25 Years of “The Competitive Advantage of Nations”

Citation

Ketels, C. and Keller, M.K. (2015), "25 Years of “The Competitive Advantage of Nations”", Competitiveness Review, Vol. 25 No. 5. https://doi.org/10.1108/CR-08-2015-0073

25 Years of “The Competitive Advantage of Nations”

Article Type: Editorial From: Competitiveness Review, Volume 25, Issue 5

In 1990, Michael Porter’s The Competitive Advantage of Nations was published. Porter (1980, 1985) had already established his name with Competitive Strategy and Competitive Advantage, two books on industry analysis and company strategy that had become instant classics in their field. With The Competitive Advantage of Nations, Porter entered a new field and started to address an audience of government leaders and economists. As in the earlier two books, he offered them new conceptual tools that were intended to change not only how to think about competitiveness but how to mobilize effective action. It introduced the “diamond” and the “cluster” as critical tools to analyze and understand competitiveness. And it fore-shadowed a new model of economic development efforts, focused on developing existing strengths and on building competitive advantages and based on public–private partnerships.

Twenty-five years later, The Competitive Advantage of Nations has undoubtedly become a classic. It has been reprinted numerous times and in an ever-growing range of languages. Its citation counts put it among the most widely spread economics books there are. For Porter maybe even more importantly, the ideas of this book have inspired and motivated public and private leaders in many countries and regions. They continue to be discussed, sometimes heatedly – what better indication of their relevance?

The purpose of this special edition of the Competitiveness Review is to contribute to the discussion of what lessons the book and the work it triggered holds today. There is no doubt that the questions Porter raised 25 years ago remain critical today; maybe even more so than ever. The recent Great Recession in the USA and the European fiscal crisis that followed are a painful sign that macroeconomic engineering has failed as a driver of sustainable growth. And while globalization has proven a powerful tool to raise prosperity, there are increasing doubts that the structural transformation from agriculture to industry that it has enabled in many countries remains a viable path forward (Rodrik, 2015). What is left, then, is the hard work of creating business environments in which companies can emerge and continuously enhance their productivity and innovative capacity. It is exactly here that Porter’s competitiveness framework offers a perspective for fact-driven efforts to enhance a country’s or region’s ability to raise its sustainable prosperity over time.

The collection of papers in this special issue pulls together the learnings from applying Porter’s competitiveness framework to a range of conceptual issues and specific locations. It cannot hope to provide a comprehensive discussion of the contribution that The Competitive Advantage of Nations has made; that is beyond the scope of this special issue. But it aspires to indicate where specific lessons can be drawn or a direction for future research can be set.

The first four articles in this special issue of Competitiveness Review deal with particular aspects of the fundamental concepts of Michael Porter’s book. The papers by Huggins and Izushi (2015) and Sölvell (2015) take different perspectives on the evolution of Porter’s thinking. Huggins and Izushi take more of an outside view, drawing on a collection of papers (Huggins and Izushi, 2011) to look at Porter’s work from the perspective of the broader literature in this field. Sölvell, who was a member of Porter’s original project team that provided the foundation for The Competitive Advantage of Nations, takes a more inside perspective, showing how the framework has deepened and expanded over time.

The papers by Martin et al. (2015) and Aiginger and Vogel (2015) then aim to push the limits of Porter’s work, connecting it to two ideas that have gained prominence in the economic development literature. Martin et al. square Michael Porter’s work on industry clusters with Richard Florida’s approach of the “creative class” (Florida, 2002). Drawing on the existing body of literature on both approaches (Delgado et al., 2014; Florida, 2012; Florida et al., 2008; Martin Prosperity Institute, 2009; Porter, 1990, 2003), the authors empirically assess the interactions of industry agglomeration and skills on economic performance. Aiginger and Vogel (2015) explore the relation of Porter’s definition of competitiveness to new conceptualizations of economic performance that include additional aspects “beyond GDP”, an area in which Porter himself has recently gotten engaged (Social Progress Index, 2015). Using recent data for the EU-27, the authors measure a broadened definition of competitiveness and examine the type of systematic relationship that exists between traditional and new elements.

The final three papers look at the impact of Porter’s competitiveness framework in policy practice. The three case studies on Norway, Portugal and Central America report both on successful experiences as well as difficulties and challenges in the practical implementation of the concepts of The Competitive Advantage of Nations. In their paper entitled Theoretical and Methodological Advances in Cluster Research, Reve and Sasson (2015) trace the evolution and impact of a series of projects to raise Norway’s competitiveness led by Reve over the past three decades. They provide an account of the methodological evolution that took place, and share insights into the mobilization of key private and public actors that they identify as critical for the success of these efforts.

In their paper Twenty Years after the Porter Report for Portugal, Goncalves et al. (2015) review the impact of a Porter-led project on Portuguese competitiveness (Porter, 1994) that was done a few years after the Competitive Advantage of Nations had been published. Unsurprisingly, given Portugal’s recent economic troubles, the author’s conclusions are mixed. The difficulties in moving from analysis to action are central, a theme that was also key to Michael Porter’s own critical assessment of the evolution of Portugal’s competitiveness evolution since his 1994 report (Porter, 2002). The final paper by Ketelhöhn et al. (2015) provides an example of a multi-country competitiveness effort in which Porter was a driving force. Here, a university-based institution proved to be a critical factor in enabling the implementation of actions.

Together, these seven papers show the remarkable potential that the ideas introduced in The Competitive Advantage of Nations continue to hold. Conceptually, much is to be gained from combining and testing these ideas with new methods and approaches. Too often there has been an uneasy relation with limited interaction between Porter’s work and the more mainstream contributions in the academic literature. Empirically, the issue of process and how to move from diagnostics to action clearly needs more attention. The Competitive Advantage of Nations already included many useful pointers, but they were too often ignored by practitioners hoping for a quick solution.

Christian Ketels

Institute for Strategy and Competitiveness, Harvard Business School, Boston, Massachusetts, USA, and

Michael Kaspar Keller

Center for Competitiveness, University of Fribourg, Fribourg, Switzerland

References

Aiginger, K. and Vogel, J. (2015), “Competitiveness: from a misleading concept to a strategy supporting Beyond GDP goals”, Competitiveness Review, Vol. 25 No. 5.

Delgado, M., Porter, M.E. and Stern, S. (2014), “Defining clusters of related industries”, Working Paper No. 20375, National Bureau of Economic Research, Cambridge, MA.

Florida, R. (2002), The Rise of the Creative Class, Basic Books, New York, NY.

Florida, R. (2012), The Rise of the Creative Class Revisited, Basic Books, New York, NY.

Florida, R., Mellander, C. and Stolarick, K. (2008), “Inside the black box of regional development – human capital, the creative class and tolerance”, Journal of Economic Geography, Vol. 8 No. 5, pp. 615-649.

Goncalves, V., Ribeiro Mendes, F., Dias Sardinha, I. and Rodrigues, R. (2015), “Twenty years after the porter report for Portugal”, Competitiveness Review, Vol. 25 No. 5.

Huggins, R. and Izushi, H. (Eds) (2011), Competition, Competitive Advantage, and Clusters: The Ideas of Michael Porter, Oxford University Press, Oxford.

Huggins, R. and Izushi, H. (2015), “The competitive advantage of nations: origins and journey”, Competitiveness Review, Vol. 25 No. 5.

Ketelhöhn, N., Artavia, R., Arce, R. and Umana, V. (2015), “The central American competitiveness initiative”, Competitiveness Review, Vol. 25 No. 5.

Martin Prosperity Institute (2009), “Ontario in the creative age”, available at: http://martinprosperity.org/media/pdfs/MPI%20Ontario%20Report%202009%20v3.pdf (accessed August 2015).

Martin, R., Florida, R., Pogue, M. and Mellander, C. (2015), “Creativity, clusters and the competitive advantage of cities”, Competitiveness Review, Vol. 25 No. 5.

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Porter, M.E. (2003), “The economic performance of regions”, Regional Studies, Vol. 37 Nos 6/7, pp. 545-546.

Reve, T. and Sasson, A. (2015), “Theoretical and methodological advances in cluster research”, Competitiveness Review, Vol. 25 No. 5.

Rodrik, D. (2015), “Premature deindustrialization”, NBER Working Paper No. 20935, February 2015, Cambridge, MA.

Social Progress Index (2015), available at: www.socialprogressimperative.org/data/spi (accessed August 2015).

Sölvell, Ö. (2015), “The competitive advantage of nations book 25 years – opening up new perspectives on competitiveness”, Competitiveness Review, Vol. 25 No. 5.

About the editors

Christian Ketels is a member of the Harvard Business School faculty at Professor Michael E. Porter's Institute for Strategy and Competitiveness. He holds a PhD (Econ) from the London School of Economics and further degrees from the Kiel Institute for World Economics and Cologne CR 25,5 456 University. He is President of TCI, a global network of professionals in the field of competitiveness, clusters and innovation; Honorary Professor at the European Business School Oestrich-Winckel; and Senior Research Fellow at the Stockholm School of Economics. In 2009, he served as a Visiting Professor at the Lee Kuan Yew School of Public Policy, Singapore. Dr Ketels has led cluster and competitiveness projects in many parts of the world, has written widely on economic policy issues and is a frequent speaker on competitiveness and strategy in Europe, North America and Asia.

Michael Kaspar Keller is an economist at the Center for Competitiveness of the University of Fribourg, Switzerland. He holds a master's degree in economics and social sciences from the same University. He is a Teaching Fellow at the Chair of Economics and Social Policy at the University of Fribourg and Assistant Editor of Competitiveness Review. He served as a member of the Board of the European MoC Chapter, a regional chapter of Professor Michael E. Porter's Microeconomics of Competitiveness network, from 2013 to 2014. Michael Keller has published on competitiveness, clusters and innovation and co-authored multiple policy reports for both private and public institutions. He is also responsible for the monthly selection of new academic articles at TCI, the global practitioners network for competitiveness, clusters and innovation. Michael Kaspar Keller is the corresponding author and can be contacted at: mailto:michael.kaspar.keller@gmail.com.