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We defined a nation’s industry as internationally successful if it possessed competitive advantage relative to the best worldwide competitors. The first identified all industries in which the nation’s companies were internationally successful, using available statistical data, supplementary published sources, and field interviews. In each nation, the study consisted of two parts. By studying nations with widely varying characteristics and circumstances, this study sought to separate the fundamental forces underlying national competitive advantage from the idiosyncratic ones. Most previous analyses of national competitiveness have focused on single nation or bilateral comparisons. Together, the ten nations accounted for fully 50 % of total world exports in 1985, the base year for statistical analysis. The other nations represent a variety of population sizes, government policies toward industry, social philosophies, geographical sizes, and locations. Three nations-the United States, Japan, and Germany-are the world’s leading industrial powers. The researchers all used the same methodology.
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I was assisted by a team of more than 30 researchers, most of whom were natives of and based in the nation they studied. To investigate why nations gain competitive advantage in particular industries and the implications for company strategy and national economies, I conducted a four-year study of ten important trading nations: Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, the United Kingdom, and the United States. (See the insert “What Is National Competitiveness?”) Patterns of National Competitive Success by: Michael E. Among governments, there is a growing tendency to experiment with various policies intended to promote national competitiveness-from efforts to manage exchange rates to new measures to manage trade to policies to relax antitrust-which usually end up only under mining it. Managers are pressing for more government support for particular industries. In companies, the words of the day are merger, alliance, strategic partnerships, collaboration, and supranational globalization. (For more about the study, see the insert “Patterns of National Competitive Success.”) According to prevailing thinking, labor costs, interest rates, exchange rates, and economies of scale are the most potent determinants of competitiveness. These conclusions, the product of a four-year study of the patterns of competitive success in ten leading trading nations, contradict the conventional wisdom that guides the thinking of many companies and national governments-and that is pervasive today in the United States. Ultimately, nations succeed in particular industries because their home environment is the most forward-looking, dynamic, and challenging. 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. Differences in national values, culture, economic structures, institutions, and histories all contribute to competitive success. Competitive advantage is created and sustained through a highly localized process.
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As the basis of competition has shifted more and more to the creation and assimilation of knowledge, the role of the nation has grown. In a world of increasingly global competition, nations have become more, not less, important. They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding local customers. Companies gain advantage against the world’s best competitors because of pressure and challenge.
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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.Ī nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. National prosperity is created, not inherited.