Shared, Competitive, and Comparative Advantages Essay


Department of Business Administration and Marketing. Universitat Jaume I. Campus Riu Sec. ? 12071 Castellon. Spain ; e-mail: [ electronic mail protected ]uji. es Received 26 February 2004 ; in revised signifier 29 April 2004 Abstract. The author’s purpose is to build and formalize through empirical observation a theoretical theoretical account that allows public presentation and fight in houses located in industrial territories to be explained. From the strategic position adopted. economic grosss are explained by three types of advantage: shared advantages. competitory advantages. and comparative advantages.

Neither integrating in the territory. nor its attractive force due to the shared competencies within it. are important forecasters of public presentation. Empirical consequences indicate that organizational public presentation is mostly explained by the joint consequence of house distinctive competencies and cluster-shared competencies. It was besides found that the greater the grade of a firm’s embeddedness in an industrial territory. the greater the consequence of its typical competencies on organizational public presentation.

This grounds suggests that houses which are better endowed with resources and capablenesss find the development of sustainable competitory advantages easier when they locate in industrial bunchs. as they are more capable of capitalizing on the potency for economic rents that these bunchs offer. Therefore. the internal heterogeneousness of the bunch stems from the different forms of appropriation of shared competencies.

In add-on. house embeddedness in an industrial territory is besides revealed as a moderating variable in the relationship between shared competencies and planetary performance/average return on assets. explained by the positive effects of the engagement in theoretical accounts. values. and cognition flows go arounding within the bunch. Introduction My general intent in this paper is to build a theoretical theoretical account enabling an account to be given of the public presentation and fight of houses located in industrial territories. and to corroborate this account through empirical observation through a sample of 835 industrial houses in 35 bunchs in Spain.

This theoretical account of industrial-district effectivity efforts to explicate the grounds for the heterogeneousness of consequences among intradistrict houses. among intradistrict compared with extradistrict houses. and among administrations located in different territorial agglomerations. The strategic position adopted efforts to explicate steadfast economic rents stemming from three types of advantage: advantages based on competencies shared by all companies located in a territory ; competitory advantages produced by single typical competencies ; and comparative advantages stemming from the attraction of the general environment.

Industrial territories have progressively been recognised as an organizational theoretical account that enables little and moderate-sized endeavors ( SMEs ) to vie internationally ( Becattini. 1987 ; Brusco. 1982 ; D’Aveni and Illinich. 1992 ; Krugman. 1991 ; Lazerson. 1995 ; Wiklund and Karlsson. 1994 ) . Empirical surveies such as those by Karlsson and? Klaesson ( 2000 ) . Becchetti and Rossi ( 2000 ) . Paniccia ( 1999 ; 1998 ) . Camison ( 2001 ) . and Signori ( 1994 ) have provided grounds that houses belonging to an industrial territory perform better.

However. the wealth of parts can non conceal the failings in this organic structure of cognition. I peculiarly wish to foreground three weak points: ( a ) the deficiency of a theoretical theoretical account to steer research into the beginnings of concern success and into the possible part of territorial agglomerations to this success ( Foss. 1996 ) ; ( B ) the job of business-performance homogeneousness or heterogeneousness within the territory ( Becattini. 1990 ; Brusco. 1990 ; DeCarolis and Deeds. 1999 ; McEvily and 2228?

C Camison Zaheer. 1999 ) ; and ( degree Celsius ) the deficiency of empirical surveies supplying important statistical grounds on the suggested causal relationships. deducing from a series of methodological and conceptual jobs ( Paniccia. 1998 ; Parr. 2002 ) . In this paper I provide theoretical and methodological inventions to get the better of these jobs. With regard to the first job. I approach the survey of industrial territories from the competence-based position ( CBV ) . This position attempts to prove the part of the single portfolio of resources and capablenesss of houses considered separately. and of the shared competencies in the territory to public presentation.

From this attack. the industrial territory is understood as an external infinite incorporating resources and capablenesss to which member houses have entree. Second. this theoretical theoretical account enables the premiss of internal homogeneousness of intradistrict companies to be questioned. Shared competencies in the industrial territory exert force per unit area in favor of internal homogeneousness. conditioning the behavior of intradistrict houses in a manner similar to the consequence of industry construction in the paradigm `structure ^ behavior ^ performance’ of industrial economic sciences.

But the internal environment of territories is heterogenous. because the single houses are free agents with different typical competencies. and subnetworks with different supporters are present. In this research. the hypothesis will be put frontward that the competitory and performance-related dissymmetries between houses within the territory root from their different forms of appropriation of shared competencies. which are. in bend. connected with their single typical competencies.

I besides attempt to happen a solution to the job of the deficiency of statistically important empirical grounds of the causal relationships established. The beginning of this job is to be found chiefly in the methodological lacks stemming from research based on industrial territory instance surveies selected idiosyncratically by the research worker ( Paniccia. 1998 ) . A farther of import methodological job is the very definition of agglomeration economic systems ( Malmberg and Maskell. 2002 ; Parr. 2002 ) . of an industrial territory. and of the scene of its boundaries.

Becattini ( 1990. page 61 ) notes the demand to gestate the industrial territory to enable “the preciseness and decisions derived from empirical surveies to be improved. ” Controversy besides surrounds the methods used for mensurating industrial territories. with parallel attacks centred entirely on economic variables ( Bellandi. 1989 ) or on those enriched with cultural and societal variables ( Becattini. 1979 ; 1990 ; Lazerson and Lorenzoni. 1999 ) . In an effort to get the better of these methodological jobs. three specific aims were determined to supply farther inventions.

First. confirmation that the constructs used in the CBV to turn out competitory advantages and the single public presentation of houses obased chiefly on information. cognition. and learningoare widespread within the domain of the industrial territory. In this manner. the construct of the industrial territory. defined as an external infinite of shared competencies to which member houses have entree. is tested. Second. a strict measuring of two of the most hard elements in specifying an industrial districtoembeddedness and shared competencies ois sought.

Third was the proviso of statistical grounds of the strength of causal relationships: the hypotheses were tested statistically by agencies of multiple arrested development theoretical accounts. A theoretical theoretical account of industrial-district fight The canonical construct of the industrial territory coined by Becattini ( 1979 ; 1989 ; 1990 ) and Brusco ( 1982 ; 1990 ) is based on an updating of the original Marshallian construct. This definition of the industrial territory profiles its conventionalized characteristics as a socioterritorial entity.

It is non merely a geographical infinite with a high denseness of little and mediumsized endeavors specializing in certain activities: the construct besides includes the frequent Shared. competitory. and comparative advantages 2229 being of interfirm cooperation webs and a community of people with both a strong sense of belonging and common cultural features. The effectivity of this production theoretical account depends on the denseness of the cooperation web created. the grade of integrating between houses. and the societal context.

These factors determine the wealth of outwardnesss and the volume of economic systems of agglomeration that can be accessed by all the cooperating houses. This construct is an effort to specify the fluidness and continuity of the flows of experience. information. and cognition circulating. with few limitations. in the territory ; the rapid informal airing and soaking up of inventions and new accomplishments ; the being of engineering spillovers ( Krugman. 1991 ; Rodr| ? guez-Pose and Refolo. 2003 ) ; and an substructure of regionally based institutional strength ( Henry and Pinch. 2001 ; Pinch and Henry. 1999 ) .

( 1 ) Economies of agglomeration found in the industrial territory enable it to be identified as a `munificent environment’ ( DeCarolis and Deeds. 1999 ) . Outwardnesss enable the constitution of dealing relationships at lower costs than the costs of internal coordination derived from a hierarchal signifier of administration ( D’Aveni and Illinich. 1992 ) . These outwardnesss are wholly different from the comparative advantages ( the state effects ) generated by the attraction of the general environment in which the house is located ( Porter. 1990 ; Thompson. 2003 ) .

Although both types of rent derive from location in a peculiar country ( territorial agglomeration versus country/region ) . their deciding factors are different. The theory of comparative advantage in international trade affects the differences in installations and the comparative cost of factors ( Leamer. 1984 ) . the institutional model ( Tezuka. 1997 ) . the construction of the economic system ( Arora and Gambardella. 1997 ) . the regional civilization ( Whipp et al. 1989 ) . and the measure and quality of the human. technological. and societal capital invested in the national environment by public action ( Howes and Singh. 2000 ) .

These same factors run through many agglomeration economic systems. In contrast. comparative advantages do non take to the common forms of strategic and organizational design observed in bunchs. The presence of a community of people within the territory has deductions which go further than Marshallian agglomeration economic systems ( Harrison. 1991 ) . An industrial territory is supported by a community of people who portion a feeling of belonging. or common individuality ( Becattini. 1979 ) oa comparatively homogeneous system of values and ideasoin the same manner as a cognitive community does.

Writers such as Paniccia ( 1998 ) . Crewe ( 1996 ) . and Harrison ( 1991 ) maintain that the being of this community of people is related to the construct of embeddedness put frontward by Granovetter ( 1985 ) . The sociological impression of the territory as a community of people ( Grandori. 1999 ; Lazerson. 1995 ; Saxenian. 1994 ) efforts to explicate the competitory advantages of companies integrated into a territory based on values. establishments. and regulations. interpreted as assets produced by interorganisational relationships between people and administrations in a peculiar societal context.

In add-on. for the societal kineticss to work without hinderance. a set of shared societal establishments and regulations must develop in analogue with the value system to circulate these values within the territory. back up them. convey them to future coevalss. and modulate the system ( Becattini. 1990. pages 39 ^ 40 ) . From the community of people stems an ambiance of cooperation. trust. and societal countenance in which economic action is regulated both by explicit and by inexplicit regulations ( Lazerson and Lorenzoni. 1999 ) .

In this manner. trust through common cognition and sustained reproduction of ( 1 ) In fact the strategic literature ( Enright. 1998 ; Porter. 1990 ; 1998 ; Porter and Solvell. 1998 ) speaks « of regional clustersofocusing above all on regional research and development ( R & A ; D ) establishments ( DeCarolis and Deeds. 1999 ) . However. in this paper. both constructs. bunch and industrial territories. are used synonymously. 2230?

C Camison concerted relationships between the agents within the territory means that there is merely a limited menace of self-interest ( Dei Ottati. 1994 ; Foss and Koch. 1996 ) . which generates low dealing costs and supports single and corporate acquisition procedures. From these economic and sociological attacks to the industrial territory. it is deduced that the organizational public presentation of companies will be straight influenced by their location in a local production system. These theories focus on explicating the differences in public presentation between houses located indoors and those located outside a territorial agglomeration.

The cardinal hypothesis is: Hypothesis 1: There is a positive relationship between embeddedness in an industrial territory and organizational public presentation. To prove this proposition. empirical work published so far has been based on choice instance surveies or samples in which the degree of homogeneousness in the gift of outwardnesss within the territory is non known. This attack offers no hints either to understanding the fight of certain industrial territories compared with others. or to the dissymmetry of consequences inside the territory.

The jobs of mensurating agglomeration economic systems and of accomplishing robust empirical grounds of the causal relationship in instance surveies suggest that a new attack needs to be sought. In the present paper a different theoretical model is adopted. which allows the outwardnesss inside the territory to be measured. and a different methodological design. viz. . proving the hypothesis with multiple additive arrested development modelsoexplained in the following subdivision.

Following the suggestions in recent theories expounded by writers such as Malmberg and Maskell ( 2002 ) . Lawson ( 1999 ) . Lawson and Lorenz ( 1999 ) . DeCarolis and Deeds ( 1999 ) . Maskell and Malmberg ( 1999 ) . and Foss ( 1996 ) . the CBV is adopted as a theoretical model. The literature ( Foss. 1993 ; 1997 ; Foss and Knudsen. 1996 ; ? Sanchez et Al. 1996 ) uses the label `CBV’ for all surveies whose common denominator is a high spot on the importance of firm-specific competencies orelated to tacit cognition and shared inside the administration ofor scheme and concern success.

This theoretical theoretical account may be an attractive option if it is extended to the domain of the territory. Its accent on factors finding the accomplishment of sustained competitory advantage and economic rents at the micro degree is utile for dissecting the internal construction of the territory. This position attempts to prove the part to public presentation derived from house competencies. every bit good as from industrial territory shared competencies. We are hence distinguishing three degrees of competencies.

( a ) Personal competencies are tantamount to what many writers call `skills’ . and are defined as capablenesss possessed by an person or group of persons within the organisationosuch as leading or experience. ( B ) Corporate competencies consist of combinations of cognition and accomplishments that belong to a house. In contrast to the potentially migratory and mostly silent nature of single cognition. corporate cognition tends to be independent of the person and to stay within an administration when persons or peculiar groups leave it. as it permeates through organizational activities and constructions.

( degree Celsius ) Shared competencies in a industrial territory include the assets of cognition. information. and larning deposited in a territorial environment near to the house ; the flexibleness in production achieved by the territory as a whole in the manner of about perpendicular integrating ; and the industrial civilization solidly established in the district. These competencies are based on web assets derived from stable. long-run concerted relationships between the agents in the local environment.

An industrial territory may therefore be understood as an external infinite with resources and capablenesss to which member companies have entree. The importance of shared competencies as a beginning of shared advantages over rivals outside a bunch. or from other bunchs. who can non entree them. derives Shared. competitory. and comparative advantages 2231 exactly from their intangible nature. These intangible assets have the features of tacit cognition and can be referred to as district-specific tacit cognition ( Porter and Solvell. 1998 ) .

In the literature ( Grant. 1991 ; Hall. 1992 ; 1993 ) there is repeated « insisting on the value of intangible assets as a beginning of sustainable competitory advantage. peculiarly because of the barriers to duplicate or their replacing by strategically tantamount assets. Extra troubles in allowing from. or copying. rivals outside the territory further reenforce their value in footings of fight and as a beginning of economic rents. Shared competencies are inserted into the procedures. webs. and establishments bing within the industrial territory.

These competencies circulate within the territory with a certain grade of freedom. as they are combinations of cognition and accomplishments that are non the legal belongings of any one house. But they are non accessible to houses outside the bunch. They lack embeddedness in the community of people and webs within the territory and impede their entree to the common infinite for resources and capablenesss. Therefore. a 2nd hypothesis may be outlined. Hypothesis 2: There is a positive relationship between the competencies shared by administrations located in an industrial territory and steadfast organizational public presentation.

This common infinite is a advancing factor for the internal homogeneousness in the territory ( Becattini. 1990 ; Brusco. 1990 ) . as it conditions the behavior of houses located in it. The strong mutuality between people and houses within a comparatively homogeneous community with a shared value system works in favor of symmetricalness. The transmittal of cognition and mention theoretical accounts within the peculiar industrial ambiance of the territory is another force in favor of common behavior forms.

However. the grounds provided by observation and empirical research indicates that there is strong heterogeneousness within industrial territories. Surveies such as those by DeCarolis and Deeds ( 1999 ) and Lazerson and Lorenzoni ( 1999 ) have indicated that the administrations located in these territorial agglomerations continue mostly to be free agents in finding their ain development. It must hence be supposed that there are different variables that define the internal heterogeneousness of intradistrict houses.

Specifically. the CBV ( Barney. 1986 ; 1991 ; Grant. 1991 ; Peteraf. 1993 ; Wernerfelt. 1984 ) postulates that house single typical competencies are the basic beginning of competitory advantages and economic rents. Shared competencies may be the beginning of single competitory advantages in enabling an intradistrict company to entree other typical competencies transferred from other administrations ( Buckley and Casson. 1988 ; Hamel et Al. 1989 ) . promoting the sharing and creative activity of cognition and acquisition.

It can be argued that the consequence of district-shared competencies on public presentation is moderated by the dissymmetry of single typical competencies in each administration. which will modulate their specific capacity to internalize these shared assets. Each house potentially can work the group of mutualities that together specify the territory in different ways. which is likely the beginning of the public presentation derived functions within it.

The earlier premiss may now be modified to be expressed as follows: Hypothesis 3: The consequence of the competencies shared by the endeavors located in an industrial territory on their organizational public presentation is moderated by the typical competencies belonging to each intradistrict house. or Hypothesis 3A: The richer the single gift with typical competencies of an intradistrict house. the greater will be the positive consequence of the shared competencies on its organizational public presentation. 2232? C Camison.

On the other manus. the likeliness that a house is non to the full linked to an industrial territory must be considered. There are so administrations which. although wholly within a local production system. stay on the borders of the community and the industrial ambiance that characterises it. In add-on. there are besides houses whose activities are carried out merely partly within the districtoeither because they have installations beyond its boundary lines. as portion of corporate groups or other external interorganisational webs. or because of a history of cooperation and commercial relationships with other agents.

The key to profiting from the district-shared competencies is in the feeling of belonging. which makes the house travel along with the common mental theoretical accounts. values. and webs and take portion in the flows of information and cognition derived from the economic systems of agglomeration. A house located inside a territory but keeping independency and absolute reserve with regard to the other internal agents will be deprived of entree to these shared competencies. Such assets may be inert assets for an intradistrict house which is non disposed to do its boundary lines permeable in order to absorb the positive outwardnesss freely go arounding in the system.

It should be remembered that an internal house can curtail its communicating with the territory. Consequently. it must be argued that the greater the embeddedness of a house in a territory. the more it can profit from the shared competencies deposited in it. The hypothesis may be outlined in the undermentioned footings: Hypothesis 4: The consequence of the competencies shared by the houses located in an industrial territory on their organizational public presentation is moderated by each firm’s embeddedness in the bunch.

The rootedness in an industrial territory may every bit hold effects on the coevals of typical competencies by internal houses. The territory acts to a certain grade as a corporate research and development ( R & A ; D ) research lab. in which invention is invariably shooting. Increased embeddedness of a house leads to its greater engagement in webs. in flows of cognition. and in larning procedures. which can move as accelerators for developing new single typical competencies.

We can therefore explicate a new proposition: Hypothesis 5: The consequence of the single typical competencies of each house located in an industrial territory on its organizational public presentation is moderated by each organisation’s embeddedness in the territory. Figure 1 schematically represents these causal relationships. which make up a theoretical model of mention in analyzing industrial territories from a CBV. Methodology The empirical survey was carried out on a sample of 835 industrial houses and 35 industrial territories in Spain.

The information on the houses which was required for empirical verification of the hypotheses was obtained from a primary survey. All the information refers to 31 December 2001. The list of Spanish industrial sectors. excepting the energy sector. published by the Spanish National Statistical Institute ( INE ) in its Central Directory of Enterprises was taken as the existence. The pick of the initial sample was made by agencies of a graded sampling process with optimal repair of size and industry. Within each stratum. choice was carried out by simple random sampling.

The initial sample was fixed at 2000 houses to obtain a statistical border of mistake of? 2X2 % with a 95. 5 % assurance interval. The aggregation of informations was carried out through a postal study. Database Shared. competitory. and comparative advantages 2233 Distinctive competencies Hypothesis 5 Embeddedness in territory Hypothesis 1 Organisational public presentation Hypothesis 3 Hypothesis 2 Hypothesis 4 Intradistrict shared competencies Figure 1. Direct. moderator. and interaction effects of the explanatory variables on public presentation. with the fieldwork undertaken between June and October 2002.

The questionnaires were sent to the top director of each of the sample houses. A sum of 964 questionnaire responses were received. After an initial statistical polish of the questionnaires. 12 of them were eliminated for assorted grounds. With the purpose of homogenizing the unit of analysis. a sum of 117 diversified companies were eliminated in order to avoid the extra consideration of the `corporation effect’ . The sample considered for the empirical survey was hence made up of 835 nondiversified companies. This concluding sample had a statistical border of mistake of?

3X3 % with a 95. 5 % assurance interval. The sample may be interpreted as a existent contemplation of the current Spanish industrial construction. The mean size of company surveyed was 301 workers. with mean gross revenues of 22. 87 million. The geographical location covered the whole Spanish district. but was concentrated in the strongest industrial Centres. Spain has a important figure of local production systems in assorted activities and geographical countries. which have involved noteworthy decentralization of production and? industrial diffusion ( Benton. 1992 ; Camison. 2001 ; Costa. 1993 ; Ybarra. 1991 ) .

The bulk of empirical surveies have adopted a quantitative standard for territory designation. depending on how assorted factors come together to show a high denseness of SMEs specializing in certain activities ( Becchetti and Rossi. 2000 ; DeCarolis and Deeds. 1999 ; Paniccia. 1998 ; 1999 ; Signori. 1994 ) . although there are besides surveies based on panels of experts. The advantage of this attack is that it avoids the jobs caused by the subjective pick of territories. which will non stand for the whole scope of possible state of affairss ( Harrison. 1991 ) . and may be restricted. for illustration. to theoretical accounts of success ( Paniccia. 1998 ) .

The purpose here was to choose industrial territories without holding to show that they are tied to the canonical Marshallian construct. Cases affecting experiences of success. outgrowth. and diminution were hence all considered. The empirical process used to specify an industrial territory is based on the methodological analysis employed by De Luca and Soto ( 1995 ) and Ybarra ( 1991 ) . Information on employment and industrial sector houses ( excepting energy ) was taken from the INE’s Central Directory of Enterprises. updated on 31 December 2001. as the starting point.

For the intents of profiling the bounds of the territory every bit accurately as possible. the statistical information collected had to be geographically segmented into the smallest possible countries. and hence was grouped non at regional. but at municipal. degree. 2234? C Camison The information was broken down from two positions: on one manus spatially. by municipalities ( identified from the 2001 INE Population Census ) . and on the other. economically. following the 1993 National Classification of Economic Activities ( CNAE ) down to three figures.

The 1994 input ^ end product tabular array for the Spanish economic system was besides used ; this provides information about intermediate ingestion and its beginning for the assorted groups of activities included in the CNAE. The statistical process developed to observe objectively the being of certain territorial concentrations of industrial activities followed the procedure detailed below. ( 1 ) Determination of the chief industrial activities ( PIAs ) in Spain. The first measure consisted of taking. from all the production sectors represented in the Spanish economic system. the dominant PIA in a peculiar industrial country.

A local production system must be profiled which. it is assumed. corresponds to industrial territories because it shows ratios of industrialization and specialization in a dominant industry ( as a per centum of the entire industrial employment ) over and above the regional norm. It was besides assumed that the PIAs fulfilled two demands: they were industrial administrations dominated by independent. independent SMEs ; and they were revitalizing elements of the set of sectors integrated to its value system.

The 2nd demand implies that PIA end product must be concluding goods ( that is. with more than 50 % of production destined for concluding demand ) . for them to be regarded as the boosters of complecting in a house web. It was hence understood that the being of a market is what stimulates the industrial production of concluding goods. and that this in bend has a drawing consequence on the production of intermediate goods inside their territorial environment.

( 2 ) Determination of the complementary industrial activities ( CIAs ) linked to each PIA. defined as the industrial sectors that provide the chief inputs used by the PIA. Suppliers of natural stuffs were non included. as they were non of industrial beginning and fell outside the range of involvement O viz. . the spacial distribution of the industrial construction. The demands of inputs whose production takes topographic point outside the regional country were besides excluded. as it was considered that the activity of these providers would non organize portion of the regional industrial administration.

The consequence of this stage was the fundamental law of a series of groups constructed with strong functional links. known as `industrial functional groups’ ( IFGs ) . which gather the most of import interfirm dealingss established between a PIA and its CIA. inside a part. ( 3 ) Delimiting and location of the industrial territories. The concluding measure consisted of gauging the strength of IFG local presence. The implicit in hypothesis in this process is that the economic systems derived from productive mutualities among the assorted activities doing up an IFG will be promoted by spacial concentration. The appraisal consists of several phases.

Calculation of the regional weight index ( RWI ) and municipal weight index ( MWI ) indexs for each municipality and each selected activity. As the purpose was to gauge the importance of each municipality in each IFG activity. two enlightening variables were selected: an index of the engagement of each industrial subdivision in each municipality ; and a 2nd that reflects the part made by the industrial municipal activity to the regional as a whole.

The analytical looks of both indexes are as follows. where eleven J represents the employment in municipality I in activity J: eleven J RWIi J? ? 100. m xl J xi J MWIi J? ? 100. n xil cubic decimeter? 1 cubic decimeter? 1 Shared. competitory. and comparative advantages 2235 The database created provided a great trade of information: two indexs for each activity doing up the IFG. each of which consisted of 8108 observations oone for every Spanish municipality.

Given the magnitude of the database. and in order to do it more operative. the available information was integrated. The process consisted of incorporating the information provided by the set of variables in a individual index. and utilizing this index to rank the municipalities.

The merger of the information to build the index was based on synthesis techniques that form portion of the multiple property decisionmaking theoretical accounts ( Hwang and Yoon. 1981 ) . Specifically. the method selected was a `method of distance’ . from the Minkowski household of distance prosodies. An ideal municipality is one that presents the ideal values in the variables that form portion of the analysis. The method of distance assigns a location index to every municipality. calculated as the distance that separates it from the ideal municipality.

The distance that separates a peculiar municipality from the ideal one is given by the look: ! 1a2? 2 di? wj? yi J A yjA? . J where di is the Euclidian distance ( 2nd order ) ? the municipality I from the ideal one ; of wj is the weighting of each variable J with J wj? 1 ; yi J is the value of the municipality I in the variable J ; yjA is the value of the ideal municipality in the variable J. To vouch the independency of the selected variables. and to avoid unwanted redundancies in their articulation survey. the variables were refined by taking the constructions of dependance established among them.

Factorial analysis was used to work out this job. In add-on. as the variables can show different scopes of fluctuation. they were standardised for intents of comparing. The transmutation was carried out utilizing the undermentioned look: yinj? Fi j A Fj m. Fj M A Fj m where yinj is a standardized factorial mark of activity J in municipality I ; Fi J is the factorial mark of activity J in municipality I ; Fj m is the minimal factorial mark of activity J ; Fj M is the maximal factorial mark of activity J. This process is a additive transmutation of the graduated table of the values regi.