International Handbook on the Economics of Integration, Volume II
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International Handbook on the Economics of Integration, Volume II

Competition, Spatial Location of Economic Activity and Financial Issues

Edited by Miroslav N. Jovanović

With this Handbook, Miroslav Jovanović has provided readers with both an excellent stand-alone original reference book as well as an integral part of a comprehensive three-volume set. This introduction into a rich and expanding academic and practical world of international economic integration also provides a theoretical and analytical framework to the reader, presenting select analytical studies and encouraging further research.
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Chapter 4: Economic Integration and the Technological Capabilities of Domestic Firms

Alvaro Cuervo-Cazurra and C. Annique Un


Alvaro Cuervo-Cazurra and C. Annique Un 1 INTRODUCTION This chapter analyses the impact of regional integration on the technological capabilities of domestic firms. Regional integration has rapidly increased around the world. By the end of 2007, the World Trade Organization had been notified of 386 agreements, of which 197 were in force, among its 151 members (WTO, 2008: 70); only 10 years earlier, in 1998, there were just 69 agreements in force (WTO, 1998). Economic integration changes the environment in which the firm operates by reducing barriers to trade and investment, facilitating the entry of foreign firms, products, and inputs in the country, and the expansion of the firm abroad. However, despite the increase in economic integration and its effect on the environment of the firm, there has been surprisingly little firmlevel research on the impact of economic integration on the technological capabilities of domestic companies. Instead, most research has focused on analysing country- and industry-level relationships and data, which limits the insights that can be drawn for firms and their managers. Therefore, this chapter focuses on the level of the firm and analyses how economic integration affects a domestic firm’s technological capabilities, including its innovation and R&D investments. This chapter is structured as follows. Section 2 reviews the literature in economics and management to take stock of what is currently known on this topic. Based on the review of the literature, Section 3 then provides suggestions for future research. Section 4 concludes. The review of the literature reveals...

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