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The Portuguese Economic Divergence with European Union: A Call for Corporate Strategy in Light of New Economic Geography Principles

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Abstract

New Economic Geography (NEG), a new branch of Spatial Economics that was developed at the beginning of the 90s, supports that “peripheral” European Union’s economies (like Portugal, Greece, Ireland or even Spain) are predestined to diverge from the developed European “centers” like France or Germany. This new field of Economics seems to be supporting the incapacity of European structural policies to battle against this divergence trend, and ultimately an inevitable catastrophe of the Single European Currency, and thus, of the European integration project as a whole. The recent evolution of the main EU’s peripheral economies(e.g. Greece, Portugal and Ireland) confirming their divergence trend from the developed core EU’s countries, seems to support these NEG forecasts. However, in our paper we support that, taking into consideration some identified pitfalls of NEG’s principles, and on the other hand, considering the potentialities that may arise from the capacity of enterprises to put in place effective Corporate Strategies (which its related with the need to develop their strategic capabilities), peripheral countries/regions may be able to overcome this apparent fatalness. Thus, more important than just funding is the aptitude of these peripheral economies – through their economic agents’ capabilities – to use these funding and profit from them adequately. This will lead us to support, not just the continuation of the European structural funds’ policies, with the positive impacts arising from the inherent redistribution effects, but also to conclude on the urgent need to develop strategic capabilities of main economic agents of these regions. Using an empirical survey, performed during the transition period of the introduction of the Euro (1999-2001), to companies operating in Portugal, we conclude by demonstrating that the lack of corporate strategic capabilities may well be an important explanation for the present difficult economic situation, explaining most of the existing problems of Portugal and that, only through a real change in the prevailing paradigm, regarding the action of these companies, we may be able in a near future to sustainably overcome the present difficulties.

Suggested Citation

  • Porfírio, José, 2011. "The Portuguese Economic Divergence with European Union: A Call for Corporate Strategy in Light of New Economic Geography Principles," Spatial and Organizational Dynamics Discussion Papers 2011-1, CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve.
  • Handle: RePEc:ris:cieodp:2011_001
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    References listed on IDEAS

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    1. Findlay, Ronald, 1996. "Modeling Global Interdependence: Centers, Peripheries, and Frontiers," American Economic Review, American Economic Association, vol. 86(2), pages 47-51, May.
    2. Philippe Martin, 1999. "Are European regional policies delivering?," Sciences Po publications info:hdl:2441/9343, Sciences Po.
    3. Paul Krugman, 1999. "The Role of Geography in Development," International Regional Science Review, , vol. 22(2), pages 142-161, August.
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    More about this item

    Keywords

    Economic Development; New Economic Geography; Corporate Strategy; European Union; Peripheral Territories;

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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