Companies are more mobile internationally. Product cycles and product lives have been shortened. Meanwhile, developments in science and technology have increased the rate of technical advance. 6.2 The degree of competition of an economy depends on a whole range of factors determining how firms interact. Across the economy, competitive pressures depend on openness to foreign trade and investment, on the domestic regulatory environment, the extent to which markets are liberalised and the degree of protection against monopoly power.
Larger countries tend to trade less as a proportion of output.
There is considerable evidence that industries open to foreign competition perform more strongly. The UK is the main location in Europe for inward investment and the third largest recipient of inward investment in the world after US and China. There is some evidence that inward investment boosts productivity. Competition and the changing market place 6.5 Companies in the knowledge driven economy often have the potential to be highly mobile. Those commodity based industries which mass-produce relatively unsophisticated products will tend to be mobile locating where they can find the necessary basic skills, low labour costs and a favourable tax and regulatory system.