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The development of cross-border economic relationships between firms in border regions

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  • Henk Van Houtum

Abstract

Central question of this paper is what effects a state border has on the development of cross-border economic relationships in border regions. First the geographical spread of these relationships is analysed. Next a theoretical model is proposed to explain the pattern and the decision-process of bilateral international economic relationships. The model is mainly based on four theories: 1. the transaction costs approach on cross border economic relations under the condition of uncertainty. 2. The 'psychic distance' approach, which considers internationalization as an incremental learning process. The speed of the internationalization of a firm is determined by the experiential knowledge about the foreign country. 3. The network-approach, which considers (international) markets as networks. Firms are linked in patterns of cooperation and affiliation. Cooperation and not efficiency of transactions determine the behaviour of firms. 4. The socio-psychological approach of relations and social identity, which stresses the role of cognitive and affective aspects of cross-border relationships. These theories have lead to the model of INTERnational Formation of Autonomous Cooperation between Entrepreneurs (INTERFACE). The INTERFACE model distinguishes between different phases of relationship-building, namely contact, attraction (the choice for the partner), interaction (the negotiation about the conditions), transaction (the realization of the agreement/contract) and relationship. This relationship-development model is used to describe the process of the development of cross-border economic relationships and to explain the number and success of cross-border economic relationships. The model is empirically tested for a large sample of firms in two Dutch-Belgian border regions. The study is part of a dissertation on the development of cross-border economic relationships. The findings of the model suggests that the action-space of the firms, in terms of informal embeddedness and economic relationships, is spatially limited by the presence of the border. The factors of similarity and trust between the partners are found to be the most important determinants of success of cross-border economic relationships. The dimensions of expectations on the discrepancy in business conventions, the expectations on the success of economic relations in the neighbouring country and the strictness of the financial-economic terms of the relationship play a major role in determining the number of cross-border economic relationships. This is defined as the 'mental distance' effect of borders.

Suggested Citation

  • Henk Van Houtum, 1998. "The development of cross-border economic relationships between firms in border regions," ERSA conference papers ersa98p201, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa98p201
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    1. Jos van den Broek & Paul Benneworth & Roel Rutten, 2016. "Border blocking effects in collaborative firm innovation," CHEPS Working Papers 201602, University of Twente, Center for Higher Education Policy Studies (CHEPS).
    2. Jean-Baptiste Harguindéguy & Almudena Sánchez Sánchez, 2017. "European Cross-Border Regions as Policy-makers: A Comparative Approach," Journal of Borderlands Studies, Taylor & Francis Journals, vol. 32(2), pages 249-265, April.
    3. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "The Final Frontier? Border Effects and German Regional Wages," Discussion Paper Series 26233, Hamburg Institute of International Economics.
    4. Jos van den Broek & Franziska Eckardt & Paul Benneworth, 2017. "The transformative role of universities in regional innovation systems," CHEPS Working Papers 201705, University of Twente, Center for Higher Education Policy Studies (CHEPS).
    5. Karl-Johan Lundquist & Michaela Trippl, 2013. "Distance, Proximity and Types of Cross-border Innovation Systems: A Conceptual Analysis," Regional Studies, Taylor & Francis Journals, vol. 47(3), pages 450-460, March.
    6. Rodrigo V Cardoso & Evert J Meijers, 2017. "The metropolitan name game: The pathways to place naming shaping metropolitan regions," Environment and Planning A, , vol. 49(3), pages 703-721, March.
    7. Steven Brakman & Harry Garretsen, 2003. "Rethinking the "New' Geographical Economics," Regional Studies, Taylor & Francis Journals, vol. 37(6-7), pages 637-648.
    8. Eduardo Medeiros, 2013. "Euro--Meso--Macro: The New Regions in Iberian and European Space," Regional Studies, Taylor & Francis Journals, vol. 47(8), pages 1249-1266, September.
    9. Gert-Jan Hospers, 2005. "Borders, bridges and branding: The transformation of the Øresund region into an imagined space," European Planning Studies, Taylor & Francis Journals, vol. 14(8), pages 1015-1033, August.

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