Management Theory and Studies for Rural Business and Infrastructure Development, Volume 34

Financial performance in micro and medium sized rural companies

Maire Nurmet, Katrin Lemsalu, Anne Põder

Abstract

While the rural economy has been traditionally associated with primary sector, the importance of primary sector in GDP and as the provider on employment in rural areas has been on decline. In Estonia the number of tertiary sector enterprises in rural areas has passed the number of primary sector enterprises. This indicates to the changing nature of rural economy where enterprises of non-primary activities, especially the tertiary sector, are the main source of growth in rural areas. As the rural economy has been changing, it is important to study the challenges faced by the rural enterprises in different sectors. The paper compares the financial performance of Estonian rural enterprises in three sectors: primary, secondary and tertiary, and analyzes three issues: labor efficiency, profitability, and production performance in rural companies of primary, secondary, and tertiary sectors using the data from Statistics Estonia. The period of 2005 to 2010 is studied. Main findings of the paper are as follows. First, labor efficiency in the tertiary sector is much higher than that in other sectors. The profitability of rural companies tended to decline. Although overall secondary sector’s share is declining, it still has the highest value added in rural areas.  Rural companies cannot become the engine of the economic growth as the average value added of rural company was about twenty-five percent lower than in Estonian average company.

JEL codes: R12, J24.

Keyword(s): rural companies, productivity, economic sectors, Statistics Estonia


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Management Theory and Studies for Rural Business and Infrastructure Development eISSN 2345-0355

This journal is published under the terms of the Creative Commons Attribution-Noncommercial 3.0 Unported License. Responsible editor: Dr Audrius Gargasas.