Concept Of National Competitiveness

Concept of National Competitiveness

The concept of National Competitiveness has been in public debate for a long time. The works of prominent neoclassical economists such as Adam Smith and David Ricardo had shown the benefits of trading between countries, with Ricardo 's theory of Comparative Advantage being one of the tenets of international economics. However, Reinert (1995) explains that although in the theory of neoclassical economics, all economic activities are alike in the sense that they are equally good for a nation. That is not the case in reality as some industry will produce industry rents such as higher profits, higher wages and higher taxable income.

It is thus through the appropriation of such industry rents that the context

World class related industries can be sources of ideas, technology, individuals, while supporting industries often deliver the most cost effective or highest quality input. All of these can be advantages in international competition. Close working relationships creates a quick and constant flow of information and a continuing exchange of ideas and innovations between suppliers and end users. Nations are typically competitive in industries where clusters of related and supporting industries are geographically concentrated, making the interactions closer and more dynamic. It is difficult to have the same level of interaction with foreign companies. The birth and upgrading of new firms and industries that occur in clusters of local industries are less likely to occur if the nation relies heavily on foreign-supplier and related

His findings generally confirmed Porter 's ideas. The demanding Turkish customers in glass and leather clothing industries forced firms to upgrade. Intense domestic rivalry in Turkish construction and leather clothes industries has made those firms internationally competitive while the uncompetitive Turkish automobile industry has led to uncompetitive firms. The Turkish glass and leather clothing industries confirm Porter 's hypotheses that competitive industries of a nation tend to cluster together. A similar study on Taiwan by Wong, Maher, Wang and Long (2001) has found the application of Porter’s Diamond analysis favorable to Taiwan.

There has been a barrage of criticism on Porter 's work ranging from questioning the originality of the framework (Dunning, 1992) (Grant, 1991) (Gray, 1991) (Rugman and D 'Cruz, 1993) to the heavy dependence on world export shares as a measure of international competitiveness (Cartwright, 1993) (Grant, 1991) (Rugman and D 'Cruz, 1993). There were also criticism of Porter 's methodology (Dunning, 1993) (Rugman and D 'Cruz, 1993) (Rugman and Verbeke,