Transition and polarisation: advanced producer services in the emerging regional (market) economies

Abstract

This article is focused on role of advanced producer services in regional development in emerging market economies. The starting point of the analysis is Porter's concept on competitive advantage of regions that rests on the performance of local firms. The APS sector is discussed as a significant element of the value chain, supporting the adaptation of local agents to the emerging system market regulations and the rapid structural changes of the national, regional and local markets in Hungary. Although, empirical studies as well as statistical calculations suggested that, flexible strategies employed by service providers contributed to economic growth in regions embedded in global production systems, the national economy was basically dichotomised by the spatial centralisation of APSs.

Notes

The share of corporations with FDI was 60 per cent in domestic investments furthermore, furthermore, they provided two-third of the national export one-third of gross added value in 1996.

The most significant elements of new regulations were the development of IT-based registration system for the institutions of taxation, enterprise licensing and social insurance.

Firms employing less than 250 persons and producing net sales revenues of 2.7 million euros or less annually are included in the category in Hungary (2001).

In 2001, Budapest had a share of 495 per cent of the GDP produced in the APS sector.

E.g. the Videoton Electronics Co. in Székesfehérvár and its region.

E.g. Suzuki Co. raised the proportion of Hungarian subcontractors from 10 to 48 per cent in its input.

However, economic policy that targeted the integration of domestic SMEs seems to be failing: the majority of state subsidies were used not for development but for daily operation of enterprises. Furthermore, the prosperous regions had the largest stake in governmental subsidies that did not eased spatial disparities. (See the homepage of the Ministry of Economic Development, Hungary, at ⟨http://www.gm.hu⟩).

The amount of FDI in the national economy rose from 5.2 to 25 billion US dollars (1996–2001), meanwhile, the share of the APS sector in foreign direct investments increased from 7.3 to 10.3 per cent.

Calculated on annual net sales revenues, 2001.

There was a 1.7-fold increase in the number of APS firms (the national average was 1.23) between 1996 and 2001.

There was a significant increase in the number and share of APS firms employing more than ten persons, furthermore, there was a shift to legal forms (particularly, limited company) that involved a higher minimum level of registered capital and larger operation costs (e.g. double-entry bookkeeping).

This finding is supported also by national statistical data: the dynamism of the APS sector was fed not only by rising international and domestic investments, but also by the double-fold increase in the employment in which, highly qualified labour had a major stake: the share of the sector rose from 3.9 to 7.6 per cent in the national labour market, and from 8.1 to 12.6 per cent in the employment of professionals (1996–2001).

To the EU-accession of Hungary involved a significant changes in accounting and auditing, taxation, environmental regulations, etc. As a consequence, due to the increasing complexity of business administration, domestic enterprises had to externalise a major part of such activities (i.e. double entry bookkeeping).

Financial consulting, IT-related and R&D services as well as marketing services, management consulting and labour recruitment – all considered as key for changing business strategy by the surveyed firms.