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DOI: 10.1177/0269094214522115
2014 29: 141Local EconomyAurora Castro Teixeira and Maria João Barros
Local municipalities' involvement in promoting the internationalisation of SMEs
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Feature
Local municipalities’involvement in promoting theinternationalisation of SMEs
Aurora Castro TeixeiraCEF.UP, Faculdade de Economia, Universidade do Porto, Portugal; INESC Porto, Portugal;
OBEGEF, Portugal
Maria Joao BarrosFaculdade de Economia, Universidade do Porto, Portugal
Abstract
Despite extensive research on decentralisation, the role of local governments in promoting the
internationalisation of firms has been rather neglected in the literature. Based on a sample of
144 Portuguese municipalities, and resorting to logistic econometric estimations, we found that:
(1) the majority of municipalities have been involved in activities to promote economic develop-
ment and the internationalisation of firms; (2) municipalities are essentially involved in the brand-
ing of regions (image building) or in organising fairs and trade missions and (3) municipalities more
active in promoting the internationalisation of small and medium-sized enterprises (SMEs) tend to
be more peripheral, with a relatively high area and population density, higher purchasing power,
higher proportion of population with secondary schooling, lower density entrepreneurial context
but with higher amounts of exports. Although there is still a long way to go for a more profound
and comprehensive decentralisation at this level in Portugal, given the knowledge municipalities
possess about the firms that are located in their vicinity, we contend that it would be desirable
that more decentralised efforts be put towards the implementation of information, and educa-
tion/training-related programmes aiming at promoting SMEs internationalisation.
Keywords
decentralisation, exports promotion, firms, local policy, Portugal
Introduction
Governments have an increasingly activerole in supporting exports by small andmedium-sized enterprises (SMEs) throughpublic policies that promote theirinternationalisation (Gil et al., 2008;Lederman et al., 2010; O’Gorman andEvers, 2011). However, in most countries
export promotion agencies and policieshave traditionally operated at the nationallevel, rather than through a decentralisedmodel (Leonidou et al., 2011). The efforts
Corresponding author:
Aurora Castro Teixeira, Faculdade de Economia,
Universidade do Porto, Rua Dr Roberto Frias, Porto
4200-464, Portugal.
Email: [email protected]
Local Economy
2014, Vol. 29(1–2) 141–162
! The Author(s) 2014
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DOI: 10.1177/0269094214522115
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to boost SME internationalisation mightoccur nevertheless at the micro (local autho-rities), meso (national trade bodies andEPAs) and macro-levels (overseas embas-sies, EU, etc.). Given the challenges and spe-cificities that countries face at the regionaland local levels, a multiscalar nature of gov-ernance within economies regarding SMEsexport promotion might be advisable.
Bearing in mind the growing process ofdecentralisation (Azfar et al., 2001; Faguet,2014; Litvack and Seddon, 1999; Marinetto,2003; Taylor, 2007) and the spread of stu-dies focusing on local economic develop-ment in the last 30 years (Barberia andBiderman, 2010; Cox, 2004; DeFilippis,1999; Fineberg, 2013), it becomes importantto assess to what extent the local sphere,through local municipalities, can and/orshould seek affirmation as a fundamentalscale of policy action in promoting localenterprises in the global market.
Notwithstanding the important and fairlywidespread scientific literature on the pro-motion of exports, public policies and pro-grammes in this area, covering their results(Shamsuddoha et al., 2009; Wilkinson andBrouthers, 2006) and the degree of satisfac-tion by the beneficiary firms (Calderon et al.,2005; Cassey, 2008; Gillespie and Riddle,2004), there is a relative lack of studies deal-ing with the local dimension or the decentral-isation of the support provided to theinternationalisation of firms (for a review,see Teixeira and Barros, 2014).
The empirical analysis undertaken in thisstudy therefore aims to contribute to reflec-tions on export promotion and internation-alisation policies at a territorial/local scale,based on the factors that, according to theliterature, can contribute to, or restrict, thedevelopment of such measures/policies atthe local level.
The study focuses on a rather unexploredreality, Portugal, a small European countrythat has received a large amount ofEU funding for the development of its
home-market infrastructures (Pinho andMartins, 2010), where internationalisation,in particular of SMEs, is at the fore of thecountry’s political agenda as a means toovercome the economic crisis (Serra et al.,2012), and where regional decentralisationis still an unresolved issue (Nanetti et al.,2004; Sorens, 2009).
The paper is organised as follows: thefollowing section presents a literaturereview on the determinants of the involve-ment of municipalities in promoting theinternationalisation of enterprises. Then,the study’s methodological considerationsare detailed in the next section and theresults obtained are presented in subsequentsection. Finally, Conclusion summarises themain topics covered in the study, as well asits limitations and pointers for futureresearch.
Determinants of theinvolvement of localmunicipalities in promoting theinternationalisation of firms:A literature review
Public policy interventions are many andvaried (Blackburn and Schaper, 2012).Among these, promoting national exportsand the internationalisation of firms is atop priority of many public policy makers,mainly because internationalisation in gen-eral, and national exports in particular, pro-vide the means to increase employmentopportunities for local people, generate for-eign exchange to finance imports, enrichpublic funds with additional tax revenues,create backward and forward linkages inthe economy, and achieve higher economicgrowth and living standards (Leonidouet al., 2011).
Government-designed internationalisa-tion promotion policies include a varietyof programmes intended to support firms’exporting activity, covering a broad spec-trum of activities (Durmusoglu et al.,
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2012; Leonidou et al., 2011; VolpeMartincus and Carballo, 2010): informa-tion-related programmes (provision of mar-keting/information/advice; information onmarket opportunities; general informationabout doing business in a specific country;specific information about doing businesswith a particular firm; export publications– newsletters, how-to-export handbooks);education- and training-related programmes(organisation of export seminars/confer-ences for potential exporters; counsellingand training on the export process for inex-perienced exporters; training on exportdocumentation; foreign language support);trade mobility-related programmes (arrangemeetings with potential customers; assist-ance in participating in trade shows/exhib-itions; participation in trade missionsabroad; support by trade offices abroad)and financial aid-related programmes (co-finance the participation in trade missions,shows and fairs, and organise these events;sponsor the creation of export consortia;export loans; export credit guarantees;funds transferring).
At the macro-level and using a bilateralgravity model, Rose (2007) demonstratedthat the presence of foreign missions, mostnotably associated with embassies and con-sulates, was positively correlated with coun-tries’ exports. At the micro-level, someearlier works (e.g. Cavusgil and Naor,1987; Gencturk and Kotabe, 2001) foundthat government export assistance pro-grammes contributed to firms’ exportsuccess. More recently, it has been demon-strated that experiential activities such astrade shows and trade missions lead tohigher levels of firms’ performance becausethey allowed managers to rapidly acquireinformation about export markets and theprocess of exporting (Wilkinson andBrouthers, 2006). Trade shows constitutean important promotional tool and can pro-vide positive economic benefits to the firm,generating both immediate sales and
product awareness (Gopalakrishna et al.,1995). Through trade shows, representativesof companies which are export ready cangain customers, disseminate information,identify prospects, gather intelligence andreinforce firm morale (Wilkinson andBrouthers, 2006).
In most countries, export promotionpolicies have traditionally operated at thenational level rather than through a decen-tralised model (Lederman et al., 2010;Leonidou et al., 2011). However, givenfirms and regions’ specificities there mightexist benefits from involving local publicauthorities in the promotion of the inter-nationalisation of their firms, that is, froma more decentralised implementation ofexport promotion policies (Teixeira andBarros, 2014).
In a centralised system, politicians makedecisions usually aimed at reflecting thecountry’s interests (Balaguer-Coll et al.,2010; Rodrıguez-Pose and Gill, 2005).Nonetheless, this practice may proverather inefficient when interests differamong regions, since some regions do notbenefit from those national policies. If pref-erences vary across regions, it would bemore efficient to geographically alter theprovision of public services. Thus, the pro-vision of public services by the public sectorcould be more efficient within a decentra-lised government structure (Balaguer-Collet al., 2010). This might be the case ofexport promotion policies, since local muni-cipalities can have branches of economicactivity that vary across regions, andwhich act as competitive advantages.
Barberia and Biderman (2010) maintainthat initiatives should be executed and man-aged at the territorial and local levels andseveral authors recognise that the mainbenefits of decentralisation are: greater agil-ity, competitiveness and flexibility to adaptto changes (Lobao and Kraybill, 2009;Oates, 1999; Taylor, 2007); the creation ofa geographical focus at the local level,
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coordinating national, state, district andlocal programmes more effectively (Litvackand Seddon, 1999); and the formulation ofmore creative, innovating and appropriateprogrammes that enable local experimenta-tion (Litvack and Seddon, 1999). It cantherefore be assumed that decentralisingexport promotion to a local scale, specific-ally, to the local municipalities, could resultin a continuing process whose final impactwould ultimately be the higher efficiencyand higher effectiveness of these policiesand, consequently, a higher degree of bene-fit for the targeted local enterprises.
Closer scrutiny shows that the benefitsattributed to decentralisation reside mostlyin the local governments’ greater respon-siveness to local needs (Lobao andKraybill, 2009; Oates, 1999), adapting poli-cies to the preferences of smaller and morehomogeneous groups (Balaguer-Coll et al.,2010; Lobao and Kraybill, 2009; Tiebout,1956; Wallis and Oates, 1988), or in thebetter ability of governments to accommo-date differences in tastes for public goodsand services (Balaguer-Coll et al., 2010;Oates, 1972; Tiebout, 1956), all factorsthat justify decentralisation from the view-point of economic efficiency.
In short, the considerations of efficiencyon which decentralisation discourses arebased (Balaguer-Coll et al., 2010) also com-prise this study’s main line of reasoning,that is, greater efficiency is the main argu-ment in favour of decentralising export pro-motion policies to the local municipalities.
Decentralisation might neverthelessinvolve possible losses. The argumentshere are directly linked to the local scaleitself, such as lack of administrative or tech-nical capacity, or even the transfer ofauthority to individuals who have limitedexperience in management and, in somecases, little interest in taking those respon-sibilities (Andersson et al., 2006; Balaguer-Coll et al., 2010; Chapman et al., 2002;Faguet, 2004); less efficient and effective
services provision (Agrawal and Ribot,1999; Andersson et al., 2006; Azfar et al.,2001; Boone, 2003; Litvack and Seddon,1999); the transfer of responsibilities to thelocal level without adequate financialresources can make the equitable distribu-tion and provision of services more difficult(Agrawal and Ribot, 1999; Andersson et al.,2006; Balaguer-Coll et al., 2010; Boone,2003; Cox, 2004; Faguet, 2004; Litvackand Seddon, 1999) and agents mayback away from new strategies they do notfully understand, perpetuating conservatismwithin the communities and stifling effortsfor improvement (Chapman, 2000;Chapman et al., 1997, 2002).
These arguments are in line with Litvackand Seddon (1999) regarding the import-ance of the organisations’ profile and char-acteristics, implying that there should bebasic knowledge of the strengths and weak-nesses of organisations in the performanceof various types of functions, since the suc-cess of decentralisation depends on thesecharacteristics and also on the appropriatepreparation of the agents of decentralisedadministration (Litvack and Seddon,1999). Teixeira and Barros (2014) furtherhighlight an emergent generation of studiesabout decentralisation that focuses not onlyon the scale of provision and the type ofservice but also on the fundamental natureof the policies and institutions. This emer-gent literature shows that it is a complexmix of institutions that generates receptivelocal agents.
What will ultimately define the finalresult of decentralisation is, besides specificfactors, the interaction between the type ofdecentralisation and the conditions underwhich it takes place. To simplify, the condi-tions that influence the success of a decen-tralisation process, that is, the increasinginvolvement of local entities, can be dividedinto two groups: the attributes of the localmunicipalities (the extent to which localauthorities are motivated to support the
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process and the availability of financial andtechnical resources) and structural vari-ables, such as the type and magnitude ofthe resources possessed, the local powerrelationships and the characteristics of thelocal economy (Pacheco, 2004; Teixeira andSilva, 2012).
Indeed, several authors agree that decen-tralisation works differently depending onthe types of powers that are decentralised(Andersson et al., 2006; Litvack et al.,1998; Ribot, 2002; Rondinelli et al., 1989).Others sustain that decentralisation canwork, but only in the context of specificinstitutions, which include mechanisms ofaccountability, supervision and transfer ofresources (Agrawal and Ribot, 1999;Andersson et al., 2006; Blair, 2000;Faguet, 2014; Gibson and Lehoucq, 2003;Joanis, 2014).
It is increasingly acknowledged that fordecentralisation to achieve the potentialbenefits of an efficient and equitable provi-sion of public goods, citizens need to havethe means to send appropriate informationto local actors, so that local politicians canrespond appropriately or be held account-able when this does not occur. It is claimedthat for these conditions to exist, severalinstitutional and social characteristics haveto be assembled. More specifically, theincentives for local politicians to respondto their constituents’ demands are under-stood as being conditioned by institutionalincentives within the framework of nationalpolicy, by constraints from the localpolitical system, and by the formal repre-sentation and articulation of the citizens’preferences in the political structure(Kauneckis and Andersson, 2009).
In the model by Kauneckis andAndersson (2009), formal political institu-tions and the structure of the local societygenerate several incentives and constraintsto the municipalities’ action. Thus, thestructure of local political action is concep-tualised as comprising two levels: the impact
of local political institutions at the nationallevel and the influence of the local munici-palities’ specific institutional and socioeco-nomic characteristics.
In this context, analysing under whichcircumstances decentralisation is moreeffective places the emphasis not on themerits of decentralisation (as opposed tocentralisation) but rather on the mannerand conditions in which it is undertaken.Theoretical premises suggest that decentral-isation depends on institutional regulationsand their interaction with social practices,influencing the achievement of decentralisedgovernance (Kamoto et al., 2013). Thesefactors, according to Azfar et al. (2001),include the distribution of powers amonglevels of government (central governmentsupervision over local government oper-ations), the discipline operating fromwithin and outside government (manage-ment of the involved staff) and the princi-pal-agent information flows (ability for allagents to participate in the decision-makingprocess), which is intimately related to theregion’s human capital. In other words,Agrawal and Ribot (1999) maintain thatthe relationship between decentralisationand its results can be better understood ifit is analysed in terms of actors, powers andaccountability, which makes it relevant toanalyse the relationships between the cen-tral government and local governmentsand between these and local populations(De Vries, 2012; Pacheco, 2004; Ribot,1999, 2001).
Summarising, the key determinants ofthe involvement of local municipalities inactivities that provide support to economicdevelopment and the internationalisation offirms include: (1) the municipalities’ charac-teristics, namely the municipal budget percapita and the number of employees; (2)the municipalities’ development indicators,including telecommunications, distance tothe capital, area, population density, popu-lation with secondary and higher education,
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purchasing power and unemployment rateand (3) the municipalities’ characteristicsof entrepreneurial activity, such as thenumber of enterprises, volume of exports,weight of medium and large enterprisesand tertiary educated labour.
Bearing in mind that the formal mechan-isms of government are important only in theway they interact with the local conditions,particular attention should be put on thelocal demand structure regarding the muni-cipalities’ characteristics and not merely onthe analysis of the relations between the cen-tral government and the local governments.In this context, according to Kauneckis andAndersson (2009), the characteristics of amunicipality that most influence the qualityof local service provision are the size of thearea the municipality has to serve, its popu-lation (education and literacy, populationdensity and percentage of population whichrequires that service) and its financial cap-acity. According to the same authors, thelarger the municipal area, the greater is thedifficulty in providing adequate quality ser-vices. Additionally, a more educated popu-lation, clustered in population centres withlow demand for the services under studyshould be easier to satisfy than low-densityclusters of population with low literacy ratesand a high demand for these services(Kauneckis and Andersson, 2009;Rowland, 2001). On the other hand, Lobaoand Kraybill (2009) concluded that localitieswith more population and less educated citi-zens get more involved in activities to pro-mote local economic development. Finally,local municipal governments are restrictedby their financial capacity to respond tolocal demand. In some cases, this relates toa flaw in devolution to local governments; inothers, it may simply reflect the relativevigour of a local economy. The municipalbudget is, therefore, used as a measure ofthe local governments’ ability to respond totheir citizens’ demand (Kauneckis andAndersson, 2009). Equally, to question the
potential efficiency and effectiveness of pro-moting exports at the local level implies theneed to examine the relationships betweenlocal municipalities and enterprises. Bygoing beyond the main arguments on thefactors influencing a process of decentralisa-tion, a healthy export sector is considered ofextreme importance to the nation, states andcommunities (Lewis, 1990). Additionally,the number of employees assigned to a div-ision may serve to indicate the commitmentof a state or municipality to develop exports(Lesch et al., 1990) and the local govern-ment’s capacity (measured in resources andnetwork) is an important determinant of theactivities pursued to promote local economicdevelopment (Lobao and Kraybill, 2009).Finally, business competitiveness withother localities pressures governments toattract businesses (Lobao and Kraybill,2009) and, by entering new markets, regionsmay increase their economic potential,instead of simply competing with eachother in the existing markets (Stagg, 1990).
Methodological considerations
The aim of this study is to assess the deter-minants underlying the involvement of thelocal sphere, most specifically the municipa-lities, in the promotion and support of localfirms’ internationalisation processes.
The municipalities’ sensibility to mattersof economic development and the inter-nationalisation of firms might be analysedconsidering three dimensions of municipali-ties’ involvement: (1) the municipality hasstaff assigned to this area (variable ‘staff’);(2) the municipality establishes contact withenterprises (variable ‘contacts’) and (3) themunicipality carries out the activities understudy (variable ‘activities’).
Based on the literature review conductedin the previous section, the determinants ofthe municipalities involvement are dividedinto three groups (see Table 1): the munici-palities’ institutional characteristics (human
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Tab
le1.
Pro
xie
sfo
rth
eke
yva
riab
les
of
the
‘theore
tica
l’m
odel.
Dete
rmin
ants
Pro
xy
Auth
ors
Sourc
e
Var
iable
sch
arac
teri
sing
the
org
anis
atio
n
Finan
cial
reso
urc
es
Munic
ipal
budge
tper
capita
(E)a
Kau
neck
isan
dA
nders
son
(2009),
Lobao
and
Kra
ybill
(2009)
Munic
ipal
itie
s’in
stitutional
websi
tes
Hum
anre
sourc
es
Num
ber
of
munic
ipal
em
plo
yees
[1994]
Lesc
het
al.(1
990)
Sale
sIn
dex
2010
Var
iable
sch
arac
teri
sing
the
regi
on’s
degr
ee
of
dev
elo
pm
ent
Infr
astr
uct
ure
san
d
acce
ssib
ilities
Tele
phone
connect
ions
(thousa
nd
hab
itan
ts)
[2009]
Lobao
and
Kra
ybill
(2009)
INE
Dis
tance
toth
eca
pital
(km
)w
ww
.via
mic
helin
.pt
Geogr
aphic
alco
nte
xt
Are
a(k
m2)
Kau
neck
isan
dA
nders
son
(2009),
Lobao
and
Kra
ybill
,
(2009)
INE
Popula
tion
densi
ty[2
009]
Row
land
(2001),
Kau
neck
isan
d
Anders
son
(2009),
Lobao
and
Kra
ybill
(2009)
Hum
anca
pital
Popula
tion
with
com
ple
ted
seco
ndar
yeduca
tion
b
[2001/2
009]
Popula
tion
with
com
ple
ted
hig
her
educa
tion
c[2
001/2
009]
Eco
nom
icco
nte
xt
Purc
has
ing
pow
er(E
)[2
007]
Kau
neck
isan
dA
nders
son
(2009)
Unem
plo
yment
rate
[2009]
Var
iable
sch
arac
teri
sing
the
entr
epre
neuri
al
activi
ty
Entr
epre
neuri
alac
tivi
tyExport
s(t
housa
nd
euro
s)[2
008]
Lew
is(1
990)
Sale
sIn
dex
2010
Weig
ht
of
mediu
man
dla
rge
firm
sd[2
007]
Num
ber
of
firm
s[2
007]
Sect
or
speci
alis
atio
nW
eig
ht
of
man
ufa
cturi
ng
sect
ore
[2005]
INE
Sour
ce:A
uth
ors
’co
mpila
tion.
Not
es:IN
E:N
atio
nal
Stat
istics
Inst
itute
;N
UT
S:N
om
encl
ature
of
Terr
itori
alU
nits
for
Stat
istics
;(u
nit
of
meas
ure
),[y
ear
].aW
hen
we
could
not
find
the
munic
ipal
budge
tfo
r2011,w
euse
dth
eva
lue
for
2010
or,
inso
me
case
s,fo
r2009.
bIn
perc
enta
ge,ca
lcula
ted
for
the
tota
lpopula
tion,dis
rega
rdin
gsc
hoolag
e.
cIn
perc
enta
ge,ca
lcula
ted
for
the
tota
lpopula
tion,dis
rega
rdin
gsc
hoolag
e.
dIn
perc
enta
ge,co
veri
ng
ente
rpri
ses
with
atle
ast
50
em
plo
yees.
eIn
perc
enta
geof
the
tota
lw
ork
forc
e,
by
NU
TS
II.
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and financial resources), extent of the muni-cipalities’ characteristics (infrastructuresand accessibilities, geographical context,human capital and economic context) andthe characteristics of the local enterprises(entrepreneurial activity and humancapital).
In order to operationalise the explana-tory variables that are likely to influencethe involvement of Portuguese municipali-ties in activities to promote economicdevelopment/the internationalisation offirms, we gathered primary and secondarydata, this latter from the Sales Index 2010(Marketest), the National Statistics Institute(INE), the City Halls’ websites and theMichelin website.
The primary data gathering involved theimplementation of a survey to the 308Portuguese municipalities, to see whetherthey engaged in activities to promote localeconomic development and the internation-alisation of local firms. The survey wascomposed of three sections. The firstgroup of questions was intended to addressthe municipalities’ sensibility to the issue ofpromoting economic development/the inter-nationalisation of firms. It enabled us todetermine whether there was a structure(formal or informal) in the municipality
assigned to these actions, its dimension(number of staff members), the level ofqualification of the involved employeesand their capacity for autonomy. Thesecond section addressed the level of themunicipalities’ intervention in this areaand was intended to assess the ways inwhich City Halls relate to local firms (and,when that contact exists, gain insights intoits nature). The last group of questionsfocused on the municipalities’ proactivityand the performance of the activities stu-died, so as to determine the inherent factorsthat influence, positively or negatively, theirinvolvement in such actions.
The first phase of the study began on23rd February 2011 and ended on 1stApril 2011. From a population of 308Portuguese municipalities, we received atotal of 144 answers, that is, a responserate of 46.8%, where the municipalities ofthe North region and those from theAutonomous Region of Madeira were themost and less receptive to this study, witha response rate of 55.8% and 27.3%,respectively (see Table 2).
Given the non-compulsory nature ofthe survey, the overall response rate byNomenclature of Territorial Units forStatistics (NUTS) II was quite acceptable
Table 2. Respondent municipalities, by geographical region.
Statistic
sub-regions
(NUTS II)
Population:
No. of municipalities
[% total]
Sample: No. of answers
[% total]
Representativeness
in the study:
response rate (%)
North 86 [27.9] 48 [33.3] 55.8
Centre 100 [32.5] 44 [30.6] 44.0
Lisbon 18 [5.8] 7 [4.9] 38.9
Alentejo 58 [18.8] 26 [18.1] 44.8
Algarve 16 [5.2] 6 [4.2] 37.5
Azores 19 [6.2] 10 [6.9] 52.6
Madeira 11 [3.6] 3 [2.1] 27.3
Total 308 [100] 144 [100] 46.8
Source: Authors’ compilation, based on the answers obtained to the survey applied to Municipalities.
Note: NUTS: Nomenclature of Territorial Units for Statistics.
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(Chang et al., 2012). Thus, excluding thecase of the Autonomous Region ofMadeira, the sample obtained is representa-tive of the population under study, enablinga rigorous statistical analysis, with the pos-sibility of extrapolating the results to thepopulation.
The binary nature of the variable toexplain variable (municipalities’ involve-ment) restricts the choice of the estimationmodel, with the logistic regression being themost appropriate regression technique tomodel the occurrence (Greene, 2012).1
Empirical results
The majority of municipalities revealed thatthey are involved in activities to promoteeconomic development/the internationalisa-tion of firms (e.g. region’s branding, exportsupport services, trade missions, fairs,market search and publications). Althoughthere is a positive linear association betweenthe three variables that measure the involve-ment of the municipality in export anddevelopment promotion, only the correl-ation coefficient estimates between‘activities’ and ‘staff’, and ‘activities’ and‘contact’, are significant (see Table 3).Thus, municipalities that perform activitiesto promote economic development/inter-nationalisation tend to a larger extent than
those that do not possess personnel assignedto activities to promote such activities andto maintain contacts with local enterprises.Such correlation however is far from per-fect. Indeed, in geographical terms (NUTSIII) we observe that not having staff mem-bers specifically assigned to the promotionof economic development/internationalisa-tion (variable ‘staff’) does not imply thenon-performance of such activities (variable‘activities’) and vice versa (see Figure 1).
As only very small number of municipa-lities has no contact with firms, it was irrele-vant to statistically and econometricallyexplore this dimension of the municipalities’involvement.
At the structural level, we observe thatthree-fourths of the municipalities formallypursue activities to promote economicdevelopment/internationalisation throughan organic unit or division speciallyassigned to that effect defined in the macro-structure. The staff members who work inthis area are qualified and possess a consid-erable level of independence with regard toprocesses of bureaucracy and hierarchy.
Regarding the contacts established withlocal enterprises, and according to the cate-gories of services provided by export pro-motion entities (Lederman et al., 2010),there is a predominance of activities toboost the region’s image building and mar-keting, including fairs and trade missions(at 77.4% and 76.6%, respectively), fol-lowed by market research and publications,and export support services (technicalassistance, seminars), at 38.0% and 29.2%,respectively. Other activities indicated by amuch small number of municipalitiesencompass information and counselling onlegislation and public support mechanismsto enterprises, support to entrepreneurshipand local and regional innovation (some-times associated with start-up centres),financial incentives, local financing mechan-isms, training, visits and tributes to enter-prises, and trade missions to take advantage
Table 3. The municipalities’ involvement in activ-
ities to promote economic development/the inter-
nationalisation of firms – correlation between the
variables ‘staff’, ‘contacts’ and ‘activities’.
Staff Contacts Activities
Staff 1
Contacts 0.103 1
Activities 0.400*** 0.174** 1
Note: **statistically significant at 5% and ***statistically
significant at 1%.
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of twinning agreements with other local-ities/regions.
In an attempt to understand why morethan one-third of the local municipalitiesare not involved in activities to promoteeconomic development/internationalisationof firms, the factors identified by localmunicipalities as enhancers or inhibitors tothe performance of such activities wereanalysed.
Within the group of municipalitiesinvolved in these activities, the factors theymost frequently indicated as apparentlyincreasing their involvement included theimportance of local businesses, competi-tiveness in relation to other municipalitiesand the fact that they are requested byfirms to act in this area (with 93.6%,
55.3% and 33.0%, respectively). Thesewere followed by the use of specific localinformation and specific technical or admin-istrative capacity. The ‘sufficient funds’option had no expression (see Figure 2).Among the other factors mentioned wereconcerns about improving the local qual-ity of life, promotion of local economicdevelopment (affirming the local brandand leveraging local resources), EUfunding opportunities and local incentiveschemes.
As for the municipalities which do notperform activities to promote economicdevelopment/internationalisation, the factorthat was most often referred to as hinderingthis action was the lack of sufficient financialresources (54.0% of the cases). This was
Staff
0%–20% 21%–40% 41%–60% 61%–80% 81%–100%
Contacts Activities
Figure 1. Dimension of the municipalities’ involvement in activities to promote economic development/
the internationalisation of firms – ‘staff’, ‘contacts’ and ‘activities’, by NUTS III, in Mainland Portugal, in
percentage of the municipalities where they exist.
Source: Authors’ compilation, based on the answers to the survey applied to Municipalities.
150 Local Economy 29(1–2)
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followed by administrative or technical limi-tations and/or shortcomings (32.0%), thefact that local businesses do not justifythis involvement (26.0%), and focuson other benefits (22.0%). The over-centralisation and lack of interest in thematter were highlighted by a fewlocal authorities, whereas the ‘lack of con-tact with local companies’ had no expres-sion (see Figure 3). Other factors pointedout included the existence of an activetrade association in the area, not havingreceived such requests, and the fact thatthe organic division in question isrecent (which was the case of three of therespondents).
The results corroborate the argumentsagainst decentralisation described in theDeterminants of the involvement of localmunicipalities in promoting the internation-alisation of firms: A literature review sec-tion, namely with regard to the constraintsderiving from administrative or technicalshortcomings at the local level (Andersson
et al., 2006; Balaguer-Coll et al., 2010;Chapman et al., 2002; Faguet, 2004) andthe lack of adequate financial resources(Agrawal and Ribot, 1999; Anderssonet al., 2006; Balaguer-Coll et al., 2010;Boone, 2003; Cox, 2004; Faguet, 2004;Litvack and Seddon, 1999). Broadlyspeaking, these factors sustain the notionthat the organisations’ characteristicsdetermine the quality of the service theyprovide (Litvack and Seddon, 1999;Rodden, 2003).
The descriptive results based on the cor-relation between the relevant variables (seeTable 4) show that the existence of staffassigned to the promotion of economicdevelopment/the internationalisation offirms is positively and significantly relatedto the volume of exports and the numberof local enterprises. This means that,based on bivariate correlations, municipali-ties with a larger volume of exports andfirms tend, on average, to involve morehuman resources in activities related to the
55
47
33
22
94
00
10
20
30
40
50
60
70
80
90
100
Compe��vidade face a outros municípios
Solicitação por parte das empresas
Aproveitamento de informação local específica
Capacidade administra�va ou técnica específica
Importância do tecido empresarial local
Suficientes recursos financeiros
Competitiveness in relation to other
municipalities
Requested by enterprises
Use of specific local information
Specific administrative or technical capacity
Importance of local businesses
Sufficient funds
Figure 2. Importance of the factors which favour the respondent municipalities’ involvement in activities
to promote economic development/internationalisation of firms, in (in % total).
Source: Authors’ compilation, based on the answers to the survey applied to Municipalities.
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promotion of economic development/theinternationalisation of firms.
With regard to the relation between theindependent variables, the results show thatthere is a high correlation between thenumber of municipal employees and mostof the other variables, which also occurswith telephone connections. There are alsostrong bivariate correlations among otherindependent variables, such as the purchas-ing power and the human capital proxies.Potential problems of multicollinearitythat may arise, which recommend the esti-mation of three separate models in the caseof municipalities’ involvement proxied bythe variable ‘Activities’.
The group of municipalities which areinvolved in activities to promote economicdevelopment/internationalisation of firms,by either assigning human resources (vari-able ‘staff’) or performing concrete activities(variable ‘activities’), present higher means,than municipalities which do not, in termsof number of municipal employees, area,
population with higher education andexports. Additionally, the differences inmeans of Kruskal–Wallis non-parametrictest shows that municipalities which assignhuman resources to activities in economicdevelopment/internationalisation are char-acterised by being more ‘accessible’ in geo-graphical terms (i.e. are closer to thecapital), have more population density, ahigher percentage of people with secondaryeducation, higher purchasing power, aremore industrialised and have more enter-prises, mostly micro and small enterprises(see Table 5).
According to the goodness of fit meas-ures (Hosmer–Lemeshow test and percent-age of correct classifications) (see Table 6),the estimated models prove to be adequate.2
All the group of determinants – organ-isation, region’s development, entrepreneur-ial activity – are relevant for explainingthe involvement of the municipalities inthe promotion of SMEs internationalisa-tion. Individually considered, the region’s
32
54
0
14
22
26
2
0
10
20
30
40
50
60
Limitações e/ou incapacidade administra�va ou técnica
Insuficientes recursos financeiros
Ausência de contacto com empresas locais
Excessiva centralização por parte do Estado
Aposta em outras vantagens do Município
Tecido empresarial do Município não o jus�fica
Falta de interesse pela área
Administrative or technical limitations
and/or shortcomings
Lack of suf f icient f inancial resources
Lack of contact with local companies
Over-centralization
Focus on other benef its
Local businesses do not justify it
Lack of interest in the area
Figure 3. Importance of the factors which restrict the respondent municipalities’ involvement in activ-
ities to promote economic development/internationalisation of firms (in % total).
Source: Authors’ compilation, based on the answers to the survey applied to Municipalities.
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Tab
le4.
Corr
ela
tion
mat
rix.
AB
12
3a
3b
4a
4b
5a
5b
6a
6b
7a
7b
7c
8
A.D
ependent
vari
able
‘sta
ff’
1
B.D
ependent
vari
able
‘act
ivitie
s’0.4
62
***
1
1.M
unic
ipal
budge
tper
capita
�0.0
04
0.1
03
1
2.N
um
ber
of
munic
ipal
em
plo
yees
0.2
27*
0.0
46�
0.2
89
**1
3a.
Tele
phone
connect
ions
�0.1
59�
0.0
89
0.3
21
***�
0.0
73
1
3b.D
ista
nce
toth
eca
pital
�0.1
50�
0.0
37
0.1
61�
0.3
83
***�
0.0
33
1
4a.
Are
a0.0
40
0.0
06
0.1
24
0.2
06*
0.3
19
***�
0.0
17
1
4b.Popula
tion
densi
ty0.1
71
0.0
36�
0.4
90
***
0.4
79
***�
0.5
15
***�
0.1
29�
0.6
64
***
1
5a.
Popula
tion
with
seco
ndar
yeduca
tion
0.0
91
0.1
69�
0.0
87
0.5
97
***
0.2
31*�
0.5
97
***�
0.0
04
0.2
43
**1
5b.Popula
tion
with
hig
her
educa
tion
0.0
23
0.0
73�
0.1
34
0.6
17
***
0.2
74
**�
0.3
03
**0.0
78
0.2
57
**0.7
22
***
1
6a.
Purc
has
ing
pow
er
0.2
22*
0.2
02*�
0.1
33
0.6
99
***
0.2
12*�
0.4
84
***
0.0
26
0.3
31
***
0.8
41
***
0.8
06
***
1
6b.U
nem
plo
yment
rate
0.0
19
0.0
23�
0.0
99
0.2
07*�
0.1
32
0.1
76�
0.2
32*
0.3
39
***
0.0
09�
0.0
57
0.0
18
1
7a.
Export
s0.3
20
***
0.1
99*�
0.3
65
***
0.5
89
***�
0.3
28
***�
0.2
21*�
0.1
45
0.6
28
***
0.2
90
**0.3
87
***
0.5
16
***
0.0
15
1
7b.W
eig
ht
of
mediu
man
dla
rge
ente
rpri
ses
0.0
93
0.0
65�
0.0
033
0.0
07�
0.2
44
**0.1
99*�
0.2
50
**0.2
59
**�
0.1
71�
0.2
11*
0.0
35
0.2
19*
0.3
09
***
1
7c.
Num
ber
of
ente
rpri
ses
0.2
69
**0.0
46�
0.5
09
***
0.8
73
***�
0.2
63
**�
0.2
16*
0.1
03
0.6
62
***
0.4
08
***
0.5
15
***
0.5
71
***
0.1
74
0.7
00
***
0.0
67
1
8.W
eig
ht
of
man
ufa
cturi
ng
0.1
95�
0.1
44�
0.4
01
***
0.0
81�
0.4
82
***
0.2
11*�
0.3
15
***
0.4
94
***�
0.3
10
***�
0.2
85
**�
0.1
83
0.3
11
***
0.3
37
***
0.4
94
***
0.2
96
**1
Not
e:T
he
grey
cells
repre
sent
stat
istica
llysi
gnifi
cant
est
imat
es
(i.e
.p-v
alue<
0.1
0).
*Sta
tist
ical
lysi
gnifi
cant
at10%
,**
stat
istica
llysi
gnifi
cant
at5%
and
***st
atis
tica
llysi
gnifi
cant
at1%
.
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Tab
le5.
Diff
ere
nce
sin
mean
sin
the
vari
able
sin
anal
ysis
(Kru
skal
–W
allis
non-p
aram
etr
icte
st).
Prox
y
Munic
ipal
itie
s’in
volv
em
ent
‘Sta
ff’
‘Act
ivitie
s’
Yes
No.
Kru
skal
–W
allis
test
(p-v
alue)
Yes
No
Kru
skal
–W
allis
test
(p-v
alue)
Munic
ipal
budge
tper
capita
1553
1959
0.1
42
1751
1707
0.2
21
Num
ber
of
munic
ipal
em
plo
yees
410
182
0.0
00
348
206
0.0
33
Tele
phone
connect
ions
26.0
27.6
0.1
53
26.3
27.5
0.4
56
Dis
tance
toth
eca
pital
249.8
486.5
0.0
00
307.8
468.6
0.1
75
Are
a348.1
272.0
0.0
44
340.2
257.9
0.0
17
Popula
tion
densi
ty423.1
170.4
0.0
93
293.2
316.0
0.6
94
Popula
tion
with
com
ple
ted
seco
ndar
yeduca
tion
5.3
4.4
0.0
01
5.1
4.5
0.1
82
Popula
tion
with
com
ple
ted
hig
her
educa
tion
3.9
3.3
0.0
42
3.8
3.2
0.0
73
Purc
has
ing
pow
er
81.0
66.7
0.0
00
76.6
69.5
0.3
63
Unem
plo
yment
rate
7.0
6.8
0.5
35
6.9
7.1
0.5
89
Export
s83971.6
19057.8
0.0
02
75585.6
22047.2
0.0
62
Weig
ht
of
mediu
man
dla
rge
firm
s0.0
054
0.0
094
0.0
31
0.0
050
0.0
118
0.5
15
Num
ber
of
firm
s5405.8
2045.8
0.0
00
4371.6
2692.6
0.1
56
Weig
ht
of
man
ufa
cturi
ng
31.1
26.3
0.0
26
28.0
30.4
0.2
92
Sour
ce:A
uth
ors
’co
mpila
tion,bas
ed
on
the
answ
ers
toth
esu
rvey
applie
dto
Munic
ipal
itie
s.
Not
e:T
he
grey
cells
repre
sent
stat
istica
llysi
gnifi
cant
est
imat
es
(i.e
.p-v
alue<
0.1
0).
154 Local Economy 29(1–2)
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Tab
le6.
The
munic
ipal
itie
s’in
volv
em
ent
inac
tivi
ties
topro
mote
eco
nom
icdev
elo
pm
ent/
inte
rnat
ional
isat
ion
of
firm
s:lo
gist
icre
gress
ion.
Dete
rmin
ants
Pro
xy
‘Sta
ff’
‘Act
ivitie
s’
Var
iable
sch
arac
teri
sing
the
org
anis
atio
n
Finan
cial
reso
urc
es
Munic
ipal
budge
tper
capita
(dum
my,
1if
above
mean
)
1.5
61
*0.5
72
0.6
07
0.5
76
Var
iable
sch
arac
teri
sing
the
regi
on’s
degr
eeofdev
elo
pm
ent
Infr
astr
uct
ure
san
dac
cess
ibili
ties
Dis
tance
toca
pital
(ln)
�0.3
11
1.1
47
**0.8
60
*0.7
71
Are
a(ln)
1.6
15
5.8
33
*2.2
13
5.0
78
*
Popula
tion
densi
ty(ln)
1.4
43
5.5
16
*1.8
90
4.7
55
*
Hum
anca
pital
Pro
port
ion
of
popula
tion
with
com
ple
ted
seco
ndar
y
educa
tion
�0.3
46
0.3
03
0.6
37
*
Pro
port
ion
of
popula
tion
with
com
ple
ted
hig
her
educa
tion
�0.6
54
**�
0.5
90
*�
0.2
63
Regi
on’s
eco
nom
icdev
elo
pm
ent
Purc
has
ing
pow
er
(ln)
8.0
27
**8.6
38
**5.9
26
**
Unem
plo
yment
rate
�0.0
58
0.0
08
0.1
05
0.0
61
Var
iable
sch
arac
teri
sing
the
entr
epre
neuri
alac
tivi
ty
Entr
epre
neuri
alac
tivi
ty
Export
s(ln)
0.2
12
0.5
81
**0.6
48
**0.4
92
*
Weig
ht
of
mediu
man
dla
rge
firm
s
�144.2
38
*�
42.7
70�
20.8
26�
10.0
71
Num
ber
of
ente
rpri
ses
(ln)
�1.0
76
�6.4
21
**�
2.4
60
�5.6
18
**
Sect
or
speci
alis
atio
nW
eig
ht
of
man
ufa
cturi
ng
0.0
51
�0.0
31
�0.0
40
�0.0
24
Const
ant
�38.0
02�
53.3
51�
12.9
24�
38.8
80
Obse
rvat
ions
Num
ber
of
obse
rvat
ions
(N)
71
71
71
71
Munic
ipal
itie
sw
ith
Staf
f/A
ctiv
itie
s45
51
51
51
Oth
er
munic
ipal
itie
s26
20
20
20
Godness
of
fitG
oodness
of
fit
Hosm
er–
Lem
esh
ow
test
(p-v
alue)
0.8
90
0.6
55
0.1
49
0.2
27
Perc
enta
geof
corr
ect
clas
sific
atio
ns
74.6
77.5
76.1
76.1
Not
e:T
he
grey
cells
repre
sent
stat
istica
llysi
gnifi
cant
est
imat
es
(i.e
.p-v
alue<
0.1
0).
*Sta
tist
ical
lysi
gnifi
cant
at10%
;**
stat
istica
llysi
gnifi
cant
at5%
.
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level of development (measured by its percapita purchasing power) and international-isation characteristics (measured by the sizeof its exports) emerged as the most criticaldeterminants for the quest for decentralisa-tion in what SMEs’ promotion policies andmeasures are concerned.
As would be expected, and in line withKauneckis and Andersson (2009), munici-palities with a higher municipal budget percapita tend, on average, ceteris paribus, tobe associated with a higher involvement inthe promotion of economic developmentand SMEs internationalisation.
Municipalities characterised by lowweight of medium and large firms, low dens-ity of firms and low share of highly edu-cated (i.e. citizens with post-secondary(‘higher’) education) are associated with ahigher level of involvement in the promo-tion of economic development and SMEsinternationalisation. This seems to indicatethat the municipalities’ involvement may tosome extent constitute an attempt to ‘com-pensate’/overcome the difficulties and obs-tacles raised by a lack of preparation of theregion’s agents in terms of human and otherresources (e.g. organisational, financial) toface internationalisation processes. Suchevidence reinforces the argument in favourof increasing decentralisation of public poli-cies and measures in the area of SMEsinternationalisation.
Accessibilities and geographical contextemerge as (much more) relevant in explain-ing the municipalities’ involvement in the‘activities’ for promotion of SMEs inter-nationalisation. In fact, all else remainingconstant, on average, larger municipalities,with relatively higher population densitiesand more distant from the capital tend todecentralise activities to promote economicdevelopment/internationalisation of firms,replacing (or complementing) the action ofcentral government institutions. The argu-ments of Lobao and Kraybill (2009) arealso corroborated, in that municipalities
with a larger area and population densityand with more educated citizens (in thiscase, at the secondary education level)tend to perform more activities to promoteeconomic development/the internationalisa-tion of firms. Thus, some population/area/human capital threshold might be requiredto justify the decentralisation of suchactivities.
At the level of entrepreneurial activity,and as has been mentioned in the literature(see Determinants of the involvement oflocal municipalities in promoting the inter-nationalisation of firms: A literature reviewsection), the higher the volume of exports,the higher, on average, is the municipalities’propensity to perform activities to promoteeconomic development/SMEs internation-alisation. This fact is in line with Lewis(1990) regarding the extreme importanceof exports in this context. On the contrary,and regardless of their industrial specialisa-tion, municipalities with fewer enterprisesand lower proportion of medium and highfirms tend, on average, to be more proactivein this area, assigning more staff and per-forming more of such activities. This evi-dence might be rationalised, following thearguments of Lewis (1990) and Lesch et al.(1990), in light of the idea that, in the pres-ence of underdeveloped local businesses,municipalities will attempt to encourageentrepreneurial and exporting activities,acting as a supporter for local agents.
Conclusion
This study analysed whether local munici-palities could be considered as valid decen-tralised agents to promote economicdevelopment and the internationalisationof firms. With this in mind, we approachedthe matter from the perspective of the muni-cipalities themselves.
To assess the municipalities’ degree ofinvolvement in this domain, regardinghuman resources, contacts with local
156 Local Economy 29(1–2)
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enterprises and performance of such activ-ities, we created and implemented a surveyto the 308 Portuguese municipalities, gather-ing 144 responses. Broadly speaking, in all thedimensions mentioned above, the majority ofthe municipalities claim to be involved inactivities to promote economic developmentand the internationalisation of firms.
In spite of the myriad of government-designed internationalisation promotionpolicies that purport to support firms’exporting and internationalisation activity(Durmusoglu et al., 2012; Leonidou et al.,2011; Volpe Martincus and Carballo, 2010),Portuguese municipalities are essentiallyinvolved in region branding (image build-ing) or in organising fairs and trade mis-sions. There is thus a long way to go for amore profound and comprehensive decen-tralisation at this level. Given the know-ledge municipalities possess about thefirms that are located in their vicinity, itwould be desirable and reasonable toexpect that more efforts be put in imple-menting and arranging information-relatedprogrammes (including the provision ofmarketing/information/advice, informationon market opportunities and general infor-mation about doing business in a specificcountry), and education- and training-related programmes (namely, counsellingand training on the export process for inex-perienced exporters, training on exportdocumentation and foreign language sup-port). At present, the austerity programmethat the Portuguese government faces puts alot of financial pressures and restrictions onmunicipalities, which justify that trademobility-related programmes (most not-ably, assistance in participating in tradeshows/exhibitions or participation in trademissions abroad) or financial aid-relatedprogrammes (e.g. co-finance the participa-tion in trade missions, sponsor the creationof export consortia, export loans, exportcredit guarantees or funds transferring) arestill considerably centralised.
Our multivariate econometric estimatesshow that municipalities with a higherbudget per capita and located in regions withhigher purchasing power tend, on average,ceteris paribus, to assign more humanresources to SMEs internationalisation pro-motion activities, which concurs with the find-ings byKauneckis and Andersson (2009), andshows that the municipal budget determinesthe municipal government’s capacity torespond to local demand, and that municipa-lities’ financial and economic context is a rele-vant factor to explain their involvement inlocal firms’ internationalisation promotion.
Entrepreneurial activity, human capitaland the characteristics of the municipalities(population density, area and geographicallocation) also arise as important determin-ants of the decentralisation of the activitiesstudied here. Specifically, larger and periph-eral municipalities, with low density of firmsand low shares of medium and large firmsbut a high volume of exports and a reason-ably high (formally) educated population,tend to be more involved in economic devel-opment/internationalisation activities.
Notes
1. Details of the derivation of the econometric
specification are provided in the appendix.2. The null hypothesis of the Hosmer–
Lemeshow test that the models have a good
fit to the data is accepted, because p-value isgreater than 0.10; additionally, the modelsforesee correctly about three-fourths of the
dependent variable observations.
Funding
This research received no specific grant from any
funding agency in the public, commercial or not-
for-profit sectors.
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Appendix: Derivation of the econometric specification
The binary nature of the dependent variable (‘municipalities’ involvement’: 1 – Yes; 0 – No)restricts the choice of the estimation model, and in this case, logistic regression seems themost appropriate regression technique to model the occurrence (Greene, 2012). Thus, thisstudy’s analysis is conducted in the context of the general framework of probabilistic models.
Prob event occurs jð Þ ¼ Prob Y ¼ jð Þ ¼ F relevant effects : parameters½ �
whereY¼ 1 if the municipality is involved in activities related to promoting economic devel-opment/internationalisation of firms.Y¼ 0 in the opposite case.
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To explain the municipality’s involvement in these activities, there is a set of factors thatpotentially determine the results, so
Prob Y ¼ 1ð Þ ¼ F X,�ð Þ
Prob Y ¼ 0ð Þ ¼ 1� F X,�ð Þ
The X vector includes a set of factors, such as the financial and geographical context,among other variables (see Determinants of the involvement of local municipalities in pro-moting the internationalisation of firms: A literature review section). The set of � parametersreflects the impact of changes in X in the probability of the municipality being involved inactivities related to the promotion of economic development/internationalisation of firms.
In the logistic regression model, the parameters are estimated using the method of themaximum likelihood. Specifically, to test if factors such as, for example, human capital andentrepreneurial activity are significant determinants of the involvement of municipalities inactivities related to the promotion of economic development/internationalisation of firms,we use the estimation of general logistic regression with the following specifications:
ProbðMunicipalities InvolvementÞ ¼1
1þ e�Z
Z ¼ �0 þ �1ln Budget per capitaþ �2ln Number employees|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}institutionalcharacteristics
þ�3ln Telefþ �4ln Dist Lxþ �5ln Pop densþ �6Secondþ �7Sup
þ�8ln Purchasing powerþ �9Un rate Area|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}developmentcharacteristics
þ �10ln Exportþ �11Manufacturingþ �12M B entþ �13ln Number enterprises|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}activitycharacteristics
The definitions of the proxies for the variables are detailed in Table 1.
We chose to proceed to an adjustment of the logistic equation for the model rewritten interms of the odds that the event will occur, which helps to interpret the coefficients of thelogistic function more clearly and directly. In this case, the logistic model is obtained asfollows:
logProbðMunicipalities Involvement
ProbðNo Municipalities Involvement
� �
¼ �0 þ �1ln Budget per capitaþ �2ln Number employees|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}institutionalcharacteristics
þ�3ln Telefþ �4ln Dist Lxþ �5ln Pop dens
þ�6Secondþ �7Supþ �8ln Purchasing powerþ �9Un rate Area|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}developmentcharacteristics
þ �10ln Exportþ �11Manufacturingþ �12M B entþ �13ln Nmber enterprises|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}activitycharacteristics
þ"i
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A way of interpreting the logistic coefficient would be based on the changing ratio of oddsassociated with a unitary change in the independent variable
�0þ�1ln Budget per capitaþ �2ln Number employees|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}institutionalcharacteristics
þ
�3ln Telefþ �4ln Dist Lxþ �5ln Pop densþ �6Secondþ�7Supþ �8ln Purchasing powerþ �9Un rate Area|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}
developmentcharacteristics
þ
�10ln Exportþ �11Manufacturingþ �12M B entþ �13ln Nmber enterprises|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}activitycharacteristics
þ"i
ProbðMunicipalities InvolvementÞ
ProbðNo Munciipalities InvolvementÞ¼ e
In this case, e elevated to �i (i¼ 1,. . ., 13) is the factor by which the odds change when theith independent variable increases in one unit. When �i is positive, this factor will be greaterthan 1, which means that the odds have increased and that the factor positively influences themunicipality’s involvement in activities to promote economic development/internationalisa-tion; if �i is negative, this factor will be less than 1, which means that the odds havedecreased, that is, the factor negatively influences the municipality’s involvement in thepromotion of economic development/internationalisation; when �i is equal to 0, the factorwill be equal to 1, which means that the odds remained unaltered, thereby the factor showsno impact on the municipality’s involvement in the said activities. The " represents therandom term.
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