Competitive Regions, Competitive Firms? A Case Study on Hungary

To boost economic performance, national governments aim particularly at reducing differences in sub-national regional competitiveness within the given country. For that, it is vital to track and compare the performance of the individual areas. But do we measure the right thing? Do the measures of the EU Commission used for estimating regional competitiveness have a direct link to the competitiveness of the firms operating in the given area? By building on a sample of more than 1500 manufacturing companies, this paper shows that in case of Hungary most of the regional EU measures are of insufficient use when explaining firm-level performance differences and even most of the factors with a significant explanatory power have a counterintuitive sign. Due to this, aiming at improving competitiveness scores of regions might not lead to a stronger economic performance in the given region. The paper also shows that there is no “one-size-fits-all” economic policy, as the competitiveness of different sub-groups of firms is not connected to the same regional measures. We may also conclude that in case of locally owned entities other characteristics than size, ownership and sub-industry play a more important role in determining competitiveness than for foreign enterprises.