A discussion about the possible effect of middle income trap on large scale firms' selection of competitive strategy

Abstract

Middle-income trap that is based on per capita income and measures per capita income in dollars and predominantly in relation to the Purchasing Power Parity indicates the vicious cycle a country enters at a certain income level. Thus, countries caught in the middle-income trap stay within this cycle for long periods of time and could not ascend to the next income level, the high-income group. Several ways out of this trap for countries were proposed in the literature stressing the significance of state incentives and support that state could provide for the private sector. The objective of this study is to discuss the possible changes that incentives provided by the state based on R&D innovations could initiate especially in competitive strategies of large scale firms and to present two propositions based on this discussion.