Back to the Future
Chapter 10: Foreign Direct Investment and the Locational Competitiveness of Countries
10. Foreign direct investment and the locational competitiveness of countries 1. INTRODUCTION One of the several research interests I shared with Sanjaya Lall was on the determinants of the competitiveness of countries. In 2001, Sanjaya wrote a trenchant criticism of the quality and relevance of some of the indices used to identify and assess the competitiveness of developing countries by the Global Competitiveness Report (GCR).1 While I endorse many of his concerns, I believe that, in one respect at least, the GCR does help us to better appreciate the role played by two distinctive, yet interrelated, components of competitiveness, which are often treated as one in the literature. These are first, the resources, capabilities and markets (RCMs) which make up the physical 2 environment in which firms and other organisations create economic well-being; and second, the institutions (together with the values and belief systems underpinning them) (I) which provide the incentive structures to make up the human environment, and (II) which set the rules of the game for, and determine the cognition and motivation of, firms and other wealth-creating entities. All too frequently in the past, in assessing national competitiveness, the RCM and I determinants of economic activity have been treated separately. Partly this reflects the different disciplinary and methodological approaches to evaluating each. While mainstream economists, borrowing from the causal and functional analytical tools of the physical and/ or biological sciences, have favoured the ‘if–then’ approach to measuring competitiveness, other social scientists, notably sociologists, have focused more...
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