Companies' International Openness and Local Common-Pool Resources: The Need for Balance in Advanced Economies

In the last decades, companies in high-income countries have progressively increased their level of international openness by arranging their activities, both production and trade, at the global level. If, on the one hand, the extensive offshoring strategies applied by multinational companies have led those firms to increase their performance in the short-medium run; on the other hand, the relocation of activities away from their domestic base (mainly, the transfer of low value-added operations in low labour cost countries) have weakened advanced economies long-run competitiveness (for a critical perspective, see Buciuni et al., 2014). The loss of control over the production has generated - in the territories in question - a gradual erosion of the local common-pool resources, defined as the set of external economies of localisation (such as job skills, supply networks, manufacturing culture, social capital) that companies significantly employ, albeit often unconsciously (Pisano & Shih, 2012; Ostrom, 1990).

A growing body of recent studies (e.g. Ellram et  al., 2013; Dachs & Kinkel, 2013; Bailey & De Propris, 2014) has highlighted how multinational companies have started to move manufacturing back or near to their home countries (a phenomenon defined as re-shoring and near-shoring, respectively) to hinder the dissipation of relationships with key local actors as well as downgrading of the skill base necessary for the development of ‘new commercially viable products’ (Pisano & Shih, 2009).

Once back in/near to their home country, firms had to define new strategies able to balance the engagement with their global and local networks. Notwithstanding the critical social-economic consequences of the ‘territorial capital’ (Camagni, 2008) hollowing out in high-income economies, we still have scant evidence on how companies in those areas can foster the renaissance of their domestic environment. Hence, the following research question emerges as interesting and relevant yet under-studied issue: which level of international openness and use of local common-pool resources should firms undertake to boost innovation in their domestic base?

The paper address this question by using a unique data set on outward foreign affiliate trade statistics and local resources (human capital endowment, supply and users networks, and institutions) for manufacturing companies located in Italy. Firstly, we proposed indicators that measure the local common-pool resources; and, secondly, we empirically investigated the extent to which innovation in the home region is a function of the level of international openness strategy and the use of local common-pool resources undertaken by manufacturing companies operating in the surrounding environment. By applying statistical technique of regression analysis, the paper shows the mix of international and local firms’ presence necessary to foster innovation in advanced economies.

This work sheds light on which are the actions (both at the local and global range) that companies in high-income economies should engage to increase the competitiveness of their domestic environment. The paper suggests encouraging a sustainable reproduction of the local resources system along with affirming firms’ presence at the international level. We conclude drawing some policy implications linked with the attraction of backshored investments.