Mrs Anthony
The competitive advantage of nations: is Porter’s Diamond Framework a new theory that explains the international competitiveness of countries?
A.J. Smit ABSTRACT
The focus of this article is to clarify the meaning of international competitiveness at the country level within in the context of Porter’s (1990a) thesis that countries, like companies, compete in international markets for their fair share of the world markets. At a country level, there are two schools of thought on country competitiveness: the economic school, which rejects Porter’s notion of country competitiveness, and the management school, which supports the notion of competitiveness at a country level. This article reviews and contrasts the theories pertaining to these two schools of thought with specific reference to trade theories and the ‘theory’ of the competitive advantage of nations originally advanced by Porter (1990a, 1997a, 1998b, 1998c, 2000). Although Porter’s Diamond Framework has been extensively discussed in the management literature, its actual contribution to the body of knowledge in the economic and management literature has never been clarified. The purpose of this article is to explain why Porter’s Diamond Framework is not a new theory that explains the competitiveness of countries but rather a framework that enhances our understanding of the international competitiveness of firms. Key words: Porter, Diamond Framework, international competition, competitiveness of countries, international business, national competitive advantage, country sources of competitive advantage
Prof. A.J. Smit is an Associate Professor of International Business, Graduate School of Business Leadership, University of South Africa. E-mail: ajsmit@sbleds.ac.za Southern African Business Review Volume 14 Number 1 2010
105
A.J. Smit
Introduction
“Today [South Africa] is part of a truly global economy. To maintain our standard of living, we must learn to compete in an ever tougher world market place.
A.J. Smit ABSTRACT
The focus of this article is to clarify the meaning of international competitiveness at the country level within in the context of Porter’s (1990a) thesis that countries, like companies, compete in international markets for their fair share of the world markets. At a country level, there are two schools of thought on country competitiveness: the economic school, which rejects Porter’s notion of country competitiveness, and the management school, which supports the notion of competitiveness at a country level. This article reviews and contrasts the theories pertaining to these two schools of thought with specific reference to trade theories and the ‘theory’ of the competitive advantage of nations originally advanced by Porter (1990a, 1997a, 1998b, 1998c, 2000). Although Porter’s Diamond Framework has been extensively discussed in the management literature, its actual contribution to the body of knowledge in the economic and management literature has never been clarified. The purpose of this article is to explain why Porter’s Diamond Framework is not a new theory that explains the competitiveness of countries but rather a framework that enhances our understanding of the international competitiveness of firms. Key words: Porter, Diamond Framework, international competition, competitiveness of countries, international business, national competitive advantage, country sources of competitive advantage
Prof. A.J. Smit is an Associate Professor of International Business, Graduate School of Business Leadership, University of South Africa. E-mail: ajsmit@sbleds.ac.za Southern African Business Review Volume 14 Number 1 2010
105
A.J. Smit
Introduction
“Today [South Africa] is part of a truly global economy. To maintain our standard of living, we must learn to compete in an ever tougher world market place.