Small and medium sized firms’ competitiveness and territorial characteristics/assets

What is it about?

This paper investigates the importance of territorial characteristics on small and medium-sized firms’ (SMEs) competitiveness. The main argument arises is that the forces of the external environment, (the combination of) territorial characteristics (such as agglomeration economies, urban infrastructure, labor and cost factors, development policies, qualitative factors) are of extreme importance. So, this research focuses on the investigation of such an argument using empirical data, statistical and econometric analysis. The analysis is based on primary data collected through questionnaires from 374 firms located in Bari (Italy), Varna (Bulgaria) and Thessaloniki (Greece). These firms operate in the sectors of industry, commerce and services. Through Exploratory Factor Analysis (EFA), a large set of territorial characteristics has been assessed allowing us to extract some important and comprehensive factors for firms’ competitiveness. Finally a multinomial logistic regression (MLR) was implemented in which the degree of firms’ competitiveness (Low, Medium, High) is specified as a function of the territorial components identified through EFA. Three categories of firms’ competitiveness are examined: competitiveness at national level, competitiveness against South-Eastern firms as well as North-Western firms. Independently of the sector of activity, most of the territorial characteristics have a positive impact on firms’ competitiveness appreciation. The implementation of MLR allows us to confirm that firms’ evaluation as regards their competitiveness is correlated with the capacity of the territory to offer a favorable business environment. The most important factor among those extracted from EFA is obviously related to the existence of research and development environment. For industrial as well as commercial firms, supporting services combined with agglomeration economies and urban infrastructures are the main factors reinforcing their competitiveness, especially at international level. The results provide particular policy directions for firms development at local level. The establishment of these policy directions based on the analysis and the characteristics of each economic sector is necessary in order local authorities and decisions makers can act by focusing to the specific needs of the market of the studied areas and not in a general way.

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Why is it important?

The forces of the external environment, (the combination of) territorial characteristics (such as agglomeration economies, urban infrastructure, labor and cost factors, development policies, qualitative factors) are of extreme importance