ABSTRACT
Although integration led to the convergence of income levels across Europe, some countries, here termed as latecomers (LCs), are still lagging behind. The globalization of the economic and political environment puts new pressures on these countries as they try to catch up with the technologically leading European nations. This chapter attempts to answer the questions of how the globalization process turns constraints into opportunities, and whether the inability of these countries to pursue protectionist policies creates a new set of constraints. We concentrate our arguments on those factors that shape an LC’s competitiveness and determine the rate of catching up. These include: innovation, technology, trade and foreign direct investment (FDI), size and resource endowments, and institutional factors. In the globalized environment, these factors are increasingly interlinked. Given that the European LCs are relatively small, the role of size and its relationship to development figures prominently in our analysis.
