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Defining firm competitiveness: A multidimensional framework

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  • Falciola, Justine
  • Jansen, Marion
  • Rollo, Valentina

Abstract

Defining and measuring competitiveness remains a subject of interest as well as debate: policy makers need to understand how competitive their country is relative to others, and how their competitive position evolves overtime (Fagerberg & Srholec, 2017). As such, well-known indicators of country performance have been developed over the years. While the business and economic literature recognise that “It is the firms, not nations, which compete in international markets” (Porter, 1998), the existing indices do not asses the capabilities of businesses. This paper fills this gap by proposing a multidimensional framework of firm competitiveness. Through factor analysis, we test the framework using firm level data from the World Bank Enterprise Surveys on over 100 countries. Regression based sensitivity checks confirm that the firm level index built in this paper positively correlates with commonly used proxies of firm competitiveness (i.e. labour productivity, the probability to export, etc.). The framework is applicable to firms of different size and export status.

Suggested Citation

  • Falciola, Justine & Jansen, Marion & Rollo, Valentina, 2020. "Defining firm competitiveness: A multidimensional framework," World Development, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:wdevel:v:129:y:2020:i:c:s0305750x19305066
    DOI: 10.1016/j.worlddev.2019.104857
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    More about this item

    Keywords

    Firm competitiveness; Multidimensional index; Factor analysis; Latent variable models;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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