National Competitiveness

A nation’s prosperity depends on its competitiveness, which is based on the productivity with which it produces goods and services. Sound macroeconomic policies and stable political and legal institutions are necessary but not sufficient conditions to ensure a prosperous economy. Competitiveness is rooted in a nation’s microeconomic fundamentals—the sophistication of company operations and strategies and the quality of the microeconomic business environment in which companies compete. An understanding of the microeconomic foundations of competitiveness is fundamental to national economic policy.

See the full list of country presentations and other resources on national competitiveness from the past several years:

Recent presentations and reports:

Mexico
Michael Porter presentations:
Regional Competitiveness and the Role of Business
Michael E. Porter
Sintonía
Puebla, Mexico
April 27, 2012

In the news:
Recibe Michael E. Porter el doctorado honoris causa de la Upaep - Puebla Noticias - April 27, 2012

La iniciativa "Sintonía" impulsada por Michael E. Porter en Puebla - Todo Puebla - May 2, 2012

RMV se reunió con Michael E. Porter, de Harvard
NG Puebla - April 27, 2012

Otorgan a Michael E. Porter el máximo reconocimiento académico en el estado - Televisa Puebla - April 25, 2012

Saudi Arabia:
Michael Porter presentations:
Entrepreneurship and Competitiveness:
Implications for Saudi Arabia
     Michael Porter
     Global Competitiveness Forum
     Riyadh, Saudi Arabia
     January 24, 2012

In the news:
Academic partner to support SAGIA's 'Entrepreneurship Village' - Arab News, January 25, 2012

The Determinants of National Competitiveness
Mercedes Delgado, Christian Ketels,
Michael E. Porter and Scott Stern
NBER Working Paper No. 18249
July 2012
We define foundational competitiveness as the expected level of output per working-age individual that is supported by the overall quality of a country as a place to do business. The focus on output per potential worker, a broader measure of national productivity than output per current worker, reflects the dual role of workforce participation and output per worker in determining a nation’s standard of living. Our framework highlights three broad and interrelated drivers of foundational competitiveness: social infrastructure and political institutions, monetary and fiscal policy, and the microeconomic environment. We estimate this framework using multiple data sets covering more than 130 countries
over the 2001-2008 period. We find a positive and separate influence of each driver on output per potential worker. The microeconomic environment has a positive effect on output per potential worker even after controlling for historical legacies. Using our framework we define a new concept, global investment attractiveness, which is the cost of factor inputs relative to a country’s competitiveness. This analysis reveals important insight into the economic trajectory of individual countries. Our framework also offers a novel methodology for the estimation of a theoretically grounded and empirically validated measure of national competitiveness.

The Competitive Advantage of Nations
     Michael E. Porter
     New York: The Free Press, 1990.
     Republished with a new introduction, 1998.
In the modern competitive marketplace, nations have their own competitive advantages. These are investigated and discussed in-depth.
Publisher's site with table of contents and first chapter excerpt

The Global Competitiveness Report
Published annually since 1979, the Global Competitiveness Report remains the most up-to-date, comprehensive data source available on the comparative strengths and weaknesses of leading economies of the world. The Report provides a thorough assessment of the world economy and is an authoritative tool to help develop an economic framework that supports private investment, entrepreneurship and social progress.

"Building the Microeconomic Foundations of Prosperity:  Findings from the Business Competitiveness Index"
     Michael E. Porter
     In The Global Competitiveness Report 2003-2004
Competitiveness has become a central preoccupation of both advanced and developing countries in an increasingly open and integrated world economy. Despite its acknowledged importance, the concept of competitiveness is often misunderstood. Here, we define competitiveness concretely, show its relationship to a nation’s standard of living, and outline a conceptual framework for understanding its causes.

The Business Competitiveness Index (BCI), based on this conceptual framework, provides a data-rich approach to measuring and analyzing the fundamental competitiveness of a large number of countries in a comparative context. This year’s BCI includes 101 countries, up from 80 last year. Our aim is to rank country competitiveness across countries, identify individual countries’ competitive strengths and weaknesses, reveal the trends in competitiveness in the global economy, and extend our basic knowledge about the sources of competitiveness and the process of economic development.

UK Competitiveness: Moving to the Next Stage
     Michael E. Porter and Christian H.M. Ketels
     DTI Economics Paper
     May 2003
In October 2002, the Economic and Social Research Council (ESRC) appointed Professor Michael Porter and his team to conduct a brief, three-month review of the existing evidence on UK competitiveness. The effort was funded jointly by the ESRC and the Department of Trade and Industry (DTI). The London School of Economics and Political Science (LSE) served as the UK-based academic sponsor of the project.

The objective of this review is to synthesize, interpret, and draw implications from the available evidence on the competitiveness of the United Kingdom, applying the Porter competitiveness framework and drawing on the learning from dozens of national competitiveness projects over the last decade. The ESRC asked that special attention be paid to the role of management in UK competitiveness.

UK competitiveness – old labour market institutions, new collaborative roles
     Christian Ketels
     March 2006
The United Kingdom’s track record over the past few decades makes it one of the clear European success stories in upgrading economic competitiveness. While the progress of the UK has been impressive, it still has not been sufficient to fully close the productivity gap separating it from its main continental European peers.  More companies based in the UK will need to move beyond their proven ability to leverage existing assets efficiently and compete based on unique products and services.
Also see related discussion from March 2004 seminar series.

Can Japan Compete?
     Michael E. Porter, Hirotaka Takeuchi,
     and Mariko Sakakibara
     Tokyo: Diamond, 2000;
     Basingstoke, England: Macmillan, 2000;
     New York: Basic Books and Perseus Publishing, 2000.
The result of a major piece of research, this book reveals that there have long been two Japans, the familiar one that was highly competitive, and another Japan, almost invisible, that was highly uncompetitive. The authors unravel this puzzle, and provide a solution that challenges the conventional wisdom on the drivers of Japanese competitiveness.

"Competing at Home to Win Abroad: Evidence from Japanese Industry"
       Michael E. Porter and Mariko Sakakibara
     Review of Economics and Statistics, May 2001.
The study explores the influence of domestic competition on international trade performance, using data from a broad sample of Japanese industries. Domestic rivalry is measured directly using market share instability rather than employing structural variables such as seller concentration. We find robust evidence that domestic rivalry has a positive and significant relationship with trade performance measured by world export share, particularly when R&D intensity reveals opportunities for dynamic improvement and innovation. Conversely, trade protection reduces export performance. These findings support the view that local competition - not monopoly, collusion, or a sheltered home market - pressures dynamic improvement that leads to international competitiveness.

"Fixing What Really Ails Japan"
     Michael E. Porter and Hirotaka Takeuchi
     Foreign Affairs, May-June 1999.
Conventional wisdom claims that Japan’s “economic miracle” stemmed from its unique model of government guidance and its revolutionary corporate management techniques. An in-depth study proves this seriously wrong. Rampant government intervention has caused more business failures than successes, and a fundamental cautiousness has led Japanese companies to ignore strategic thinking and shun risk. To pull out of its current slump, Japan must embrace competition, innovation, and bold leadership.

"The Adam Smith Address: Location, Clusters, and the 'New' Microeconomics of Competition"
     Michael E. Porter
     Business Economics, January 1998
The new microeconomics of competition is contained in frameworks that structure the complexity of competition and inform managers of the choices they must make. The role of location has shifted from factor endowments and size to productivity growth; factor inputs are abundant and accessed via globalization. To increase productivity, factor inputs must improve in efficiency, qualify and ultimately specialization to particular cluster areas. A cluster is a critical mass of companies in a particular location (a country, state, region or even a city). Governments have significant roles in creating an environment to support rising productivity, and companies have a different agenda than just building offices or factories. The impacts of this approach on contemporary policy issues, especially the environment and inequality, are presented.

Competitiveness Index:  Where America Stands
     Michael E. Porter, Council on Competitiveness
     January 2007
Competitiveness Index: Where America Stands benchmarks current U.S. competitiveness against twenty years of domestic and global economic data. The baseline year, 1986, was chosen because it marked the beginning of cyclical expansion in the domestic economy, a high dollar, and an exploding trade deficit, which put the concept of competitiveness on the U.S. national agenda. It also marked the creation of the Council on Competitiveness. The report is a wide-ranging assessment of how the changing global economy presents new challenges for the future.

National Summit on American Competitiveness
     Washington, D.C.
    September 18, 2007
Sponsored by the U.S. Department of Commerce, The National Summit on American Competitiveness convened  leaders of business, government, academia and the research community to address the core components of U.S. competitiveness.  Michael Porter participated on the panel addressing Competitiveness Challenges: Video and Transcript.

Competitiveness in a globalised world: Michael Porter on the microeconomic foundations of the competitiveness of nations, regions, and firms
    Brian Snowdon and George Stonehouse
    Journal of International Business Studies
    March 2006
Interview with Michael Porter.

Microeconomic Foundations of Competitiveness -
A New Agenda for International Aid Institutions (pdf)
Workshop with the UNDP Leadership Team
     Michael E. Porter
     New York, November 2003

Scholar Urges HR to Work With Schools
     Mark Schoeff Jr.
     Workforce Management
     September 19, 2007

The Productivity Marathon
     IDB Magazine
     December 2002
Coverage of Michael Porter speaking at the Inter-American Development Bank seminar: Competitiveness and Consensus Building in Latin America.  Available in English, Spanish, Portuguese and French.

Available through Harvard Business Online:

Finland and Nokia
Finland, with a special language and culture, has developed as a country in between the west (the Nordic region and Europe) and the east (especially its neighbor Russia). In the 1980s, a process started of moving out of an investment-driven economy into an innovation-driven one. With the collapse of the Soviet Union around 1990, Finland reached a crisis. This case covers policy changes made in the 1990s and how the country by 2002 had managed to become the most competitive country in the world. A large part of the success could be attributed to the dynamic telecommunications cluster, and especially Nokia, accounting for some 70% to 80% of the cluster exports and the world leader in mobile phones. Nokia also reached a crisis around 1990. Teaching Purpose: To illustrate both the success of a nation, a cluster within a nation, and an individual firm using the following models: industry analysis (five force model); strategy (positioning, fit, activities); diamond model; cluster model; and policy at a national scale. What did Finland do? What is the role of a big crisis in a nation and in a firm? How important is Finland to Nokia? And how important is Nokia to Finland?

Iceland: Small fish in a global pond
Describes the economic development of Iceland since 1945, focusing in particular on the years since 2000, when Iceland experienced strong growth and Icelandic companies aggressively internationalized.

Estonia in Transition
Discusses the success of a transition country, Estonia, until 1991 part of the former Soviet Union. Illustrates the transition from a planned economy to a market economy, the Diamond model, the cluster model, national policy (macro stability and micro reforms), and potential for a cross-border regional agenda (role of proximity, regional restructuring, and enhanced attractiveness). Teaching Purpose: For students to gain a better understanding of how a good set of policies--combining macro and micro policies--can move an economy into growth and development. Treats the specific case of a planned economy (under Soviet oppression) moving into a transition phase during the 1990s.

Indonesia: Attracting Foreign Investment
Describes the economic development of Indonesia from independence after World War II to 2006 and the post-Suharto period. The coverage of the post-Suharto period provides evidence of how political and economic conditions are intertwined after a change in the political regime. Profiles the business environment in 2006, including a documentation of past and present policies that shaped the current situation. A particular focus is Indonesia's stance towards attracting foreign direct investment (FDI). The country has a checkered history of oscillating between seeking and fighting foreign investors. Provides a perspective on the relative importance of FDI policies, general economic policies and business environment conditions, and the nature of competition from other locations on FDI flows.

"The Competitive Advantage of Nations"
     On Competition, Chapter 6
     Michael E. Porter

National prosperity is created, not inherited.  It does not grow out of a country's natural endowments, its labor pool, its interest rates, or its currency's value, as classical economics insists.

A nations competitiveness depends on the capacity of its industry to innovate and upgrade.  Companies gain advantage against the world's best competitors because of pressure and challenge.  They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding local customers.

In a world of increasing global competition, nations have become more, not less, important.  As the basis for competition has shifted more and more to the creation and assimilation of knowledge, the role of the nation has grown.  Competitive advantage is created and sustained through a highly localized process.  Differences in national values, culture, economic structures, institutions, and histories all contribute to competitive success.  There are striking differences in the patterns of competitiveness in every country; no nation can or will be competitive in every or even most industries.  Ultimately, nations succeed in particular industries because their home environment is the most forward-looking, dynamic, and challenging.

The first National Competitiveness Report of Armenia, preface by Michael Porter.

World Economic Forum Global Competitiveness Programme

Affiliated Institutes with a formal relationship to the Institute for Strategy and Competitiveness.

National Competitiveness Councils: Australia, Croatia, Hungary, Ireland, Jordan, Kazakhstan, Mauritius, Thailand

New Zealand's Economic and Trade Development Agency on Business Clusters.