Effect of Integration on the Gross Value Added in the Baltic States Dairy Sector Secondary Level

Dairy sector is an essential part of Baltic States economies in terms of created gross value added (GVA) and labour usage. The dairy sector’s potential to create economic effect is underutilised as a result of fragmented production structure and ensuing low economic efficiency. Integration can facilitate concentration of the sector’s market structure. The aim of this paper is to evaluate the effect of dairy sector secondary-level company integration on the creation of GVA. To accomplish the aim, an extensive sample of 54 companies is used whereas previous research has been based on data of only 5-10 largest Baltic States companies. It is concluded that integration characteristics of dairy processing companies significantly influence relationships which express their GVA creation pattern. Dominating horizontally integrated dairy processing companies are the most valuable to the economy as their GVA increase rate which results from net turnover growth is the highest. Non-integrated companies’ GVA growth rate provided that their net turnover grows is lower than for dominating horizontally integrated companies. Increases in company size do not statistically significantly increase the relation of GVA to the sum of net turnover and other operating income. Both successful and commercially weak companies can produce high GVA in respect to their size. However, only the successful companies are expected to generate positive growth dynamics, be economically efficient and can be relied upon as driving force of dairy sector growth.