Superior economic performance in a small state: the pharmaceutical industry in Malta

Various academic disciplines have attempted to explain the factors underpinning superior economic performance. Generally they neglect the realities of small states. The literature fails to clearly define a small state . Mainstream theories associate smallness with sub-optimality . Small states studies tend to be conditioned by a vulnerability complex. Yet, a good number of small states have an economic track record which is the envy of much larger states. This thesis adopts an interdisciplinary approach to investigate the theoretical explanations of superior economic performance, at both the state and firm level. Resource-advantage theory, which claims to be a general theory of competition, offers valuable insights in understanding the superior economic performance of small states. The field research follows Porter (1998) in studying the performance of particular industries to understand the competitiveness of nations. A qualitative, case study approach, involving both primary and secondary investigation, explores the performance of the pharmaceutical industry in Malta following the country s decision to join the EU. This work perceives a small state as an organisation with well-defined, but permeable, boundaries. This open system is characterised by both a lack of market power and a small population. Through the secondary field research a small number of higher-order resources, competencies and dynamic capabilities (RCDCs) are identified. The field research s findings affirm the relevance of these arch-RCDCs in creating competitive advantage for the pharmaceutical industry in Malta. It also elucidates the key role played by an external catalyst, foreign direct investment, to circumvent domestic limitations. The study finds that it is still relevant to study small states and that achieving a strategic fit between the resource base and international market opportunities is essential if small states are to enhance their market power and achieve a superior economic performance.