What determines the success of economic transition? Constructing regional advantage for Eastern and Western European regions

Abstract

AbstractThe aim of this paper is to identify the differences in the determinants of successful transition (understood as the creation of a new development path) between the eastern and the western EU Member States between 1994 and 2014 and elaborate assumptions for a strategy of constructing regional advantage for them at the NUTS2 level. We find that the regional transition requires individual approaches to using comparative advantage at the beginning of the process and then competing with specific advantages that can be consciously constructed throughout the process. Therefore, we hypothesise that a successful transition requires constructing regional advantages based on the knowledge-related factors, leading to specialisation in the knowledge-intensive industries. Furthermore, we state that the way of constructing such advantages differs across the regions. All of our hypotheses were confirmed. Both groups of regions had different comparative advantages at the beginning of the period and constructed competitive advantage based on related knowledge-intensive industries, leading to their specialisation. Interestingly, although the process of building regional advantage was similar, the factors used to create it were different, had a different impact on GDP growth and led to a different specialisation.