The essence of the first transition is that the small economy does possess sources of
potential competitiveness (positive location advantages); predominantly a labour supply
and other complementary inputs (energy, raw materials) that can support its participation
in significant export-oriented value-added operations.5 The implicitly antecedent importsubstitution
context of protectionism, taken with the small local market (and low-income
local demand patterns), meant that drawing of these sources of comparative advantage
into competitive use had not yet been realised (in what would, for MNEs, have been
MS operations). But alongside these existing macro-level potentials (i.e., the sources of
latent comparative advantage), realisation of export-oriented competitiveness will also
be dependent on access to micro-level, firm-specific, capabilities able to turn these inputs
into internationally-competitive goods. These can include product technologies whose
factor proportions require the input mix that defines the host-country potentials; management
skills applicable to effective operationalisation of these inputs (notably abilities
in organising and motivating a large labour force that is new to industrial employment
practices); and, crucially, access to already established and receptive international markets.
Both the low level of the small economy’s development, and the forms taken by any
existing economic activity, implies the likely absence of such indigenous enterprise competences.
However, these attributes (as OAs) are precisely those possessed by MNEs that
are pursuing the ES sharpening of the global competitiveness of an international supply
network through the accessing of more cost-effective inputs (i.e., LAs). Therefore, we
can presume that for a small economy the leveraging of its first transition potentials into
competitive entry into the international economy is most likely to be secured through an
opening to participation of international business.