Competitiveness, catching-up and the role of foreign direct investment and clusters

Abstract

In this paper, we explore the role of foreign direct investment (FDI) and clusters of Small and Medium-sized Enterprises (SMEs) on the competitiveness of emerging economies and economic integration. We structure the paper as follows. Following this Introduction (Section 1), in Section 2, we assess briefly and critically extant theories of FDI and the MNE. In Section 3, we discuss theoretical perspectives on “clusters” of SMEs. In Section 4, we critically assess competitiveness and catching-up theory and policy and the role of FDI and clusters in this context. Section 5 sets off from limitations of extant scholarship identified in the previous section to develop a novel framework for competitiveness and catching-up and discuss the role of FDI, clusters and government policy in its context. Section 5V discusses ways through which emerging economies can effect economic integration through enhanced competitiveness and accelerated catching-up, by leveraging strategies informed from recent developments on scholarship in International Business (IB) strategy. Section 6 summarizes and concludes.