A cross-country analysis of the effects of firm characteristics and regional factors on small firm competitiveness

This study explores the influence of firm characteristics and regional factors on firm competitiveness of Small and Medium-sized Enterprises (SMEs) using a cross-country analysis of Hungary and the Czech Republic, based on the Resource Based View (RBV) and insights from geographical economics and regional development frameworks. Cross-sectional regression models are used to analyze a dataset of 331 SMEs distinguished along urban and rural divide in the two countries. The findings of the study show that firm size has a positive and significant association with firm competitiveness suggesting the importance of a firm’s scale in harnessing competitive advantage. Firm age relates negatively with firm competitiveness, indicative of the likely inertia challenges faced by older firms thus affecting their propensity to adapt to market dynamics as well as to innovate. While the study fails to validate significance of urban-rural location dichotomy as a predictor of competitiveness, firm agglomeration, measured by the number of firms in regional clusters positively relates to competitiveness, pointing to potential benefits of agglomeration economies. Based on the findings, targeted policy actions that consider the context of the environment in which firms operate are recommended in order to foster firm competitiveness. By adopting a comparative perspective, this study contributes to the understanding of contextual nature of SMEs. The study extends practical insights to firm owners, policy makers and development practitioners for fostering firm competitiveness.

Keywords: SME competitiveness, cross-country analysis, RBV, regional development, urban–
rural location