy, and Spain), by decomposing them by size class and sector.
Examining the population of exporting companies in European countries from a sectoral perspective, the preponderance among manufacturing and trade exporting companies is clearly evident (the combination of the two sectors represents 88% of Italian exporting companies, 82% of German ones, 70% of Spanish ones, and 82% of French ones).
In order to better analyze the determinants of openness to foreign markets, it is advantageous to distinguish between the industrial sector and the commercial sector, given the different strategic significance that internationalization holds for each sector. In the manufacturing sector, internationalization goes beyond daily management; it acts as a catalyst for innovation, stimulating the growth and development of companies. Conversely, for companies in the commercial sector, operating in foreign markets has predominantly managerial impact, with limited strategic implications.
This study will primarily focus on the manufacturing sector.
Export propensity by size class
As a first step in analyzing the degree of openness of an economy, we evaluate the share of exports as a percentage of the total revenue of the four size classes considered for the countries under analysis.
Export propensity, manufacturing sector, 2022
| Italy | Germany | Spain | France | |
| Total | 35.46% | 36.13% | 33.17% | 28.47% |
|---|---|---|---|---|
| From 0 to 9 persons employed | 9.07% | 12.57% | 8.31% | 6.92% |
| From 10 to 49 persons employed | 23.34% | 16.95% | 21.00% | 12.20% |
| From 50 to 249 persons employed | 44.75% | 34.48% | 34.12% | 28.47% |
| 250 persons employed or more | 39.97% | 38.20% | 37.95% | 30.80% |
Source: StudiaBo elaborations on Eurostat data
From the table, it emerges that the German manufacturing industry has the highest export propensity, followed by Italy and Spain. Considering the number of active companies by revenue class, it emerges that Germany and France find their strength in the higher presence of medium and large-sized companies. Conversely, Italy and Spain are characterized by the prevalence of micro and small businesses.
Number of exporting companies
Let's now focus on only the exporting companies to analyze how many of these have been able to expand into foreign markets.
The following table shows the percentage of exporting companies out of the total active companies for each analyzed cluster. Under equal conditions, as already indicated, the foreign propensity of an economy is greater the larger the percentage of companies that have successfully initiated internationalization processes.
Share of exporting companies out of total active companies, manufacturing sector, 2022
| Italy | Germany | Spain | France | |
| From 0 to 9 persons employed | 13.32% | 21.00% | 13.66% | 4.65% |
|---|---|---|---|---|
| From 10 to 49 persons employed | 56.79% | 46.14% | 56.25% | 37.56% |
| From 50 to 249 persons employed | 93.52% | 90.34% | 76.73% | 81.13% |
| 250 persons employed or more | 89.73% | 92.10% | 92.56% | 88.90% |
Source: StudiaBo elaborations on Eurostat data
Immediately noticeable is that a high percentage of small (10-49) and especially medium-sized (50-249) Italian manufacturing companies are exporters. For these two size classes, Italy's percentage is significantly higher than the levels relative to other countries. This high share can be explained by the greater structural weakness of the Italian market, which drives companies to seek opportunities in foreign markets that are often lacking domestically.
As for the share of exporting micro-enterprises, however, it is relatively low in Italy, although it is equal to that of Spain and higher than that of France.
Furthermore, the table highlights that the share of exporting micro-enterprises in Germany is higher than that of other countries. This suggests that German micro-enterprises are more supported in their expansion into foreign markets compared to the other countries considered.
Share of foreign revenue by size class
An important factor to support the growth of exports in an economy is naturally the share of foreign sales achieved by exporting companies. Unfortunately, this information cannot be immediately calculated based on available statistics. Official statistics only provide information on the total exports of exporting companies and the total revenue of all active companies (exporting and non-exporting).
However, it is possible to estimate the revenue of all exporting companies alone by introducing some simplifying assumptions. Assuming that the revenue level of a company does not depend on whether it is an exporter or not, but only on its size class, it is possible to estimate the total revenue of only exporting companies and use this estimate to calculate their export propensity.
The following table shows the shares of revenue realized abroad by the different clusters analyzed in this study.
Share of foreign revenue, manufacturing sector, 2022
| Italy | Germany | Spain | France | |
| From 0 to 9 persons employed | 68.11% | 59.85% | 60.82% | 148.88% |
|---|---|---|---|---|
| From 10 to 49 persons employed | 41.11% | 36.74% | 37.33% | 32.48% |
| From 50 to 249 persons employed | 47.85% | 38.17% | 44.47% | 35.09% |
| 250 persons employed or more | 44.55% | 41.48% | 41.00% | 34.64% |
Source: StudiaBo elaborations on Eurostat data
These data represent maximum estimates, with measurement error tending to increase as the percentage of exporting companies decreases. Therefore, the data for micro-enterprises should be considered cautiously, as also suggested by the "anomalous" value for France.
The important fact that emerges from this table is the absence of a relationship between size class and percentage of foreign revenue, indicating that once companies enter foreign markets, regardless of their size class or country of origin, they all manage to obtain a high share of revenue from foreign markets, which in some cases approaches 50%.
Conclusions
The most important result emerging from this brief analysis is that for companies that have already consolidated their presence in foreign markets, the size class does not significantly influence the share of their sales abroad. On the contrary, for companies in the initial phase of entry into foreign markets[1], the size of the company is crucial for successfully taking the first steps.
This result helps explain the higher export propensity of the German manufacturing industry. In addition to the different number of large companies, the disparity between Italy and Germany is due to the different percentage of exporting micro-enterprises. This discrepancy, with a higher presence of exporting micro-enterprises in Germany, underscores the country's greater ability to conquer foreign markets.
The difference between Italy and Germany is therefore more pronounced in the percentage of exporting micro-enterprises than in their share of export revenue once they enter foreign markets. The main obstacle for Italian micro-enterprises is taking the first step; once this process is initiated, the results in terms of sales in foreign markets are as positive as those of larger companies.
[1] By the initial phase of entry, we mean in this case not so much passive export or sporadic attempts to sell in foreign markets, but rather an investment process by the company to establish a continuous and active presence in one or more foreign markets.
