Fostering Comparative Advantage in French Regional Economies: The Role of Regional Institutional Actors and Multi-Level Institutional Resources in the Retention of FDI

Comparative institutional scholars (Hall and Soskice 2001; Whitley 2007) have argued that the mutually reinforcing institutions of distinctive ‘varieties of capitalism’ or ‘national business and innovation systems’ (NBIS) provide firms with a competitive advantage in particular economic activities and technologies. Scholars writing on the comparative advantage of ‘regions’ have alternatively emphasised the development of ‘innovation networks’, ‘skills ecosystems’ (Finegold 1999) and ‘learning regions’ (Morgan 1997) in attracting and retaining high value-added investment. This literature has, however, largely ignored how NBIS both enhance and constrain the ability of regions to compete “on unique value and innovation” (Porter and Ketels 2003: 5).

Economic geographers (Peck and Theodore 2007; Gertler 2010) have therefore recently suggested that a deeper interrogation and exploration of the interaction between regional economies and their macro-institutional environment is needed in order to understand how institutions are produced, reproduced and interact at multiple spatial scales. This follows on from the work of evolutionary theorists, notably, Boschma (2004), who acknowledged that national institutions enable or constrain the capacity of ‘regions’ to coordinate the actions of a wide range of actors and organisations with complementary inputs. Evolutionary economic geographers have therefore made an important conceptual contribution to understanding the multi-scalar institutional environment of regional economies by viewing them as complex and evolving environments where firms compete “across a hierarchy of relatively unstable selection environments that span local, national and even global spaces.” (Essletzbichler and Rigby 2007: 565)

The firm-centric conceptualisation and analysis of ‘regions’ and regional comparative advantage provided by evolutionary economic geographers therefore complements the literature on the spatial behaviour of multinational enterprises (MNEs) which has widely argued that the ownership advantages of MNEs are derived, from their ability to leverage tacit knowledge and tangible resources across national borders and different geographical locations. (Meyer et al 2011) McCann and Mudambi (2005: 1858) therefore recently acknowledged that economic geography has much to contribute to the literature on the MNE as “it cannot deal with locational issues at subnational geographical scales”.

In the context of this cross-disciplinary and largely tangential discussion, this paper combines comparative institutional and evolutionary approaches in order to examine ‘how’ and ‘how successfully’ regional and local institutional actors exploit the institutional resources of ‘national business and innovation systems’ (NBIS) and employ novel regional institutional resources in order to embed and develop the activities of foreign multinational enterprises (MNEs).

Drawing on descriptive evidence from a multiple-embedded case-study on foreign MNEs and the French city-region of Rennes-Bretagne, this paper highlights both the successes and the limits of embedding FDI on the basis of institutional resources at multiple spatial scales.

Findings suggest that institutional renewal and experimentation are not doomed to failure and that the existence of ‘institutional complementarity’ between multiple scales and levels of governance is significant in the retention of FDI and in developing the comparative advantage of peripheral regional economies.