In Certain Cases Porter's Diamond of Competitive Advantage May Not Be an Appropriate Framework for the Analysis of a Nation's Sources of Competitive Advantage. Essay Example
Introduction
Since its publication in 1990, Michael Porter's book The Competitive Advantage of Nations has attracted much consideration. The main analytical tool of the book is the diamond of competitive advantage (figure 1). This model is based on four country specific "determinants" and two external variables. Porter's four determinants and two outside forces interact in a "diamond" of competitive advantage, with the nature of a country's international competitiveness depending upon the type and quality of these interactions. However, because it is fundamentally a home-based model of international competitiveness, the diamond theory is criticized by many international business scholars. Dunning , and Rugman ¬, ¬¬ point out that the influence on competitiveness of two-way foreign direct investment (FDI) and foreign government influence and interference on trade and investment have been neglected. Rugman and Collinson have also evaluated the model and identified eight areas for comment. This essay will look at Rugman and Collinson's criticisms of Porter's model, focussing on three major areas: the role of FDI, foreign government influence and Multi National Enterprises (MNEs), before looking at developments to Porters diamond with country specific examples.
RUGMAN'S AND COLLINSON'S CRITIQUE OF PORTER'S DIAMOND
The eight areas identified for comment and evaluation namely: the model is limited by being based on ten countries, which are either industrialised or a member of a triad; the Government is of critical importance, and has been neglected by Porter; chance although critical, is difficult to predict or guard against; Porter's model must be applied in terms of company-specific considerations and not in terms of national advantages; Porter delineates only four distinct stages of national competitive development; Porter contends that only outward FDI is valuable in creating competitive advantage, and inbound foreign investment is never the solution to a
Since its publication in 1990, Michael Porter's book The Competitive Advantage of Nations has attracted much consideration. The main analytical tool of the book is the diamond of competitive advantage (figure 1). This model is based on four country specific "determinants" and two external variables. Porter's four determinants and two outside forces interact in a "diamond" of competitive advantage, with the nature of a country's international competitiveness depending upon the type and quality of these interactions. However, because it is fundamentally a home-based model of international competitiveness, the diamond theory is criticized by many international business scholars. Dunning , and Rugman ¬, ¬¬ point out that the influence on competitiveness of two-way foreign direct investment (FDI) and foreign government influence and interference on trade and investment have been neglected. Rugman and Collinson have also evaluated the model and identified eight areas for comment. This essay will look at Rugman and Collinson's criticisms of Porter's model, focussing on three major areas: the role of FDI, foreign government influence and Multi National Enterprises (MNEs), before looking at developments to Porters diamond with country specific examples.
RUGMAN'S AND COLLINSON'S CRITIQUE OF PORTER'S DIAMOND
The eight areas identified for comment and evaluation namely: the model is limited by being based on ten countries, which are either industrialised or a member of a triad; the Government is of critical importance, and has been neglected by Porter; chance although critical, is difficult to predict or guard against; Porter's model must be applied in terms of company-specific considerations and not in terms of national advantages; Porter delineates only four distinct stages of national competitive development; Porter contends that only outward FDI is valuable in creating competitive advantage, and inbound foreign investment is never the solution to a