Is technology the basis of long-term national competitive advantage? Compare differences in the innovation systems of leading economies, industries and firms. (72%)
Technological developments have shaped our world since the beginning of civilization. In this report, by examining the important influences of technology and other factors which may also be powerful influences on human history, we will discuss whether technology is the basis of long-term national competitive advantage. We will base our argument on Porter’s and Chandler’s theories, and support it with research evidence. In the following report, we will answer the questions in detail.
In order to compare differences in the innovation systems of leading economies, industries and firms, the structure of the argument is going to be three-tiered; broken down by national level, industrial level and firm level. We will mainly focus on the automobile industry due to the fact it has been one of the most important and biggest industries since the first industrial revolution. At the national level, five leading economic countries will be compared horizontally: the US, China, Japan, Germany and the UK. At the industrial level, we will look at the history of automobile development. At the firm level, we will carefully compare two case studies, Toyota and BMW.
2. Technological Influences on Long-term National Competitive advantage
To achieve a national competitive advantage is one of the most significant goals for any nation. In looking at national competitiveness, Porter (1990) defined the competitive advantage of a nation as its capacity to attract local and foreign firms to use the country as a platform to conduct business and achieve national economic success. One of the major reasons behind national competitive advantage is technology. According to Porter (1998) technological change is one of the principal drivers of competition, which is at the heart of economic growth and development. This is because technology development can lead to product designs and service that differentiate or lower cost from its competitors. Technology also plays an important role in shaping the pattern of product innovation and enhances a firm’s ability to provide a better customer service than its competitors.
For a nation to sustain a competitive advantage in a particular industry sector requires dynamic advantage. Some leading industries have managed to gain competitive advantage in world markets through sophisticated technology and innovation, such as the Japanese car industries. Firms must broaden and extend the basis of their competitive advantage by innovation through technology development and update (Fitzgerald, 1994). Innovation through technological development also leads to a national comparative advantage. Comparative advantage is based on being able to produce particular goods or service at a lower opportunity cost than other countries through technological superiority. Therefore, technology seems the basis of a long-term national competitive advantage.
Although technology is regarded as a primary determinant of driving national economic success, it doesn’t work alone. There are many other influential factors which are considered equally crucial, such as government support, research and development (R&D), professional management, human resource (HR) and culture.
Technological change has been a major force in the sustained economic growth of nations’ wealth since the late 19th century. Large industrial enterprises have thus been a substantial part of this economic achievement mainly through the commercialization of new products and processes which embodied innovating technologies. The major contributions of the worlds’s large industrial enterprises to economic growth during the twentieth century appear to be four. First, lowered the cost of production; Second, by recruiting the human capital; Third assured flow of materials and...
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