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Technological Change and Economic Catch-up

The Role of Science and Multinationals

Edited by Grazia D. Santangelo

This book tackles the issue of technological and economic catch-up by examining the role that public research institutions and local policy play in the promotion of this process by fostering local science–technology linkages with incoming foreign-owned multinationals. Although the book comprises various techno-socio-economic contexts and different methodological perspectives, the authors share the idea that public research, educational and political institutions provide capabilities in basic research and training of highly skilled labour, while private corporations establish networking connections with scientific and professional communities (and therefore access to knowledge and contacts) in other parts of the world.
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Chapter 6: Creating, Importing and Losing Competitive Advantage: Evidence from the Austrian Manufacturing Sector

Christian Bellak


Christian Bellak 1. INTRODUCTION There is considerable interest from governments in policies to boost the competitiveness of firms within their jurisdiction. Designing the ‘right’ policies, which effectively stimulate the firms’ competitive position in markets, requires not only information on the present competitiveness of a country’s firms, but also some prediction about the behaviour of domestic and foreign firms in different industries in the future. The possibility exists that policy measures become ineffective if they counteract or do not affect the firms’ strategies at all. Governments have several options in maintaining the competitiveness of their countries and regions: domestic firms create competitive advantage; foreign firms investing in the country transfer (‘import’) competitive advantage from their parent; and the linkages which exist between these two groups of firms may lead to new advantages that could not be developed by either group of firms alone. A similar argument about the creation of competitive advantage applies to the loss of competitive advantage. It has been argued in various studies that the response of a multinational enterprise (MNE) to a deterioration of its market share or the discovery of new market opportunities (e.g. new markets, new product or process technologies) depends on the current sources of competitiveness, but empirical evidence is still scarce. The configuration of these sources first determines whether the firm will choose to produce in the same location or shift production to a new location; and/or second, whether domestic firms will supply the good/service or whether this...

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