Global demand, regional business dynamics and local firm growth

Latin America, particularly MERCOSUR region, faces an extraordinary expansion of global demand, partially originated in Asia, for natural resources based products. Production and exports of these products have increased significantly, generating a strong regional business dynamics that favours local firm growth, even in smaller countries whose industries take part in regional value chains with global presence. Our empirical analysis confirms that a high participation of regional (MERCOSUR) exports in world trade by industry (i.e. food and agro energy products) seems to be a driver for local (Uruguayan) firms' growth. We find that in those competitive industries with increasing productivity, local firms may grow faster. Also, activities related to the entrepreneurial orientation of the firm (i.e. innovation and export activities) show a strong association with firm employment growth rates. We claim that this perspective contributes to a better understanding of socio-economic reality, competitiveness issues and business strategy in the developing world.