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Technological competitiveness, trade and foreign direct investment

  • Narula, Rajneesh
  • Wakelin, Katharine

This paper seeks to assess the importance of country-level determinants in affecting the international competitiveness of a country, defined both by export shares and shares in FDI, within a common framework based on a neo-Schumpeterian approach which regards technology as playing a central role in competitiveness. The relationships are tested with data for 40 developing and industrialised countries, and country determinants are found to play a similar role in explaining both inward and outward investment and exports. However, the explanatory power of the model varies over countries, explaining almost all the variation in competitiveness of the developing countries and a much lower proportion of the variation for industrialised countries. Technological capabilities, and the level of development of the country, are found to be two of the key determinants of competitiveness. We conclude that country determinants are equally effective in explaining both trade and FDI, but that in the case of industrialised countries there are additional factors, such as firm specific competitive advantages, which are not related to country-specific characteristics, and are important determinants of competitiveness.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 9 (1998)
Issue (Month): 3 (September)
Pages: 373-387

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Handle: RePEc:eee:streco:v:9:y:1998:i:3:p:373-387
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/525148

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  1. Giovanni Dosi & Keith Pavitt & Luc Soete, 1990. "The Economics of Technical Change and International Trade," LEM Book Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy, number dosietal-1990, August.
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  4. Fagerberg, Jan, 1988. "International Competitiveness: Errata," Economic Journal, Royal Economic Society, vol. 98(393), pages 1203, December.
  5. Culem, Claudy G., 1988. "The locational determinants of direct investments among industrialized countries," European Economic Review, Elsevier, vol. 32(4), pages 885-904, April.
  6. Veugelers, Reinhilde, 1991. "Locational Determinants and Ranking of Host Countries: An Empirical Assessment," Kyklos, Wiley Blackwell, vol. 44(3), pages 363-82.
  7. John H Dunning, 1980. "Towards an Eclectic Theory of International Production: Some Empirical Tests," Journal of International Business Studies, Palgrave Macmillan, vol. 11(1), pages 9-31, March.
  8. Leamer, Edward E, 1980. "The Leontief Paradox, Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 495-503, June.
  9. Jan Fagerberg, 1988. "International Competitiveness," Working Papers Archives 1988001, Centre for Technology, Innovation and Culture, University of Oslo.
  10. John Cantwell, 1987. "The Reorganization of European Industries After Integration: Selected Evidence on the Role of Multinational Enterprise Activities," Journal of Common Market Studies, Wiley Blackwell, vol. 26(2), pages 127-151, December.
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  12. M. Alam, 1992. "Convergence in developed countries: an empirical investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(2), pages 189-201, June.
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