Local country attributes and the emergence of high tech clusters

The aim of this study is to explore the effect of a country’s attributes on the decision of firms to be active globally. We first built a theoretical model, which shows that an initial difference in the business environment may dampen the desire of firms located in countries with a relatively weak business environment to seek a higher level of R&D. The decision not to pursue higher levels of R&D leads, in turn, to lower output and lower scope of activity of global firms in these countries. Moreover, firms with relatively high level of management skills will choose to migrate from a relatively weak country to one with a stronger business environment, creating a brain drain that will further impoverish the weak country.