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Porter's Theory Of Competitiveness

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1) Introduction Competitive Advantage of Nations by Michael Porter (1990) is a largely reputable yet often criticised work. The framework of competitiveness by Porter explained the achievements of industries and their contributions to the success of nations. Firstly, the concept of National Competitiveness and the diamond model will be explained. Secondly, the critical analysis of Porter’s theory in comparison with other academics’ arguments will be provided. Lastly, it will be analysed whether Porter’s theory is effective and identify some of the missing dimensions in his framework.

2) Concept of National Competitiveness The constant public debate surrounding National Competitiveness has existed for a long time. According to Reinert (1995), despite neoclassical economics theory stating that all economic activities have similar benefits for a country, that is not reflected in reality due to certain industry churning out industry rents for instance higher profits, wages and taxable income. Therefore, National Competitiveness can be analysed through the appropriation of industry rents in nations. According to Gray (1991), It is believed that dynamic industries create rent for a country and the spillover results of such industries are of great value to the home nation and as a result, increases the country’s standard of living and welfare through such economic growth.
Paul Krugman (1994) criticised the concept of National Competitiveness

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