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National Competitiveness and Economic Growth

The Changing Determinants of Economic Performance in the World Economy

Timo J. Hämäläinen

The current paradigm shift in the world economy is challenging the traditional competitiveness and growth theories with their few explanatory variables. This book offers a more holistic framework to synthesise the key findings of the various branches of competitiveness and growth research. The author illustrates this framework with a new long wave theory of socio-economic development. This theory emphasises the competitiveness and growth benefits of rapid structural adjustment in the rapidly changing techno-economic environment. Based on thorough analysis the author argues that both markets and governments have become less efficient due to the current transformation of the world economy. His empirical data from 22 OECD countries in the 1980s and 1990s illustrates that efficiency and growth-oriented governments have significantly contributed to their countries’ economic success.
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Chapter 11: International business activities

Timo J. Hämäläinen


In Part 1 we pointed out that the competitiveness and growth of economic systems is shaped by their external economic and social relationships. Although external social relationships, such as the kinship ties of emigrants to their home country or old colonial ties between countries, may have an important bearing on the competitiveness and growth of economic systems (see Mascarenhas 1988) we focus on economic relationships in this chapter. The geographical scope of economic systems and their external relationships have increased over time with the expansion and integration of markets, emigration of people, increased travel and improved communication media. Today, when most economic transactions still take place within national borders, external economic relationships take the form of international business activities (IBAs). For analytical purposes IBAs can be divided into three subgroups: foreign direct investment (inward and outward) and production, international trade (imports and exports) and cross-border cooperative ventures (strategic alliances, joint ventures, franchising etc.). Dunning has emphasized that IBAs may have good or bad welfare (competitiveness and growth) consequences for national economies depending upon country-, industry- and firm-specific characteristics of the particular activity; the form of involvement; time period under study (short or long term); government policies and from whose perspective one is trying to assess their impact (Dunning 1993).1 Since the competitiveness and growth consequences of IBAs are specific to particular situations, few generalizations are possible. However it is still useful to analyze the ways in which different forms of international business activity may influence the performance of economic...

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