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The Role of State, Universities/Research Centers and the Industrial Sectors on the Competitiveness of Firms: Evidences from a Latin American Developing Country, Peru

Jesús C. Peña-Vinces* University of Seville

Rafael Triguero-Sáchez Pablo de Olavide University

Carmen Díaz-Fernández University of Seville

Abstract

The aim of this research is to evaluate the influence of some elements of

the environment of the home country of the firms such as: the state

(government), universities and centers of research and the collaboration of

the industrial sectors have on the international competitiveness of firms

from a Latin American developing country. This took place with a sample

of 100 small and medium multinational enterprises (SMEs) from a

developing country, Peru, in accordance with a statistic analysis combined

carried out with Partial Least Squares Structural Equation Modeling

(SEM-PLS) methodology and multi-variate regression models. Our results

reveal that the role played by the state have been of vital importance for

the international competitiveness of their firms and its process of

internationalization; however, this is not the case with universities and

centers of research.

Key Words: Firm’s international competitiveness, the state,

universities/research centers, collaboration of industrial sectors.

JEL Classification: F23, L25, L26 ________________________________ ∗Corresponding author: College of Economics and Business, Department of Business Management and Marketing, University of Seville (Spain). Av. Ramón y Cajal nº 1, 41018, Sevilla-España. E-mail: jesuspvinces@us.es

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1 Introduction

Currently, some Latin American countries (e.g. Brazil, Chile, Peru, etc.,)

have shown a greater level of economic development, such is the case of

Peru with a mean rate of 9.9 % of GDP growth registered in the last three

years. According to the statistics of Mincetur (2010), this country is

considered one of the most important for Foreign Direct Investment (FDI)

in South America. It is very important to note that this growth is recent,

because in the past decade, it hasn’t had this excellent economic behavior.

Despite this, Peru is still considered as a developing country (WEF, 2008,

and IMD, 2008), whose case is similar to that of Chile, Colombia, Ecuador,

etc. On the other hand, there is a large number of consultants and

politicians who manifest that its economic growth is due to their activities

in foreign markets (i.e. exporting). In this sense, these activities have

played a crucial role (Peña-Vinces, 2009). In fact, the activities of

Multinational Enterprises (ME) in foreign markets are a significant factor

for the growth and development of countries (Dunning and Lundan,

1998). Therefore, we assume that behind of exports, there are firms which are

internationally competitive (Peña -Vinces, Cepeda and Chin, 2012). They

offer their products and services around the world. Hence, it is essential to

study those firms which have the capacity or ability to sell (product

/services) in international markets (Cuervo-Cazurra, 2008) and those

factors which help them to compete more efficiently abroad. Since

International Firms (IF) are considered engines of a country’s economic growth

(Peña-Vinces, Cepeda and Chin, 2012), especially in development

economies, it is important to understand the factors of the country of

origin which help firms to compete in foreign markets, or simply help

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them maintain their market quota. Accordingly, our study evaluates whether

factors such as governments, universities and centers of research and the

collaboration of industrial sector exercise influence on the firm’s international

competitiveness (FIC). It is important to mention that these factors have not

yet been studied in Latin America, which has led us to analyze the case of

Peru.

According to literature review (2000-12) our study could be one of

the pioneers in evaluating whether its effect is either negative or positive

(the main research question). Therefore, our paper will cover two gaps,

proposed by the literature. First, we propose a multi-variate regression

models which works with latent and non- latent variables, furthermore,

the FIC is studied both from financial and non-financial approach.

Second, this model is applied in a developing country, with the aim of

noting if we can find similar results with relation to the theoretical background

that generally comes from developed countries. In this sense, Cuervo-Cazurra

(2008, p.139) points out that we even know very little about ME from

Latin-America (either large, medium and small), and that it would be

interesting to deepen our knowledge of their broader aspects, especially

those of developing countries.

Ultimately, our study holds clear implications for both

management and academics, as it will help design state public policy, and

even more so in Latin-America, since in some developing countries,

especially those in South America, the role of government is insufficient

(Porter et al, 2008).

2 Background and the Research Model

The concept of competitiveness (i.e., countries) although broadly

controversial, continues to call the attention of politicians, economists and

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firms in all over the world. Its controversy lays in the lack of better

indicators to evaluate the performance of countries.

Generally, when speaking about a country’s competitiveness, one

refers to its capacity to produce goods and services that meet market

requirements and at the same time maintain and enhance the real income

of its citizens (Cho and Moon 2000; Cho et al, 2007; Porter 1998, based on

the concept of OCDE, 1993). Certainly, competitiveness depends on the

capacity of a firm to successfully compete in domestic and international

markets. Yet, when it comes to a country’s international competitiveness,

it refers to growth and macroeconomic development scenarios (Cho and

Moon 2000, p. 187), because competitiveness cannot be measured or

defined in terms of international competition among nations (Peña-Vinces,

2009). In other words, for this type of competitiveness it is necessary to

analyze a country’s international economic scenario in order to

understand their situation over a specific time period (IMD, 2008; WEF,

2008). However, when referring to a firm’s international competitiveness,

one studies internal and external factors that help them to achieve better

international performance in terms of market share, increased exports, and

greater profit margins when they do business overseas (Cerrato and

Depperu, 2011; Dunning and Lundan, 1998; Zeng et al, 2008). In summary,

international competitiveness is a concept that directly refers to a firm’s

performance and not the country’s performance (Peña-Vinces, 2009; Peña-

Vinces, Cepeda, and Chin, 2012).

Thanks to Porter’s work (1990), firms have been taking important

leadership roles in international competitiveness. He affirms that not

countries, but rather companies are those which compete internationally.

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In regard to, the environment of the home country is defined as the

grouping of elements of the country of origin of firms, which may be

controllable or uncontrollable by the companies, but that in some way

condition their competitiveness (Belso-Martinez, 2006; Fahy, 2002):

However, on certain occasions, they can help the firm to improve its

competitiveness in foreign markets (Fahy, 2002; Toppinen et al., 2007;

Wheeler et al., 2008). In this sense, the literature review shows us that the

high level of competition between enterprises in the local market (home

country) explains the success of firms in foreign markets (Toppinen et al.,

2007). This is because the struggle for the home market makes firms more

prepared to face global competitors (Cuervo-Cazurra, 2008; Porter, 1998).

Diverse empirical studies show the existence of a wide consensus in

identifying which are the factors of a country origin which exercise

influence on a firm’s international competitiveness (Arze and Svebsson,

1997; Carpano et al, 2006; Cho et al, 2007; Fahy, 2002). These factors could

act as motivating elements for exporting, but at the same time, on many

occasions they might equally become an obstacle toward obtaining an

international competitive advantage. Among the numerous factors

presented by the literature review, in this research we have centered on

only three (See Figure 1). We have chosen this selection because, within

our scenario of study regarding countries en route toward development,

such factors would be the most important for the FIC. Figure 1 shows the

research model and the development of our hypotheses.

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FIRM’S

INTERNATIONAL

COMPETITIVENESS

Collaboration

of Industrial Sector

Universities/

Research Centers

Governments (states)

Figure 1. Research model

2.1 The Role Played by Governments (States) on the

FIC

There are many works carried out in developed economies which

have demonstrated the direct influence of the actions and policies made

by governments in favor of firms’ international competitiveness (Cho and

Moon, 2000; Hao-Sung, 2003; Moon and Lee, 2004; Moon, Rugman and

Verbeke, 1998; Porter, 1990). Wilkinson et al (2000) have claimed the

important role that governments play in the competitiveness of its

industries, by means of policies supporting exporting, and by searching

for Direct Foreign Investment (IDE, Inward). On the other hand, there are

also some researchers which suggest that firms respond better in

international markets if their governments support them firmly in their

process of internationalization (Arze and Stevenson, 1997; Cho and Moon,

2000; Ho, 2005; Nadvi, 1999). Moreno-Jaimes, (2007, 141) have argued that

the role of government involves very diverse activities, which range from

the classic function of protection or other forms of direct or indirect

intervention (e.g. control of interest rates, signing international trade

agreements, and so forth).

Porter (1990) and Porter et al (2008) establish that the role of

governments must not be the direct intervention in business processes, but

rather it is necessary that they be the stimulator of the firm’s

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competitiveness, since their attitude could favor certain sectors and

neglect others. Therefore, the function of government should be only that

of a catalyst of innovation and competitiveness (Lowe, 2003; Porter et al,

2008), and a facilitator in searching for FDI. In this sense, governments,

through their political representatives abroad, allow firms with scarce

resources to promote their products and services in foreign markets (Arze

and Stevenson, 1997; Nadvi, 1999; Wilkinson et al, 2000). Taking into

account the previous arguments, we think that it is certain that

governments must take part in the internationalization process of its firms.

On the other hand, the institutional framework (laws) usually

controlled by governments determines managerial decisions concerning

places where they choose operate commercially (Del Sol and Kogan, 2006;

Sala-i-Martin et al, 2008). Consequently, the strategies of the international

companies will always be influenced by the macroeconomic policies

applied by countries in a direct or indirect manner, and therefore they

eventually end up controlling the markets (Del Sol and Kogan, 2007;

Toppinen et al, 2007, Sala-i-Martin et al, 2008). In summary, when we talk

about governments and the actions exercised by its political

representatives, we must take into account that: 1) On many occasions

their diverse actions benefit national enterprises, which allows to firms

improve both locally and internationally and 2), Thanks to the

opportunities offered by politicians, firms manage to obtain competitive

advantages.

According to the literature review, the actions of government and

politicians may be the following:

a) Investment in research and development (CCI, 2008; IMD, 2008; WEF, 2008).

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b) Investment realized in basic infrastructures (airports, ports, telecommunications Cho and Moon, 2000, Porter, 1990; Porter et al, 2008).

c) Incentives granted to firms so that they may realize research and development activities (IMD and WEF, 2008).

d) Efficient management of the administration (not bureaucracy, computerized systems of attention to citizens) (IMD, 2008; Porter et al, 2008; WEF, 2008).

e) A good, regulated business framework (Cho, 1994; Jin and Moon, 2006; Porter 1998; Sala-i-Martin et al, 2008).

f) The stability of money-markets (IMD, 2008; WEF, 2008).

g) Facilitating access to national and foreign financing for firms and entrepreneurs (IMD, 2008; WEF, 2008).

h) Watching for sustained growth of GDP (Cho and Moon, 2000, IMD, 2008; Moon and Lee, 2004; WEF, 2008).

i) The formation of regional networks among nations, and the search for new markets for firms (Zho, Yao and Wand, 2006; Wilkinson, Mattsson and Easton, 2000).

j) Politics of attraction or repulsion in certain industrial sectors (Del Sol and Kogan, 2006; Jin and Moon, 2006).

k) The stability of the types of change (Porter et al, 2008, Sala-i-Martin et al, 2008; Thompson, 2004)

It is important to mention that this list is not exhaustive, and that

there exist other variables that affect directly or indirectly the FIC. For

instance, some researchers consider governments a member of a network

whose actions constitute competitive advantages for its companies

(D'Cruz and Rugman, 1992; 1993), since it facilitates access to certain

resources that are not usually directly available to firms.

To conclude with the literature reviewed regarding governments,

we think that is important to also consider another diverging viewpoint

such as Abereiijo et al (2009) who have manifested, regarding their results

obtained from studies realized in Nigeria, that the presence of political

institutions such as governments and universities in developing countries

do not help those firms established there become more competitive

internationally. Their findings are attributed to the limited recourses

available to governments in the above-mentioned countries to invest in

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infrastructure or finance research and development activity in local

universities (Abereiijo et al, 2009). As opposed to these differences we

pose the following hypothesis:

Hypothesis 1: The role played by government will positively affects the FIC 2.2 Universities/Centers of Research

Universities and centers of research play a very important role in the

competitiveness of countries, industries and companies, particularly in

developed countries (Cho, 1994; Cho et al, 2007; Moon and Lee, 2004).

They act as a source of specialized knowledge that provide or help to

build competitive international advantage for firms which acquire them

(Cho and Moon, 2000; Dalman et al, 2004; Chen and Lin, 2006; Gualdrón

and Dobón 2010; Porter, 1998). They also help to bring together, locally

and regionally, the abundance of new knowledge that these institutions

developed and manage, thus enabling significant savings in corporate

costs, specifically in research and development activities (Tijssen, 2006;

Dalman et al, 2009).

Empirical findings reveal that firms which have a cooperation

agreement with competitive universities are much better prepared

internationally in relation to those that do not (D'Cruz and Rugman, 1992,

Nilsson et al, 2005; Tijssen, 2006). There exist many such cases, one of

them having to do with North American music instrument manufacturers,

where the sector’s best professionals and scientists work together. Another

more recognized case is Finland’s wood and biotechnology sector (Nilsson

et al, 2005), or that of Spain, where 90 percent of firms’ biotechnology

patents are developed thanks to the collaboration between universities

and local research centers.

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D'Cruz and Rugman (1993, 1994) argued that universities are a type

of non-commercial infrastructure localized in the countries of origin. They

allow international firms to be better prepared and trained to compete

with competitors in any part of world. The main reason is that these

entities not only offer new knowledge to firms, but also provide highly

qualified and prepared personnel (human resources) that guide, lead and

manage firms in international markets (Cho, 1994; Cho and Moon, 2000;

IMD, 2008; Porter et al, 2008). Currently, universities are also stimulating

entrepreneurship by promoting the birth of new firms gestated within their

institutions (Gualdrón and Dobón, 2010). In Europe such firms are called

spin-offs.

In short, universities have become generators of industrial tissue for

regions and countries (Nilsson et al, 2005). One must take into account

that the literature reviewed comes from countries with high levels of

economic development. Considering that this study has been conducted

on a developing country, we therefore formulate the following hypothesis:

Hypothesis 2: The role played by universities/research centers will have a positive influence on the FIC 2.3 Collaboration of the Industrial Sector

It is important to mention that the sector variable is widely used as

a control variable, however in this research we studied the collaboration

between companies belonging to a sector or involved in similar activities

(e.g, textile, farm business, and chemical, etc.), because their mere

presence would only tell us its position within an industrial group, but not

the role that these play within the FIC. In this sense, when mention

collaboration we are talking about the mechanisms that one way or

another allow enterprises to compete more successfully in foreign

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markets. The truth is that companies need the support and assistance from

their sector in order to grow and compete internationally (Arze and

Svebsson, 1997, Cho and Moon, 2000; Cho et al., 2007; Nadvi, 1999).

Porter (1998) argues that the presence of suppliers and similar

industries within a nation provides advantages for companies that

compete internationally. Such benefits may include innovation,

transformation, exchange of information and the participation in

technological development. Therefore, the success of an internationally

competitive company is associated with success of local industries (Nadvi,

1999; Porter, 1998). On the other hand, it also allows firms to form

partnership agreements in order to achieve international success (D'Cruz

and Rugman, 1993). But the presence of similar industries is not the only

key in the FIC. The presence of other institutions such as banks, insurance

companies, advertising agencies, and so on (Cho and Moon, 2000; Cho et

al, 2009; Hao-Sung, 2003, Jin and Moon, 2006) are also important. Hence a

nation’s enterprises reap the maximum benefits of the local environment

when their supplier’s industries are themselves global competitors, which

then facilitates the necessary flow of technology for its customers located

in foreign markets (Hao-Sung, 2003; Porter, 1998).

Therefore, within the analysis of the collaboration of industrial

sectors, according to Porter (1998) is also important to mention the role

that geographical proximity plays among enterprises of similar sectors,

which have acquired the denomination of clusters, according to this

author. That is to say, firms which are geographic concentrations of

interconnected companies, suppliers of specialized goods and services,

related industries and associated institutions in a particular field in which

they compete, but also cooperate. The local proximity of companies and

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institutions and establishing relationships between them requires better

coordination and trust than simple market interaction between

geographically dispersed actors (Mesquita and Lazzarini, 2008). This

coordination and trust between firms is much more flexible and less

expensive than that provided by vertical integration or formal

relationships between companies and networks, alliances or

collaborations. In this sense, Porter (1998) also states that concentrations

are a system of interconnected enterprises and institutions in which the

whole is greater than the sum of its parts. This is because they represent a

source of competitive advantage because of the simple fact that firms

which are geographically close benefit from economies of scale and scope

and the high specialization of labor offered by some regional areas (Ito

and Pucik, 1998). Empirical evidence shows us that firms which are

located in highly competitive industries benefit from activities such as

research and development, as do those which belong to sectors with

similar characteristics and they tend to be more competitive ((Nadvi, 1999;

Mesquita and Lazzarini, 2008). Furthermore, industrial sectors allow

smaller companies which are ignorant of foreign markets to achieve

internationalization, thanks to cooperation with other companies of its

sector (Nadvi, 1999; Zent et al, 2008).

Wilkinson et al (2000), has argued that the geographical proximity

between customers and suppliers allows the mutual adaptation of

products and processes, resulting in efficiency gains along the value chain

and a competitive advantage with respect to third parties.

It is important to mention that firms that have strong ties to their

sector usually benefit from the transfer of knowledge, new technology and

resources, and the experience of the most competitive companies, which

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facilitates learning and allows for rapid internationalization (Arze and

Stevenson, 1997; Lin and Chaney, 2007; Mesquita and Lazzarini, 2008;

Wilkinson et al, 2000)

Ultimately, the collaboration between companies allows them

compete better in foreign markets, as opposed to when they operate in

isolation, which also allows significant cost savings that firms individually

could not achieve on their own (Toppinen et al, 2007). As we mentioned

above, all the literature analyzed comes from developed countries. In the context of

developing countries, we pose the following hypotheses

Hypothesis 3: The collaboration of the industrial sector could positively affect the FIC

3 Methodologies 3.1 Measurement of Variables At this stage we note that Tables 1 and 2 include a complete list of the

items used in this research. They also provide items means, scales’

reliability coefficients, and inter-scale correlations.

In order to measure the FIC we have employed a measurement of

its financial nature which is very objective that evaluates the growth rate

of foreign sales, in accordance with many authors (e.g. Arze and Svebsson,

1997; Coviello et al, 1998; Ito and Pucik, 1998; Fahy, 2002; Ho, 2005;

Carpano et al, 2006). On the other hand, a more subjective measurement

commonly accepted by the academic community developed by Zou and

Stan (1998) and confirmed by Wheeler et al (2008) were also used. It is

referred to as the perception of the aims and achieved goals in foreign

markets.

In respect to the importance and role that the collaboration between

companies of the same sector plays in the competitiveness of firms, Belso-

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Martínez (2006, 212) states that whatever the denomination of the term

sector collaboration, it always refers to the degree of cooperation between

firms in order to improve their strategic position in international markets.

Therefore, to measure this variable the questionnaire of Lin and Chaney

(2007: 570) was used, while to measure the role played by universities and

research centers in developing countries we adapt the scale developed by

Lefebvre et al (1998) to the Peruvian context.

According to literature reviewed on the FIC, almost 100% of the

works published used control variables when studying any aspect of the

firms, for two important scientific reasons; first, the objective is to obtain a

parsimonious model (Mesquita and Lazzarini, 2008). And second, the FIC

depends upon multiple factors or areas within a firm. Our study is no

exception in this regard. Two measurements were used as control

variables (1) Size of firms (Wheeler et al 2008; Zou and Stan 1998), and (2)

Longevity of firms in domestic and foreign markets (Peña-Vinces, Cepeda

and Chin, 2012). A summary of the measuring instruments and their

variables can be observed in more detail in Table 1.

Table 1. Measurement and constructs (variables)

DENPEDENT VARIABLE

International competitiveness of firms (FIC) Cronbach’s Alpha, Composity Reliability Analysis of the extracted variance

Financial measures (FIC1) Rate of growth (%) during the last three years as a consequence of foreign sales (2006, 2007, 2009). Official data from Mincetur (2006)

Single measure

Non Financial measures (ICnF2)

a) Assess the success of your company in foreign countries during

the last three years 1 = very bad, between 5% - 10% 2 = bad, between 10% - 20% 3= average, between 20% - 40% 4= good, between 60% - 80% 5 = very good, between 80% -100% -b) Satisfaction of objectives, compliance and goals achieved in

foreign markets in the last three years 1 = very bad, between 5% - 10% 2 = bad, between 10% - 20% 3= average, between 20% - 40% 4= good, between 60% - 80%

Cronbach’s Alpha = 0.856 Composity Reliability = 0.929 Analysis of the extracted variance = 0.867

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5 = very good, between 80% -100%

INDENPEDENT VARIABLES

The government’s role The work of the Peruvian government has been very important in order for your firm to achieve an international presence, in terms of foreign sales. Likert's scale 1-7, (1: not important and 7: very important).

Single measure

Universities and Research Centers (U&R ) a) Relationships between local universities and your firm have positively influenced your internationalization process. Likert’s scale 1-7, (1: very slightly and 7: very much). b) The relationship between research centers and your firm have positively influenced your internationalization process. Likert’s scale 1-7, (1: very slightly and 7: very much).

Cronbach’s Alpha = 0. 731 Composity Reliability= 0,867 Analysis of the extracted variance = 0.767

Collaboration of the Industrial Sectors (CIS)

a) Decisions concerning the internationalization of your business have generally have been based on industry experience and knowledge afforded by other companies in your sector A dichotomy scale used: (Yes= 1, No= 0) b) Learning among business groups, belonging to networks or linkages. We believe that these can help to reduce risk and uncertainty, and help us compete in overseas markets without having to wait to gain knowledge and dominate our own market (local market). A dichotomy scale used: (Yes= 1, No= 0)

Alfa de Cronbach 0. 580. Composity Reliability= 0.819 Analysis of the extracted variance = 0.697.

CONTROL VARIABLES (CV) Size of Firm (SF)

Number of employees in firm during the last three years Single measure

Years of local operation (YLO)

Number of years of commercial operation in the firm's native country (The average of last three years)

Single measure

Years of international operation (YILO) Number of years exporting (average of last three years)

Single measure

Table 2. Inter-Scale Correlation Coefficient

N Mean SD 1 2 3 4 5 6 7 8

1) FIC1 97 45.72 104.14 1

2) ICnF2 100 3.96 0.35 -0.378** 1

3) Gov 100 4.22 1,86 0.161* -0.061 1

4) U&R 100 3.69 1.73 -0.184 0.228* 0.332** 1

5) CIS 100 0.75 0.35 -0.331** 0.486** 0.060 0.322** 1

6) SF 94 554.36 927.24 0.746** -0.174 0.104 -0.180 -0.120 1

7) YLO 100 24.41 18.457 0.223* -0.206* 0.082 0.060 -0.054 0.257* 1

8) YILO 100 13.80 10.72 0.212* -0.098 0.151 -0.127 -0.043 0.291** 0.476** 1

Note. SD. Standard deviation N= number of firms, **.p< 0,01; * p < 0,05

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3.2. Population and Data Collection

This study has been conducted in a developing South American country

such as Peru because this country has shown a great level of economic

industrial growth over the past three years (9% of GDP). We thus studied

the industrial export sector of Peru which, according to the classification

made by this country’s Ministry of Tourism and Commerce (Mincetur,

2006), is divided into sixteen areas: Agribusiness, Agricultural, Crafts,

Footwear and Leather, Hydrocarbons, Jewelry, Wood and Paper,

Mechanical Metals, Mining, Non-metallic Mining, Fishing, Chemical Iron

and Steel, Textiles and others. Concerning the unit sample, the

questionnaires have been answered by three types of respondent

international operations managers, CEO and manager of foreign activities

Following the Barroso et al (2010)’s recommendations, the

questionnaire methodology was adopted in this work. According to the

Mincetur (2006)’s ranking the questionnaire was sent to the top 1,000

export companies, which make up the population of this study. A total of

100 questionnaires were returned in different forms: via email, postal mail,

on-line survey (web survey) and personal interviews with manufacturers

(from 06/07 to 05/09). This represents a reply rate of 10 per cent. The low

reply rate is explained in part because many companies from developing

countries are hesitant to answer surveys from foreign universities, according to

similar studies made in developing countries (Mesquita and Lazzarini,

2008), taking into account that the study was conducted from Spain and

that the subject of study is in Peru. The following table summarizes the

descriptive statistics of the unit analysis.

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Table 3. Sample’s statistics-characteristics

N Minimum Maximum Mean SD International sales, in US$ 100 46.240 266,916.4 15,600.7 41,205.2 Rate of growth of international sales ssalesalessales

97 -63per cent

660per cent 45.72per cent 104.11 Firm Size 94 7 4.20 554.36 927.25 Years of local operation 100 5 130 24.41 18.46 Years of international operation 99 3 67 13.80 10.73 Number of countries of sales 99 1 48 12.37 11.65

Main export markets USA, China, Switzerland, Portugal, Canada, Chile, Brazil, Japan, Germany, Spain, etc.

Note. SD. Standard deviation N= number of firms

According to Table 3 and respect to the qualitative analyses of the

sample, the age of these companies is on average 24 years for total

operations and 14 years for international operations (i.e., only exporting).

Relative to the size of the enterprises; they had an average of 554

employees. In reference to the number of countries where the companies

sell their products and services, this reflects the capacity of a firm to

compete and remain in international markets (Cerrato and Depperu, 2011)

the vast majority has sold to more than 12 countries.

3.3 Reliability and Validity of Constructs

Since we have worked with latent and non-latent variables, various

researchers like Chin (2003) and Tenehaus et al (2005), and others suggest

that is necessary to homogenize the values of regression analysis. To carry

this out we have transformed the variables into latent scores using the

Partial Least Square (PLS) technique developed by Chin (2003).

In this sense, it was important to first evaluate the reliability and

variance of all constructs. On one hand, they were evaluated using

Cronbach's alpha, in which, as can be seen in Table 1, the average of all

constructs are over 0.70 (Hair et al. 2005). Composity Reliability (CR) was

also assessed (CR ≥ 0.70), exceeding the criteria set (Nunallaly, 1979) and

the analysis of variance extracted (AVE) according to Fornell and Larcker

(1981) (see results in Table 3), is evaluated simultaneously (AVE ≥ 0.70).

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Finally, the variance inflation factor (VIF) for each independent

variable was computed to assess the multicollinearity problem between

variables within the regression model. Mason and Perreault (1991)

recommend a VIF score less than 10 as an acceptable threshold. The

highest VIF score occurs for the industrial sector (VIF = 1.99), suggesting

that multicollinearity did not pose a problem in this study.

4 Tests of the Research Hypothesis

We elected to use multi-variate regression models. This technique was

chosen because it allows an examination of the impact of all three

independent variables on the international competitiveness of firms

simultaneously.

In order to explore the influence that different factors have on the

FIC, two regression models were analyzed. One of them estimates the FIC

considering a pure accounting approach (Model 1), and the other

contemplates a subjective approach (Model 2). The specifications of the

linear regression are as follows.

Model 1

Y1 = a1 + β1X1 + β2X2 + β3X3 + β4X4+ ε1

Model 2 Y2 = a1 + β1X1 + β2X2 + β3X3 + β4X4+ ε1

Where: Y1 = International competitiveness of firms (Financial approachFIC1); Y2 = International competitiveness of firms (Non-Financial approach ICnF2); X1 = Role of Governments (Gob); X2 = Universities/Research Centers of Country of Origin (U&R); X3 =Collaboration of Industrial Sector (CIS) X4 =Control variables (CV); ε1= residual term

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5 Survey Results

In Model 1 the main aim has been to evaluate the FIC from a financial

point of view. In this case, the results of the multiple regression model

indicate (Table 4), assuming the correct fit of our model, it is fairly

significant (F = 26.25, p <0.01). The same occurs with the other model

analyzed (Model 2) (F = 5.75, p <0.01).

On the other hand, the independent variable explains the variance

in the case of model 1, with 65 per cent, whereas in model 2 it is 30 per

cent. These are both acceptable values for Social Science Research, as has

been manifested by Hair et al (2004).

The results of our first model show the positive effects of the role

played by governments in the competitiveness of Peruvian firms (β =

0.133, p <.1). While the variables that evaluate the role of universities /

research institutions and the collaboration of industrial sectors do not

have empirical support, because these have demonstrated a negative

value, contrary to the hypothesis posed initially. Within the same model,

we underline the effect a firm’s size has on international competitiveness

(β =- 0.698, p <.05) which showed to be an important element in our

subject of study.

Continuing with the analysis of the results, our second model

(Model 2) studied the FIC from a subjective approach. We stress the

importance that the collaboration of the industrial sector has on the

perception of the Peruvian entrepreneurs within their industries and firms

(β = 0.379, p <.001.). However, the other two variables (Gob and U&R) that

were proposed as a condition of firm’s competitiveness were not

sustained. We emphasize that, just as in the prior model (Model 1), the

20

firm’s size played an important role in the FIC, and in particular the

internationalization process of firms.

Table 4. Results of regression model

Note: NS= Non-sustained, bold values are Path coefficients, * p < .05; ** p < .01; ***p<0.001; T-values in parenthesis

6 Conclusions

In accordance with literature reviewed (Coldwell, 2000) the results have

shown how the role played by governments and the politicians is essential

to successfully achieve a firm’s international competitiveness. In this

sense, we may say that governments are not an obstacle for firms that

want to sell in foreign markets, but rather a strategic partner in their

process of internationalization. In spite of the scarce resources that

governments have in developing countries, their role favors domestic

enterprises which operate in foreign markets and continues to be very

important for the competitiveness of both countries and firms. In

Variables Model 1

(FIC1)

Financial Measures

Model 2 (ICnF2)

Non-financial Measures

Role of Governments 0.133

(1.826)* -0.095 (NS)

Universities and Research Centers -0.026 (NS)

0.135 (NS)

Collaboration of Industrial Sectors -0.268

(-3.772) 0.379

(3.748)*** Control variables

Firm Size 0.698

(10.092)*** -0.038 (NS)

Firm Age (Local) 0.029 (NS)

-0.280 (-2.616)

Firm Age (International) -0.038 (NS)

0.073 (NS)

Intercept 3.970

(1.570)* 3.523

(12.536)***

R2 0.65 0.29 Adjusted R2 0.62 0.24

F-statistic 26.25

5.74

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summary, governments have a direct influence on the FIC of Peruvian

SME

Regarding universities and centers of research and their

relationship to companies; when this factor was evaluated through

objective measures of competitiveness, the results showed negative values

opposed to those expected. The same occurred with the subjective

evaluation of firm competitiveness. However, we can retain this slight

trend shown by the results, which becomes a clear line of future research,

in order to compare whether such a trend is maintained or simply lost in

the future. Therefore, the results of this competitive factor would indicate

that in developing countries, particularly in Peru, these institutions are not

viewed as important elements for the success of companies in foreign

markets.

One explanation would perhaps be that the lack of competitiveness

of these institutions in developing countries is due to the limited

knowledge they generate, and that these later have no impact, either

positive or negative, on the competitiveness of domestic firms. The lack of

trust that exists between Peruvian companies and its universities and

research institutes is quite clear. Qualitative data reveals that this is the

case with 90% of the companies studied here, which did not consider

important the signing of cooperation agreements between community

colleges, businesses and private enterprises. Hence, in the country where

the study was conducted most companies prefer to train personnel for key

staff positions in foreign universities. Academic and scientific rigor in

some universities in Peru is a bit poor compared to foreign universities

(Martinez, 2011; Piscoya, 2011), which leads Peruvian entrepreneurs to

generalize that perception. This does not mean that there are not

22

exceptions. High quality institutions do exist, but the truth is that there

are very few (Martinez, 2011), which are generally focused on the private

sector and oriented toward training professionals and there neglect

research, which is therefore not available when require by firms.

Summarizing that exhibited above, universities and research

institutions would not be sources of support for achieving competitive

advantage in foreign markets, in contrast to the literature studied (Tijseen,

2006; Nilsson et al 2005; Porter et al. 2008), which usually involves

countries with a high level of industrialization.

In regard to the cooperation of industrial sectors, we can say that its

influence on firms’ international competitiveness would be indirect,

because when studied in relation to sales growth in foreign markets

(objective competitiveness) the results have shown negative values

contrary to those desired. However, when these variables were studied in

a subjective manner the recorded values were far from negligible,

allowing us to conclude, at least, that entrepreneurs have a very good

perception of the role played by the sector in the process of

internationalization. This confirms that their international competitiveness

is due in part to the relationship with their industries and the knowledge

generated by the industrial districts, which have allowed them to reduce

risk and uncertainty upon entry into foreign markets. In this sense, the

results allow us establish that the relationship between enterprises of the

same sector or with others sectors is very important for achieving

international competitiveness, according to the literature reviewed (Hao-

Sung, 2003; Porter, 1998)

Regarding the implications for management and politics, there is no

doubt that the policies implemented by national governments in favor of

23

their companies have a direct effect on their international competitiveness.

This encourages the governments of other countries to the commit to

increasing funds destined to, and in favor of policies that assist in the

internationalization of their companies (competitiveness ex-ante),

especially in countries with economic development models based

primarily on activities proceeding from foreign markets (Dunning and

Lundan, 1998; Peña-Vinces, 2009).

As we have shown in this work, the cooperation between firms

within the same sector is very important in order for firms to compete

successfully in foreign markets (Mesquita y Lazzarini, 2008; Nadvi, 2008).

Hence, its geographic location constitutes a key element for a firm’s

competitiveness. In this sense, the descriptive information of the sample

revealed that 98% of Peruvian export firms that operate in foreign markets

are located in this country’s major industrial districts, allowing them to

obtain advantages such as the specialization and abundance of labor, and

economies of larger scale and scope.

7 Limitations and Future Line of Research

One of the main limitations of this research is that the study sample has

been collected in only one country (Peru). Therefore, the results could not

be applied to other countries with different economic characteristics. The

other limitation is related to its non-longitudinal character. And finally,

the limited literature on firm competitiveness has not allowed the

establishment of other relationships among the variables studied here,

pointing to the need for further research on these issues so that

entrepreneurs and academics can count on more scientific information

being available. This is evident when comparing the difference between

our results and the theoretical approaches posed by the literature review.

24

With respect to future lines of research, we propose the evaluation

of the factors discussed here in relation to other internal aspects of firms,

such as the effect that they could have on R&D, firm strategy or human

resources. On the other hand, our constructs (variables) have been

assessed in direct relation to international competitiveness and it would be

interesting to know which variables moderate the relationships studied in

order to understand which factors exercised a direct influence on these

variables.

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