Explaining Arab Manufacturing Exporters’ Preference for Western over MENA Markets: The Key Role of Information Availability and R&D Spillovers
Authors: Abidi and Elbardan, H.
Journal: Organisational Studies and Innovation Review
Despite several attempts to build trade agreements between Arab countries, evidence shows that little has been achieved. This conceptual essay proposes a comprehensive view of factors that could explain Arab manufacturers’ preference for Western over MENA markets as export destination. On the one hand, information asymmetry and R&D spillovers can be seen as potential explanations. Arab manufacturing exporters are potentially driven by the existence of considerable stock of information on Western markets due to historical and colonial heritage, knowledge sharing with domestic exporters to Western markets and the active assistance conveyed by export promotion agencies. Such transparency can lower information asymmetry in Western markets relative to MENA markets and reduce risk perceptions among Arab manufacturing exports consequently. On the other hand, Western markets can provide a substantial advantage to Arab manufacturers who enjoy R&D spillovers. Arab markets lack the facilitative conditions that generate R&D spillovers, such as sophisticated and advanced production factors, existence of demanding customers, strong support and related industries, etc.
Finally, the paper states that the choice of Western export destination over an Arab market is expected to benefit firm’s performance. The challenging competitive landscape in Western markets will exert high pressure on exporters to fit into Western markets through upgrading their offerings at different levels.