Porters Model of National Competitve Advantage

To what extent does Porters model of national competitive advantage adequately account for variations in national business systems and comparative economic performance?

Porters model of national competitive advantage has aided us in understanding why some nations are more competitive than others. The core principle that the diamond model communicates is that a nations competitive advantage is dependent on its ability to create strong innovative industry clusters within national borders (Porter,1990). In addition to this, having a home environment that is most forward looking, dynamic and challenging helps the nation in maintaining competitive advantage (Ibid). However, even Porter realises that CA is not an easy concept to define, suggesting that national CA is as a result of productivity, which needs to be continuously upgraded in order for a country to sustain CA. Therefore to understand why a nation is competitive, one must understand how and why its productivity grows.

Porters diamond constitutes of a set of four primary determinants; factor conditions; demand conditions; firm strategy, structure and rivalry; and related and supporting industries, which according to Porter creates an environment for domestic firms to compete and sustain CA. In addition to the four, Porter adds a further two variables which he finds to be of secondary importance; the role of chance and the role of government. Porter believes that when all these determinants interact with each other it creates a dynamic environment for firms to compete. Dynamic conditions that influence innovation and the upgrading of competitive advantage are far more important than initial resource endowments in determining national patterns of competitiveness. According to Porter, industries that are advanced in all the determinants are likely to be more competitive than those who are only partially advanced. Such an influential model has been subject to many criticisms that make apparent key problems....