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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.
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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. |
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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.
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Recent presentations and reports:
Competitiveness as an Engine for
Economic Growth: Implications for Saudi Arabia
Michael E. Porter
Global Competitiveness Forum
Riyadh, Saudi Arabia
January 21, 2008
Competitiveness
at the Crossroads: Choosing the Future Direction of the Russian Economy
Michael E. Porter
and Christian Ketels
December 2007
Competitiveness: Implications
for Central and Europe and the Czech Republic
Michael E. Porter
Prague
October 22, 2007
Colombia Competitiveness:
Moving to the Next Level
Bogotá, Colombia
September 14, 2007
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Also see the full list
of presentations and other resources on national competitiveness from the
past several years:
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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.
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
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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.
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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.
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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.
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"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.
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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.
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World
Economic Forum Global Competitiveness Programme
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National Competitiveness Councils:
Australia,
Croatia,
Hungary,
Ireland,
Jordan, Kazakhstan,
Mauritius,
Thailand
New Zealand's Economic and Trade Development Agency on
Business Clusters
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