Urban Advantages and Disadvantages in Southeastern Europe: An Appreciation on Industrial Firms by Using Exploratory Factor Analysis

By Metaxas, Theodore | European Research Studies, April 2012 | Go to article overview

Urban Advantages and Disadvantages in Southeastern Europe: An Appreciation on Industrial Firms by Using Exploratory Factor Analysis


Metaxas, Theodore, European Research Studies


1. Introduction: Industrial Firms' Competitiveness and Local Assets

Mainly, two traditional theories of strategic management, the Industrial Organization Theory and the Resource-Based View, try to explain the development and competitiveness of industrial firms. The first theory focuses on the forces of firms external environment that influenced their competitiveness (Porter, M.E., 1998), while the second one concerns firms internal environment--their own capacities and the sources that they have in order to become competitive (Barney, 2001; Wernerfelt, 1984). To the forces of external environment, are also referred the distinctive characteristics or urban assets where firms are located (Parkinson, et al., 2004; Begg, 1999; Deas, and Giordano, 2001). According to Maskell and Malmberg (1999), the competitiveness of industrial firms, depends on a particular combination of local characteristics that influence the distribution of economic activities, combining each time the capacity of each place on local and regional level. Through the analysis of the relationship between the territory (region, city) and the industrial firm, they try to find the answers on questions relating to how the forces of the spatial environment affect firms, through which ways and procedures these firms grow and how industrial systems (2), in which the firms belong to, affect the firms' development strategies. Porter, referring to the formation of the firms environment at micro level, he argued that it is understood through the correlation of four key areas of analysis: a) the quality of inputs / conditions of the local environment, b) the framework of the strategies and competition of the firm, c) the quality of demand conditions in the local environment and d) the presence of other related or supporting firms (Porter, 1998, 2000, 2003 / DTI 2003). As shown in figure 1 ('diamond model'), the factors that compose the above areas of analysis, represent both the firms as organizations and activities and environmental characteristics of sites / areas where the firms are located and which affect the productivity and the firms' development.

Several other studies examine specific factors such as agglomeration economies and easy access to markets (national and European markets, access to customers and suppliers, existence of foreign firms and availability of supporting services) [CEC, 1993; Iammarino, and Pitelis, 2000; Haufler and Wooton, 1999; Nachum and Keeble, 2003; Redding and Venables, 2004; Iammarino and McCann, 2006)], regional and local policies (strong investments motives, local authorities attitude towards businesses, entrepreneurial climate, and low local taxes) [Fuller, et al., 2003; Cossentino, 1996; Bennett and Krebs, 1991; Devereux and Griffith, 2002; Young, 2005], labour factors (availability, quality and the specialization of the labour force) [Keune, 2001; Sforzi and Lorenzini, 2002 cited in Lazzeretti, et. al., 2008], cost of transportation and the costs of land use and labour (Harrington and Warf, 1995; Miller, 1977; Zhu, 2000), urban infrastructure (efficiency of road/highway network, railway connections, sea connections, air connections and telecommunications) [Vickerman, 1994, 1996; Gao, 2004]. Finally, a number of studies have define that role of the local authorities is very important since they can support the competitiveness of the existing firms and they can attract new ones, contributing to the creation of a dynamic business environment, (Leeming, 2002; Syrett, 1994).

[FIGURE 1 OMITTED]

Based on the above each firm is not just a formal structured entity, but contrary it is an important part of the wider local social, economic and cultural environment. This environment can provide competitive advantages, which might refer to the specific characteristics of the cities / areas (infrastructure, technology, expertise, etc.). These advantages will strengthen the competitiveness of the local firms and contribute to attracting and creating new ones (Keune, 2001; Cossentino, 1996). …

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