Growth Of Local Firms Research Articles

R&D investments, ownership and local firm growth

Abstract How do research and development (R&D) investments stimulate the local economy? Our paper complements and extends the voluminous literature on the externalities of R&D investments by looking at internal firm growth across regions and the “spillovers” from R&D workers on other workers within the same firm. More specifically, we examine how R&D investments affect the change in employment and productivity in the same firm over time. We also investigate the differences that come with domestic or foreign ownership. Combining data from the Swedish biennial survey series on R&D with firm and establishment registers, we find that R&D-stimulated growth is a localized phenomenon: firms tend to grow in the same regions where they invest in R&D activities. This link is particularly strong for employment effects. While we find that the positive association between R&D and labor productivity holds for all firms, growth effects on local employment are limited to domestically owned firms, especially in manufacturing. The results strengthen our understanding of the correlation between R&D and firm growth on a local level, and contribute to both the academic and policy debate on the effects of globalization on local economic growth.

Optimal responses of multinational firms towards non-tariff or tariff barrier: Onshore versus offshore manufacturing

Trade barriers are typically provided by emerging economies to impede multinational firms (MNFs) and safeguard their small and medium-sized local firms. So far, it is still unclear how MNFs modify their manufacturing strategies to better manage trade barriers. As a result, this paper systematically examines how MNFs respond to various trade barriers including non-tariff and tariff barriers, where both onshore (ONM) and offshore (OFM) manufacturing are feasible. Three important and intriguing findings of this research can be distilled via the definition of the relative market size. (1) Under ONM, trade barriers do undoubtedly aid in the growth of local firms in emerging economics, and the relative market size can have an impact on the MNF’s marketing strategy. Also, the MNF exhibits a bargaining effect when the relative market size is bigger, meaning that trade barriers will not result in a decline in the MNF’s operational performance. (2) Under either of trade barriers, the MNF can base on the relative market size to select OFM or ONM. That is, when the relative market size is sufficient, the MNF prefers to use ONM to guarantee a stable supply process even while facing trade barriers; otherwise, the MNF is advised to adopt OFM to avoid trade barriers and occupy greater product shares in the emerging market. (3) Regarding emerging economics, trade barriers are advised to be implemented if their local enterprises are not sufficiently developed. And as their local firms become more reliable, trade barriers are ineffective to restraint the MNF since the MNF is willing to shift its production base.

Factors Influencing Students’ Choice of Accounting Major in Cambodia

ABSTRACT Higher education institutions in Cambodia have offered a major in accounting since the private sector was permitted to provide education services. The development of the country, which sees the inflow of foreign companies and the growth of local firms, the full adoption of the accounting standards, the International Financial Reporting Standards (IFRS) by the National Accounting Council (NAC) may have induced the growing demand for professional accountants and the enrollment of students in accounting program. Recently, a major in accounting has attracted increasing interest from students. This study determined factors influencing Cambodian students’ decision to major in accounting. Three hundred ninety-four 394 students currently studying accounting were surveyed using the anonymous self-administered questionnaire through Google Forms. The Exploratory Factor Analysis (EFA) was used to construct the variables, and multiple regression was employed to analyze the factors influencing students’ choice of accounting major. The results showed that personal interest, school reputation, and career expectations are significant factors. Although female students account for the majority of accounting students, gender was not found to have a significant influence on students’ choices. The results suggest that higher education institutions should prioritize strengthening their reputations by offering internationally accredited curricula and programs so that their graduates will be qualified to work in top-class companies, boosting students’ interest and expectation in pursuing accounting careers. Keywords: Accounting major; Factor analysis; Multiple regression

Foreign direct investment industry characteristics and spillovers

Purpose– The purpose of this paper is to develop a double mechanism model to separate two foreign direct investment (FDI) intra-industry spillovers mechanisms: spillovers by FDI intensity and by FDI efficiency. This paper seeks to illustrate the potential use of the double mechanism model rather than provide precise estimates of spillovers. The evidence on the links between technology and the nature, size and mechanisms of FDI spillovers effects in economically developing countries is mixed.Design/methodology/approach– A model is developed and tested, in principle. Empirical testing was conducted in two steps. In the first step, the authors examined the effect of each influencing factor to FDI spillovers separately. To complete this step, the authors divided the whole sample industry into sub-groups and tested them with the double-mechanism using ordinary least squares regression. This study applies Chinese National Bureau of Statistics manufacturing industry level data, for the years 2000, 2001 and 2002, including the food industry, beverage industry, textile industry, textiles and garments, chemicals and chemical products industry, overall manufacturing equipment, special equipment, computer and other electronic equipment manufacturing industries.Findings– The analysis suggests significant differences between types of spillovers: export orientation of domestic firms mainly influences FDI spillovers by intensity; the capability gap between local and foreign firms influences spillovers by efficiency; and the growth of local firms influences both types of spillovers. This paper develops existing models of FDI and suggests that disaggregating spillovers types may provide important theoretical and policy insights.Originality/value– This study has found, first, that compared with the classic single mechanism model, the double mechanism model is more appropriate for testing FDI intra-industry spillovers, as it is able to separate spillovers by intensity and spillovers by efficiency, which are shown as two distinct mechanisms for FDI spillovers. This allows a deeper analysis into each mechanism and the identification of relevant influencing factors.

Job Destruction and Productivity Gains in Heterogeneous Incumbent Firms: Comparing the Effects of Imports and Inward Foreign Direct Investment

:Using a ten-year panel of firm-level data for the Slovenian manufacturing sector, we find that as a result of investment liberalization, the least-efficient incumbent firms are experiencing job destruction, and the most-efficient are experiencing productivity gains; firms from the middle part of the total factor productivity (TFP) distribution are faced with both effects. Further, local firms from the lower and middle parts of the TFP distribution also experience a competition effect from imports in terms of both reduced employment and TFP growth. Our results imply that policy measures affecting foreign firm entry would have a relatively uniform effect on the employment growth of local firms, while their TFP growth would adjust significantly differently across the TFP distribution.

The role of intermediary organizations in enhancing the innovation capability of MSMEs: evidence from a Chinese case

Micro-, small- and medium-sized enterprises (MSMEs) are of great importance to national economies. However, due to their small size, the growth of MSMEs is vulnerable. Generally, MSMEs lack the capability to innovate on their own, and most MSMEs cannot grow into large and competitive firms. In this paper, we argue that intermediary organizations can integrate innovation resources for MSMEs and enhance the innovation capabilities of MSMEs. Through a case study of an intermediary organization in China, this paper confirms that intermediary organizations can expand the innovation resources available for MSMEs, help MSMEs scan and identify useful innovation resources, and provide expertise to MSMEs in utilizing innovation resources. While traditional resource-based theories maintain that a firm's internal heterogeneous resources can generate competitive advantages, this paper proposes that specialized intermediary organizations can also play the role of resource integrators for small firms and help small firms acquire and utilize external strategic resources. This research also provides insights to the literature about the growth of local firms in emerging economies. Although technological innovation projects require significant R&D investments and are difficult for local MSMEs to handle, this paper suggests that intermediary organizations can help MSMEs initiate innovation projects by expanding the resources available to MSMEs and by assisting them in maximizing the use of the resources at a reasonable cost. Finally, this paper provides some policy implications for firms and policy-makers in emerging economies.

Global demand, regional business dynamics and local firm growth

Latin America, particularly MERCOSUR region, faces an extraordinary expansion of global demand, partially originated in Asia, for natural resources based products. Production and exports of these products have increased significantly, generating a strong regional business dynamics that favours local firm growth, even in smaller countries whose industries take part in regional value chains with global presence. Our empirical analysis confirms that a high participation of regional (MERCOSUR) exports in world trade by industry (i.e. food and agro energy products) seems to be a driver for local (Uruguayan) firms’ growth. We find that in those competitive industries with increasing productivity, local firms may grow faster. Also, activities related to the entrepreneurial orientation of the firm (i.e. innovation and export activities) show a strong association with firm employment growth rates. We claim that this perspective contributes to a better understanding of socio-economic reality, competitiveness issues and business strategy in the developing world.

A Place for Area-Based Policy? The Survival and Growth of Local Firms in Dutch Residential Neighborhoods

ABSTRACT:Although their market scope often exceeds the neighborhood level, for most entrepreneurs of small-scale firms the neighborhood is the relevant arena for both their professional activities and their personal affairs. Dutch local economic policy aims to stimulate new firm formation and firm survival in (disadvantaged) neighborhoods by conditioning economic, social, and physical aspects of the neighborhood such as economic zoning and clustering, livability, and the quality of the built-up area. Although substantial differences in firm success exist across neighborhoods, it is not clear whether area-level factors contribute to these differences, suggesting that area-level policies are useful, or whether differences are due to either urban effects or to microlevel entrepreneurial and firm composition effects. This article distinguishes neighborhood effects from composition effects on local firm survival and firm growth, thereby also taking into account spatial dependence across neighborhoods. Our results suggest that aspects of the local livability of neighborhoods and of economic agglomeration are significantly related to individual firm survival and firm growth. The models provide proof for spillover effects of livability problems and market potential between adjacent neighborhoods. Neighborhoods and cities are therefore potentially places for area-based policies, aiming at the survival and growth of local firms.

Does Foreign Direct Investment Affect the Growth of Local Firms? The Case of China's Electrical and Electronics Industry

AbstractDoes foreign direct investment (FDI) into developing countries affect the growth of local firms in host countries? Using a dataset of 38 sectors in China's electrical and electronics industry, in this paper, we analyze whether FDI has a positive effect on local firms, with technology spillovers, added value and increasing total factor productivity, or a negative, market stealing, effect. Estimating the relationship between growth of local firms and investment of foreign firms, our results show that FDI is likely to have a negative impact on the growth of local firms in sectors with large disparities in technology and less experience in business. Therefore, local firms lacking in technology need to find markets with no competition from foreign firms or determine strategies to compensate technology disparities.

The Added Value of Neighborhood-Based Support Networks to Local Firm Growth

The rise of the service economy and developments in modern information and communication technologies have promoted workplace flexibility and increased the number of people working from home. As a result, an increasing number of firms and entrepreneurs can be found within residential neighborhoods. These developments have drawn attention to the local neighborhood as the relevant context for both the private and professional lives of neighborhood entrepreneurs and as a potential networking arena. Recent empirical studies show that firm support networks influence firms’ and entrepreneurial success, in accordance with the resource-based perspective and the social capital approach. However, the role of geographically proximate network members in a firm’s success remains largely unexplored. Through an extensive survey of 385 Dutch entrepreneurs, this paper empirically examines the extent to which firms’ neighborhood-based support networks influence their success with respect to sales growth, profit growth, and employment growth. Our results, which were controlled for firm- and entrepreneur-level factors, show that the strength and proximity, not the size, of these support networks are related to firms’ success. These findings indicate that the relationship between neighborhood-based entrepreneurs and their support networks certainly has a neighborhood-based dimension.

The role of FDI, R&D accumulation and trade in transferring technology to transition countries: evidence from firm panel data for eight transition countries

This paper examines different channels of global technology transfer to transition countries. We study the impact of direct technology transfer through FDI, intra-industry knowledge spillovers from FDI, firm’s own R&D accumulation and R&D spillovers through trade for total factor productivity (TFP) growth of local firms. Using firm-level data for eight transition countries for the period 1994–1998, we found that technology is being primarily transferred to local firms through direct foreign linkages. Our results also suggest that FDI do not generate positive intra-industry spillovers for domestic firms.

Institutional Variety, Networking and Knowledge Exchange: Communication and Innovation in the Case of the Brianza Technological District

P ATRUCCO P. P. (2003) Institutional variety, networking and knowledge exchange: communication and innovation in the case of the Brianza technological district, Reg. Studies 37 , 159-172. Elaborating on the literature on innovation systems and technological districts, this paper suggests that localization is conducive to a multilateral exchange of interdependent and external knowledge bases but requires explicit communication efforts in order to lead to innovation. In particular, the case of the Brianza technological district shows that different and yet complementary knowledge bases are built upon the institutional variety characterizing the local economic system. Moreover and more importantly, this case provides empirical evidence for the fact that the construction of an interorganizational network of dissimilar but complementary cooperative relations - in contrast to a concentration on one dominant kind of interaction - is the key source of innovation and growth of local firms.