The Relationships Between Michael Porter’s Theory of Competitiveness and Economic Development of Nations, Regions, and Cities and the Economics of Innovation

Additionally, globalization allows for the concentration of labor in agricultural and industrial economic production (Sosa, 2004). This means the implementation of the concept of comparative advantage, which describes a country’s need to access information and discharge new technology to capitalize at what they are best at doing (Sosa, 2004). I believe Mitchell’s statement “when countries open their border to trade, they tend to specialize in producing goods and services that intensively use their most abundant factors of production” (Mitchell, 2002) is quite accurate. The benefits of implementing global production reside in the opportunities of taking resources from different areas of the world, and profiting from the national differences in the cost and quality of the production factors (i.e.labor, energy, land, and capital) (Sosa, 2004). By allotting the resources and capital invested to obtain those assets effectively, businesses can ultimately reduce their overall cost structure and improve the quality and functionality of their final products, measures that hold greater competitive potential in the global market (Hill, 2003).

Much discussion has been conducted on the topic of globalisation of the world of economy. Globalisation may be defined as the increasing economic and financial integration of economies on a global scale. Factors enabling globalisation include the change in technology which is the socialised knowledge of producing goods and services, as well as the reduction in the protection of the world economy such as the successive reduction in trade barriers since the Second World War. Consequences that arise as a result of Globalisation are known to be both positive and negative. One consequence faced by Australian businesses and industries is the aggravation of unemployment. Another is competition, in which demand and supply are balanced out by a regulatory function when businesses challenge each other by offering the best price, quality and service of their ability. A change in technology has been a main facilitator and driving force of most of the globalisation processes. Improvements in the capacity to produce have been made applicable through technology. The spread and speed of knowledge transfer and communication have increased, meaning that Australian businesses are able to market products at a cheaper price and be exposed to a global market to compete. This is because it is a requirement for producing goods such as clothes and cars, as well as services such as banking and security. Technologically, most

National systems of innovation has been a helpful tool used by all countries. Innovation by itself has proven to be successful in modern day business with increasing profit margins but also in organisations and the world. University’s governments and companies all work together in building new innovative products and service that can benefit everyone as a whole. The National innovation system is a success as it allows you to see where innovations are thriving and where they are lacking. National Innovation systems is an effective way on where you sitting with the world in innovation and innovators. . . . . . . . . . . . . . . . . . . . . . . . .

The country can maximize their wealth by putting the resources in the most competitive industries. Government created comparative advantage rather than free trade because now easier moves the production processes and the machines into countries that can produce more goods (Yeager & Tuereck, 1984). However, many countries now move to new trade theory suggests the ability firms to limit the number of competitors associated with economic scale (reduction of costs with a large scale of output) (Krugman, 1992). The comparative advantage occurs when two-way trade in identical products, it will useful where economic scale is important, but it will create problem with this model. As a result, government must intervene in international trade for protection to domestic firms (Krugman, 1990)

These aspect are all key, but probably the most vital two are rivalry and cooperation within the nation. These tie in with Porter’s theory of industry clusters. The idea behind of rivalry and cooperation within a nation is that the rivalry will help drive the firms forward and the cooperation will also help each firm be more competitive in the global market. The firm may share ideas of production or new technological revolutions. This information would be shared within an industry cluster. “..the fundamental source of the domestic industry’s global competitive advantage may well be domestic cooperation that ensures the collectivization of knowledge-a process that gives those individual enterprises within the domestic industry that share knowledge and ability to engage in continuous innovation.” (Lazonick, 1991) Industry clusters are “geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions (for example, universities, standards agencies, and trade associations) in particular fields that compete but also cooperate.” (Porter, 1979) The importance and role of clusters, from Porter’s

Competitiveness is the force needed to win when in competition with other competitors in the same business. Country competitiveness can be defined as the amount of riches a country is able to generate more than its competitors. It can also be said to be the major determinant of the standard of living for a country and also the main its source of income. Productivity is also

According to Zahra, Oviatt and McDougall overlooked a critical aspect that confers competitive advantage. He posits that the institutional environment and economic geography can not only build, but can sustain competitive advantage for an INV. He identified the subtleties such as culture, history and geography which can have a profound effect when you are dealing with opportunities in a new country or territory. They also go a

Sweden has developed a modern industrial culture based on natural resources, technical skills, and a sense of quality. Simplicity and even severity resulting from geographic and economic conditions characterize Swedish society and life.

In the article “The Competitive Advantage of Nations” Michael Porter describes a diamond shaped relationship of forces that define a country’s potential for being competitive in a specified industry. The four points on the diamond representing the different forces are: factor conditions; demand conditions; firm strategy, structure and rivalry; and related and supporting industries. According to Porter, the four points apply pressure to each other resulting in a national

In his book The Competitive Advantage of Nations Michael Porter examines modern global economy and explains the theory of competitive advantage through a reflection of a “diamond” which maintains its growth and prosperity. Porter who is considered the father of modern businesses and promoter of notions of competitiveness produced a number of books on strategic management in which he bridged the gap between national and international economics. His latest book is specifically the broadest in scope because it shifts the focus of attention from the performance of the firm to the performance of the nation whole. However, the focus of this paper discusses how a developing nation like Qatar is growing its firms’ foundations and bettering its environmental conditions

The classical model also known as the Ricardian model argued that countries trade because of differences in their technology however, the Heckscher-Ohlin (HO) is a factor-proportions theory of comparative advantage idea which argues that the idea of comparative advantage works under the influence of relative factor abundance and relative factor insensitivity (Suranovic, 2006).

Competitiveness of a country is defined as the set of institutions, policies and factors that contribute to the level of productivity (World Economic Forum, 2015). Numerous empirical evidences show that productivity is the most fundamental element in explaining the level of prosperity of companies and Americans. So the United States is competitive to the extent that corporations operating in this country are able to achieve success in the global economy while supporting increasing wages and high living standards for the average citizen (HBS U.S Competitiveness Project, 2015). In short, competitiveness is a shared prosperity that firms win and citizens thrive.

Porter’s Diamond Model provides companies with four reliant factors that fully depend on the state of each other to achieve success within a competitive environment. However, Curran (2001) claims that Porter’s Diamond Model does not fully explain a country’s competitive advantage since only two factors provide evidence of their competitive position. The used factors are company rivalry, strategy, and factor endowments. With reference to the competitive positions of countries within major economies, factor endowments comprising of land, capital, labor, advanced technology and materials as stated in Porter’s theory, a government is responsible for contributing toward a company’s physical infrastructure (Porter 1998).

Comparative advantage is a principle developed by David Ricardo in the early 19th century to explain the benefits of mutual trade (Carbaugh, 2008). Many underlying assumptions of comparative advantage depend on states of economic equilibrium and an absence of economy of scale. In reality, economies are dynamic and subject to innovation and interference; which has led to revised assumptions of return and competition (Krugman, 1987). These factors have created questions of free trade and governmental participation in an economy by the development of strategic trade policies. These new concepts do not replace the theory of comparative advantage; however, they further explain how trade can benefit a country's economy (Krugman, 1987).

Any country should use porter diamond theory of national advantage. It's designed to help understand the competitive advantage nations. It suggests that the national home base of any organizations are playing a supportive role in shaping the size or scoop to which it is likely to achieve advantage on a global scale. This home base provides basic factors, which support organizations from building advantages in international competition. Porter classifies four determinants: Factor Condition, Diamond Condition, Relatives & supporting and Structure, strategy & Rivalry. Egypt government acts to catalysts to improve Egypt position in a globally competitive economic environment. They found that they can create new factors such as skilled labor and high technology (Porter M., 1990). Porter's diamond model suggests threat there are inherent reasons why some nations are more competitive than others on an international market. Another factor that influence in competitive advantages such as the policies that put by government. One of the most influencer policies is (FDI) Foreign direct investment