Abstract
AbstractThis paper investigates the role of extra-regional capabilities in regional economic development in a Central and Eastern European context. This is done by analysing the association between the related variety of manufacturing import and export of domestic- and foreign-owned firms on the one hand, and regional employment in manufacturing export on the other. By means of a panel regression framework applied to the Hungarian microregions between 2000 and 2011, we find that domestic firms, in particular, benefit from the related variety of export activities in the regions, while import related to existing export activities is beneficial amongst both foreign and domestic firms. Furthermore, bridging the technological gap between foreign companies and the host economy requires stronger technological relatedness, unless domestic firms have experience in importing.
Highlights
International trade has long been considered a decisive underlying mechanism in regional development because export is a major source of income for regions, which can be multiplied by internal input-output relations (North 1955), and because the level of success in international trade is linked to the cumulative emergence of agglomeration economies in the region (Krugman 1991)
By means of a panel regression framework applied to the Hungarian microregions between 2000 and 2011, we find that domestic firms, in particular, benefit from the related variety of export activities in the regions, while import related to existing export activities is beneficial amongst both foreign and domestic firms
With respect to the relatedness between the international trade activities of foreign and domestic firms we find that bridging the technological gap between foreign companies and the host economy requires stronger technological proximity, weaker technological proximity may be bridged if domestic firms have experience in importing
Summary
International trade has long been considered a decisive underlying mechanism in regional development because export is a major source of income for regions, which can be multiplied by internal input-output relations (North 1955), and because the level of success in international trade is linked to the cumulative emergence of agglomeration economies in the region (Krugman 1991). The intensification of globalisation gave rise to empirical explorations on this matter (for an overview, see Bru€lhart 1998), and brought the role of foreign firms in regional development into the focus of interest (Dicken 1994; Young et al 1994; Beugelsdijk et al 2010; Iammarino – McCann 2013). This is because multinational enterprises (MNEs) are more active than other firms in the global division of labour (Greeneway – Keller 2007), because spillovers from foreign-owned firms increase the productivity of domestic-owned companies (Haskel et al 2007), and decrease the entry cost for other potential exporters (Aitken et al 1997). One can argue that if the regions are the units of production, imports are the inputs and exports are the outputs, combining related rather than similar products yields more complex products, representing more valueadded, leading to higher economic growth
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