This monthly selection of articles has been carried out by Philippe Gugler and Damiano Lepori, the Center for Competitiveness, University of Fribourg. The entire selection, carried out since 2013, can be consulted on the academic articles page of our web.

Emerging countries’ country-specific advantages (CSAs) and competitiveness of emerging market multinational enterprises (EMNEs)

By: P. Gugler. Competitiveness Review, Vol. 27, Iss. 3, pp.194-207, 2017.

Abstract : “A significant stream of literature focuses on host countries’ locations when explaining why firms internalize some of their activities in specific countries. At first glance, home location schemes and specificities seem to have attracted less attention in the scientific community. The purpose of this contribution is to provide a literature review linked to the specific issue of emerging countries’ country-specific advantages and the competitiveness of emerging market multinational enterprises. The approach is to present the main theoretical developments related to the role of home countries in the internationalization process of domestic firms in general and as far as the home context of emerging countries is concerned. A rigorous analysis of the literature shows that theoretical developments and empirical studies on international business do refer explicitly or at least implicitly to the role of home countries in the international expansion of firms. The value of this review is to develop the main streams of the literature and to serve as a basis for the other contributions published in this area.” [ABSTRACT FROM AUTHOR]

The competitiveness of emerging country multinational enterprise: Does it derive from CSAs or FSAs?

By: P. J. Buckley. Competitiveness Review, Vol. 27, Iss. 3, pp.208-216, 2017.

Abstract : “This paper aims to conduct a theoretical enquiry into the questions as to whether emerging country multinationals’ competitiveness derives from country-specific advantage (CSA) or firm-specific advantages (FSA). The case of China is also examined. CSAs and FSAs are examined both in theory and in the specific case of China as explicators of outward foreign direct investment from emerging countries. FSAs and CSAs are found to be imprecise explanatory mechanisms to explain the competitiveness of emerging country multinationals. The examination of imperfections in emerging markets and in global markets and the internalisation responses of firms in different contexts is found to be a superior explanation of the financial flows classified as “outward direct investment”. Internalisation theory requires a focus on mechanisms to convert home country attributes into competitive advantages and suggests that FSAs are context dependent, ephemeral and subject to negation by the competitive actions of rival firms.” [ABSTRACT FROM AUTHOR]

Outward direct investment by Chinese state-owned enterprises: Can host country policy act as a country-specific advantage?

By: A. T. Tavares Lehmann, F. Lehmann. Competitiveness Review, Vol. 27, Iss. 3, pp.231-252, 2017.

Abstract : “The paper aims to investigate outward foreign direct investment (OFDI) by Chinese state-owned enterprises (SOEs), aiming to unveil whether the Chinese OFDI policy acted as a country-specific advantage (CSA) that has been turned by Chinese firms, particularly SOEs, into a firm-specific advantage (FSA). Using a data set spanning 18 years (1996-2013) on international mergers and acquisitions (IM&As) by Chinese companies (SOEs and private-owned enterprises – POEs) and drawing on extant literature, the paper systematically compares the behavior of Chinese SOEs and POEs, aiming to identify differences in their behavioral patterns that indicate that SOEs have benefitted more from policy-induced advantages than their private counterparts. Among other aspects, significant differences were found regarding the behavior of SOEs vis-à-vis POEs that seem to show that SOEs had greater support from public entities, leading them to close larger deals and purchase more companies/stakes in cash; acquire firms with greater debt (implying higher interest payments); and purchase smaller stakes than POEs (indicating that there are other objectives than control). This lends support to the assumption that Chinese SOEs are “sitting on piles of cash”, and that the availability of capital acted as a CSA that has been transformed into an FSA by the companies involved, notably by SOEs. The comprehensive and large-scale data set used includes wholly owned SOEs, leaving out of this research partially owned SOEs. The findings of this paper have implications for the discussion on competitive neutrality and for the academic, managerial and public policy debate. To the best of the authors’ knowledge, this is the only study, to date, that shows systematic differences in financing patterns of OFDI (notably via IM&As) by Chinese SOEs and POEs, among other behavioral characteristics of both types of companies when conducting FDI abroad, linking that to CSAs and FSAs induced by CSAs.” [ABSTRACT FROM AUTHORS]

Home country underdevelopment and internationalization

By: A. Cuervo-Cazurra, R. Ramamurti. Competitiveness Review, Vol. 27, Iss. 3, pp. 217-230, 2017.

Abstract : “The purpose of this study is to use the rise of emerging-market multinationals as a vehicle to explore how a firm’s country of origin influences its internationalization. We argue that the home country’s institutional and economic underdevelopment can influence the internationalization of firms in two ways. First, emerging-market firms may leverage innovations made at home to cope with underdeveloped institutions or economic backwardness to gain a competitive advantage abroad, especially in other emerging markets; We call this innovation-based internationalization. Second, they may expand into countries that are more developed or have better institutions to escape weaknesses on these fronts at home; we call this escape-based internationalization. Comparative disadvantages influence the internationalization of the firm differently from comparative advantage, as it forces the firm to actively upgrade its firm-specific advantage and internationalize. We explain two drivers of internationalization that managers operating in emerging markets can consider when facing disadvantages in their home countries and follow several strategies, namely, trickle-up innovation, self-reliant innovation, improvisation management, self-reliance management, technological escape, marketing escape, institutional escape and discriminatory escape. We explain how a firm’s home country’s comparative disadvantage, not just its comparative advantage, can spur firms its internationalization.” [ABSTRACT FROM AUTHORS]

Agglomeration, Industrial Districts and Industry Clusters: Trends of the 21st Century Literature

By: B. A. Gilbert. Foundations and Trends® in Entrepreneurship, Vol. 13, No. 1, pp 1-80, 2017.

Abstract : “In a previous issue of Foundations and Trends in Entrepreneurship, small firms were commonly acknowledged as an important topic in the 20th century literature on industry concentration. Since the turn of the 21st century, startups have become a topic of significant prominence. Despite this fact, none of the recent literature reviews on industry concentration highlights their importance. Likewise, several other factors that have been identified since Marshall’s (1920) work, have received new attention with fresh perspectives in the 21st century literature. These topics have not yet been sufficiently explored in the literature. The purpose of this monograph is to review the early work of scholarship on agglomerations, industrial districts and industry clusters that has been published in the 21st century. This monograph explicates the prominent themes that emerged between 2000–2015, with the specific objective of highlighting the relationships of entrepreneurs, knowledge, networks and creative and high technology industries in industry concentration.” [ABSTRACT FROM AUTHOR]

The Economic Microgeography of Diversity and Specialization

M. Andersson, J. P. Larsson, J. Wernberg. IFN Working Paper No. 1167, 2017.

Abstract : “As cities increasingly become centers of economic growth and innovation, there is a need to understand their inner workings and organization in greater detail. We use ge-coded firm- level panel data at the sub-city level to assess the long-standing question whether agglomeration economies derive from specialization (within-industry) or diversity (between-industry). We show that these two types of externalities co-exist, but differ in their spatial distribution and attenuation within cities. There are robust positive effects of diversity and specialization on firms’ TFP growth at the local within-city neighborhood level, especially for firms in high-tech and knowledge-intensive activities. While specialization effects are bound to the local sub-city level, we demonstrate a positive effect of overall diversity also at the city-wide level. The results resonate with the idea that urban economies provide a mix of industrial diversity and specialisation. A location in a within- city industry cluster in a diversified, large city appears to let firms enjoy the benefits of local industry-specific externalities, while reaping the general city-wide benefits of a diversified city.” [ABSTRACT FROM AUTHORS]

Entrepreneurship and Industrial Clusters: Evidence from China Industrial Census

By : X. Zhu, Y. Liu, M. He, D. Luo, Y. Wu. RIEI Working Paper No. 2017-05, 2017.

Abstract : “This article studies the synergy effect of entrepreneurship on China’s industrial clusters. We propose an extension to Duranton and Overman’s (2005) method which enables us to delimit industrial clusters in space. The empirical model is identified with historical measures of local entrepreneur potential in the spirit of Chinitz (1961). We find that measures of entrepreneurship contribute significantly to cluster formation, cluster size, and cluster strength. Access to sea ports stimulates industrial concentration but agricultural legacy has the opposite effect. Light industries have more clusters which are also larger and stronger. Clusters also benefit from historical measures of market potential, localization/urbanization economies, and urban population density. Most of the results are robust to alternative instrumental strategies. Finally, we find evidence that the synergy effect is stronger where the local conditions are favorable to clusters.” [ABSTRACT FROM AUTHORS]

Associations among Employment and Industries of Slovak Economy

By: G. Kolvekova, D. Palascakova. IER Working Paper No. 45/2017, 2017.

Abstract : “Urban areas are as important as rural ones for regional de- velopment. This paper observes especially the position of cities, urban areas in the context of global value chains – GVC. Global value chains reflect specialization and labour division of companies, mostly multinational enterprises – MNEs. MNEs can be considered for flagships of some industries. Such flagship influence suppliers and purchasers. MNEs are a part of networks or do have got an access to such networks that combine dispersion of the value chain the boundaries of the firm and across national borders. The impetus of this humble work was to look at position of Slovak cities (Bratislava, Žilina) in order to look for sectors that can help to develop the city and its adjacent regions, particularly cross-border regions. The paper dis- cussed how the attribute of the cross-border regions gives the cities more advanta- geous position in GVC. Applying method of location quotient allowed to shed a light on GVC, which cities participate in. Some cities were in a position to take ad- vantage of participation in GVC. Examined cities are located in the western part of Slovak Republic. Discussion about the attribute of the cross-border regions can stimulate new ideas for finding causalities in city sprawl or in specialization patterns in indus- trial structure of the city. Discussion further fosters the comparison of two cities strengths and weakness of each of them that were summarized in terms of employ- ment and industrial exploitation of GVC. It is the first finding and value added of the paper. Second one, method of location quotient is simple, but provides clear ev- idence on the regional development or decline in particular industries and time of observation.” [ABSTRACT FROM AUTHORS]

Firms, governance and development in industrial districts

By: P. R. Tomlinson, R. Branston. Regional Studies, DOI: 10.1080/00343404.2017.1324199, 2017. 

Abstract : “This paper explores the link between local governance structures and the ability of local firms to influence the strategic direction (and future development) of their industrial district. In doing so, it utilizes unique survey data from two British industrial districts to examine, first, the extent to which local firms shape local industrial development strategies and, second, the institutional conduits through which their influence is exercised. The empirical results suggest a role for (local) business associations, the building of reciprocal networks among firms, social capital and more heterarchical governance structures to enhance firm engagement in local initiatives and industrial development.” [ABSTRACT FROM AUTHORS]

Firm performance and state innovation funding: Evidence from China’s innofund program

By : Y. Wang, J. Li, J. L. Furman. Research Policy, Vol. 46, Iss. 6, pp. 1142-1161, 2017.

Abstract : “Can firms leverage public entrepreneurship investments to improve innovation and financial performance? Analysis of this question is frustrated by the difficulty of distinguishing treatment from selection effects. We take advantage of internal administrative data on applications to China’s Innofund program in order (a) to identify which application features are associated with higher chances of obtaining grants and (b) to evaluate the causal impact of receiving a grant on firm performance using a regression discontinuity (RD) design. With regards to grant receipt, we find that firms possessing observable merits and political connections are more likely to receive Innofund grants. We also find evidence of bureaucratic intervention, as applicants’ evaluation scores are non- randomly missing and that some firms whose scores did not meet funding standards nonetheless received grants. With regards to post-grant performance, we find that firms receiving high project evaluation scores and Innofund grants perform better than those that do not receive grants and have lower scores. These do not appear to be causal effects, however. Applying Fuzzy RD methods, we find no evidence that receiving an Innofund grant boosts survival, patenting, or venture funding. Our analysis demonstrates the value of administrative data for causal analysis and for uncovering evidence regarding the possibility that bureaucratic intervention affects firm and program outcomes.” [ABSTRACT FROM AUTHORS]

Does innovation policy attract international competition? Evidence from energy storage

By: K. R. Fabrizio, S. Poczter, B. A. Zelner. Research Policy, Vol. 46, Iss. 6, pp. 1106-1117, 2017.

Abstract : “Though existing studies suggest that innovation-promoting public policies are associated with an increase in the number of inventions generated, these studies do not explore the geographic origin of such inventions. Though domestic policies aimed at developing innovation capabilities in a particular technological area may result in more innovation, such policies may also invite more competition from technologies developed abroad. In this paper, we describe the impact of two categories of innovation-supporting policies: those focused on the supply of a given set of technologies, and those focused on the demand for products based on these technologies. We argue that the latter will result in relatively more technology transfer into a given country from abroad. Using international panel data on the patenting of energy storage technologies, we explore the impact of these two policy types on domestic innovation and the inward transfer of foreign-invented technologies. Our results indicate that the transfer of such technologies into a given country increased significantly after demand-pull policies were put into place, but the same pattern does not hold for supply-push policies.” [ABSTRACT FROM AUTHORS]