Regional Business Competitiveness: Medium and Low-Technology Production Systems in Northern Greece

Abstract

1. Introduction The following analysis focuses on the vulnerable region of Northern Greece, where the bulk of the country's traditional (4) manufacturing is concentrated in local production systems of small and medium-sized manufacturing enterprises. The paper attempts to estimate the impact of technological and innovation dynamism on regional business competitiveness under the current conditions of globalisation and crisis. To this purpose, technological and innovation capacity is explored across enterprises of different industries in the region concerned. Industrial/sectoral and territorial/localized factors are taken into account, as determinants of competitive business strategies. Such factors encompass the technological level of the regional production system, the pre-established industrial structures, the labour market, human capital and the institutional basis. We assert that entrepreneurial technological capacities are the outcome of production, social and institutional structures of the regional context. The analysis focuses on manufacturing sectors of high labour intensity and low or medium technology intensity, operating in the regions of Western, Central and Eastern Macedonia and Thrace. Primary and secondary data are analysed on the business and sector level, in order to estimate the impact of sectoral and territorial factors on entrepreneurial technological capacity and consequently, regional competitiveness. The main objective of the analysis is to contest mainstream microeconomic approaches that advocate the dependence of competitiveness merely on production cost. The paper attempts to substantiate that the adoption of dynamic strategies improving productivity through technological advancement and innovation is the prerequisite for business and regional competitiveness. A central hypothesis in the following analysis is that upgraded technological capacities have a positive contribution to firms' economic performance. Thus, business data on employment, labour skills, practices for technological improvement and innovation are associated to data on sales, in order to provide indication of entrepreneurial competitiveness. Results indicate that 'passive' business strategies compressing production cost, wages and investments, result into low value added production and weak competitiveness. While, higher competitiveness is achieved through 'reactive' strategies motivating business potential in the direction of technological upgrading and innovativeness. This of course requires skilled labour, high wages and substantial investments that allow for high value added production. 2. Regional development and inequalities in the New Economy of Knowledge According to the New Economy theory, firms, industries, regions and economies that learn faster become more competitive as the knowledge they develop particularly the one embodied in labour and social capital--is hardly imitated or transferred to competitors (Storper, 1997). As knowledge has become increasingly traded, growth inequalities are the outcome of the uneven capacities of economic agents to absorb it and transform it to innovation (Hudson, 1999). Likewise, the successful integration of regional agglomerations in international networks is based on their capacity to accumulate knowledge and innovate. In Romer's endogenous growth theory (Romer, 1986, 1990), knowledge spillovers and their externalities created within the spatial boundaries of agglomerations constitute important sources of innovation and lead to increasing development rates. The related discourse focuses on the connection of innovativeness to the industrial structure/composition of regional agglomerations and explores whether local externalities affect differently innovativeness in industrial sectors of different technological intensity (Glaeser et al., 1992; Greunz, 2004; Thalassinos et al., 2012). This connection will be explored in the following analysis as well. …