DEVELOPMENT OF INTERNATIONAL COMPETITIVENESS IN INDUSTRIES AND INDIVIDUAL FIRMS IN DEVELOPING-COUNTRIES - THE CASE OF THE CHILEAN FOREST-BASED INDUSTRY AND THE CHILEAN ENGINEERING FIRM ARZE, RECINE AND ASOCIADOS

The report, which is based on case studies of the Chilean forest-based industry and the Chilean engineering firm Arte, Recine and Asociados (ARA), discusses and analyzes the interdependence over time between te chnology and knowledge of foreign origin and in-house innovative capab ility in connection with development of international competitiveness in a developing country environment. The case studies illustrate the i mportant role that foreign technology and know-how have played for the development of the Chilean forest-based industry as well as for ARA. A common denominator of the two cases, however, is that the acquisitio n of foreign technology and knowledge has often been initiated from th e Chilean side which has made possible a successful assimilation and ' 'internalization'' of the acquired technology, resulting in increased self-sufficiency. An analysis of the ''productivity status'' of variou s factors of production for selected sectors of the Chilean forest-bas ed industry points out the pulp sector as the most competitive in the international context. However, as this competitiveness is primarily b ased on natural cost advantages and low wages, sustained international competitiveness for the pulp sector as well as for other sectors will , increasingly depend on the ability to replace basic factor advantage s with advantages based on more sophisticated capabilities and compete nces. This will allow for a gradual shift from the vulnerable cost-bas ed strategies presently applied, to more stable and long-lived strateg ies based on differentiation. A similar analysis of ARA reveals that t he firm, in order to become competitive in the international market, n eeds to improve in all respects related to operating internationally, including international marketing, language skills and representation abroad. The internationalization of ARA could be implemented either in -house or in partnership with other domestic firms or with foreign fir ms. The strategic alliances with foreign firm that the firm has experi enced in the past have contributed significantly to improve ARA's comp etitiveness in the domestic market, but yielded very little in terms o f participation in international assignments, This is due to, among ot her things, low confidence in the foreign market in the qualities and capabilities of Chilean products and firms and protectionistic behavio r of foreign partners and governments. In case foreign partnership wou ld be chosen as internationalization strategy, the ideal partner would be a small or medium-sized firm whose specific know-how within a cert ain field of technology is complementary to that of ARA.