The Portuguese Economic Divergence with European Union: A Call for Corporate Strategy in Light of New Economic Geography Principles

José Porfírio

No 2011-1, Spatial and Organizational Dynamics Discussion Papers from CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve

Abstract: New Economic Geography (NEG), a new branch of Spatial Economics that was developed at the beginning of the 90s, supports that “peripheral” European Union’s economies (like Portugal, Greece, Ireland or even Spain) are predestined to diverge from the developed European “centers” like France or Germany. This new field of Economics seems to be supporting the incapacity of European structural policies to battle against this divergence trend, and ultimately an inevitable catastrophe of the Single European Currency, and thus, of the European integration project as a whole. The recent evolution of the main EU’s peripheral economies(e.g. Greece, Portugal and Ireland) confirming their divergence trend from the developed core EU’s countries, seems to support these NEG forecasts. However, in our paper we support that, taking into consideration some identified pitfalls of NEG’s principles, and on the other hand, considering the potentialities that may arise from the capacity of enterprises to put in place effective Corporate Strategies (which its related with the need to develop their strategic capabilities), peripheral countries/regions may be able to overcome this apparent fatalness. Thus, more important than just funding is the aptitude of these peripheral economies – through their economic agents’ capabilities – to use these funding and profit from them adequately. This will lead us to support, not just the continuation of the European structural funds’ policies, with the positive impacts arising from the inherent redistribution effects, but also to conclude on the urgent need to develop strategic capabilities of main economic agents of these regions. Using an empirical survey, performed during the transition period of the introduction of the Euro (1999-2001), to companies operating in Portugal, we conclude by demonstrating that the lack of corporate strategic capabilities may well be an important explanation for the present difficult economic situation, explaining most of the existing problems of Portugal and that, only through a real change in the prevailing paradigm, regarding the action of these companies, we may be able in a near future to sustainably overcome the present difficulties.

Keywords: Economic Development; New Economic Geography; Corporate Strategy; European Union; Peripheral Territories (search for similar items in EconPapers)
JEL-codes: M21 O12 R12 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2011-03-31
New Economics Papers: this item is included in nep-eec
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