Emerging ICT clusters in the Western Balkans: A convergence model based on financial statement analysis

Abstract

The Western Balkans is experiencing an ongoing inflow of foreign direct investments (FDI) in the information and communications technology (ICT) industry as several European enterprises have already established their presence in the region. These inflows have generated large-scale ICT investments in the region, creating new knowledge-based clusters and technology spillovers in regional economies. On the basis of financial statement indicators collected for 327 European and regional ICT enterprises and on panel data estimation, this paper tries to estimate technology transfer in the Western Balkan region. Specifically, the proposed model examines cluster spillover effects in improving the absorptive capacity of the Western Balkan region in creating a pool of specialized local suppliers and a talented regional labor force. Model estimation results indicate that limited spillover effects have occurred from the newly created clusters of European ICT enterprises in the regional economy of the Western Balkan region. Spillovers related to improved technical capabilities, increased labor productivity, higher resource efficiency, and flexible operational structures require further stimulation to speed up convergence and integration of the local ICT industry in the corresponding European value chain. Finally, this paper concludes that competitive advantages such as a cheap labor force are no longer feasible for sustainable development. To narrow down the existing know-how gap, particular efforts are required regarding policies focused on educating human capital and transforming regional enterprises to successfully compete in the European market.