diamond model advanced economies
TRANSCRIPT
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Microeconomics of Competitiveness
Session 3:Introduction to the Diamond Model
This presentation draws on ideas from Professor Porters articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), TheMicroeconomic Foundations of Economic Development, in The Global Competitiveness Report 2007-08, (World Economic Forum, 2008), Clusters and theNew Competitive Agenda for Companies and Governments in On Competition (Harvard Business School Press, 1998), and the Clusters of Innovation Initiative(www.compete.org), a joint effort of the Council on Competitiveness, Monitor Group, and Professor Porter and ongoing research at the Institute for Strategy andCompetitiveness. Additional information may be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu No part of thispublication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, orotherwise - without the permission of Michael E. Porter. Version: February 4, 2008
Microeconomics of CompetitivenessFebruary 4, 2008
Professor Michael E. Porter
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Perspectives on Firm Success
Internal
Internal External
External
Competitive
advantage residessolely inside acompany or in itsindustry
Competitive successdepends primarily oncompany choices
Competitive advantage (or
disadvantage) residespartly in the locations atwhich a companysbusiness units are based
Cluster participation is animportant contributor tocompetitiveness
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Competitiveness is determined by the productivity with which a nationuses its human, capital, and natural resources.
Productivity sets the standard of living (wages, returns on capital, returnson natural resources) that a country can sustain
It is not what industries a nation competes in that matters for prosperity, buthow it competes in those industries
Productivity in a national economy arises from a combination of domesticand foreign firms
The productivity of local or domestic industries is fundamental tocompetitiveness, not just that of export industries
Devaluation and revaluation do not mean that a country is more or lesscompetitive
What is Competitiveness?
Nations compete in offering the most productive environment forbusiness
The public and private sectors play different but interrelated roles increating a productive economy
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Sources of Prosperity
Inherited ProsperityInherited Prosperity
Prosperity is derived from selling orexploiting inherited natural resources
Prosperity is constrained
Government is the central actor in theeconomy as the owner and distributor ofresource wealth
Resource revenues allowunproductive policies and practices
to persist
Governments role gravitates towards thedistribution of wealth as interest groupsseek a bigger share of the pie
Prosperity is derived from selling orexploiting inherited natural resources
Prosperity is constrained
Government is the central actor in theeconomy as the owner and distributor ofresource wealth
Resource revenues allowunproductive policies and practices
to persist
Governments role gravitates towards thedistribution of wealth as interest groupsseek a bigger share of the pie
Created ProsperityCreated Prosperity
Prosperity is derived from creatingvaluable products and services
Prosperity is unlimited
Companies are the central actors in theeconomy
Prosperity can only be created byfirms
Governments role is to create theenabling conditions for productivityand foster private sector development
Prosperity is derived from creatingvaluable products and services
Prosperity is unlimited
Companies are the central actors in theeconomy
Prosperity can only be created byfirms
Governments role is to create theenabling conditions for productivityand foster private sector development
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Decomposing Prosperity
Per Capita IncomePer Capita IncomePer Capita Income
LaborProductivity
LaborProductivity
LaborUtilization
LaborUtilization
DomesticPurchasing
Power
DomesticPurchasing
Power
Local prices
Efficiency of localindustries
Level of local marketcompetition
Consumption taxes
ProsperityProsperityProsperity
Skills
Capital stock
Total factor productivity
Workforce participation rate
Population age profile
Unemployment Working hours
Standard of living
Inequality
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10
20
30
40
50
60
Colom
bia
South
Afric
aChile
Costa
Rica
China
Thailand
Unite
dStat
es
Russian
Fede
ration
Ghan
aLa
tvia
Vietna
m
Eston
iaSp
ain
Indon
esia
Croatia
Pakis
tan
Rwan
da
Germ
any
Finlan
d
Norway
CzechR
epublic
Swed
enJapa
n
Income InequalitySelected Countries
Gini Index
Note: Most recent Gini index data available for each country (1999 2003). Czech Republic data is from 1996.Source: World Bank, World Development Indicators, 2007.
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7 Copyright 2007 Professor Michael E. PorterCompetitiveness Master = 2007-11-14.ppt
0
0.1
0.2
0.3
0.4
0.5
0.6
CHIN
A
THAILA
ND
NORW
AY
SING
APOR
E
VIET
NAM
AUST
RALIA
JAPA
N
UNITE
DST
ATES
ESTO
NIA
KORE
A
LATV
IA
RUSS
IA
FINLA
ND
GHAN
ASP
AIN
COST
ARI
CA
SOUT
HAFRI
CA
TAIW
AN
INDO
NESI
A
MALA
YSIA
CHILE
BRAZIL
INDI
A
SLOV
AKIA
COLO
MBIA
TURK
EY
SAUD
IARA
BIA
Labor Force MobilizationSelected Countries
Employees as % ofPopulation, 2006
Note: Use most recent year available, either 2005 or 2006
Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, November 2007
OECD average: 0.47
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0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
-6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4%
Unemployment PerformanceSelected CountriesUnemployment
Rate, 2006
Change of Unemployment Rate in Percentage Points,
1998 - 2006Source: EIU (2007)
Turkey
Spain
(-10.1%)
Slovenia
Czech Republic
Switzerland Norway
Slovakia
Latvia
Estonia
AustriaUK
Portugal
France
Germany
Greece
Netherlands
Poland(6.2%)
Sweden
Iceland
Romania
Croatia
Bulgaria
Hungary
USADenmarkIreland
Macedonia(35%)
Lithuania Ukraine
Improving Deteriorating
Japan
ColombiaIndonesia
(7.04%)
Ecuador Egypt China
Costa Rica
ChileRussia
Italy Sri Lanka
New Zealand
Korea
Thailand
Singapore
TaiwanPakistanVietnam
Canada
PhilippinesIndia
Malaysia
Australia
Finland
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Source: Groningen Growth and Development Centre and The Conference Board, 2008
Labor Input Level and GrowthWorking Hours, Selected Countries
1,300
1,600
1,900
2,200
-1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0%
Hours worked per Employee, 2006
Change of Hours worked per Employee, CAGR, 1997- 2006
France
UK Belgium
Finland
Germany
ItalyDenmark
Sweden
Norway
LithuaniaPortugal
Ireland
South Korea(-1.3%)
Czech Republic
Latvia
PolandEstonia
Mexico
Slovenia
Japan
Taiwan
Netherlands
Austria
Switzerland
New Zealand
US
Hungary(1.2%)Romania
Cyprus
TurkeyGreece
Iceland
SlovakiaAustralia
Bulgaria
Canada
Spain
Singapore (2307 hours)
Chile
ColombiaVenezuela
Argentina
Brazil
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10
25
40
55
-1% 0% 1% 2% 3% 4% 5% 6% 7% 8%
Source: Groningen Growth and Development Centre and The Conference Board, 2008
Labor Productivity Level and GrowthSelected Countries
Real GDP per hourworked, US-$, 2007
Growth of Real GDP per Hour, CAGR, 2002 - 2007
France
UK
USA
BelgiumNetherlands
Finland
Germany
Italy
Spain
DenmarkCanada
Norway (70.1)
Sweden
AustraliaSwitzerland
Austria
GreeceIceland
Ireland
Japan
Portugal
New Zealand
Czech Republic
Turkey
Latvia
Estonia
Slovenia
Slovakia
Poland
South Korea
Mexico BulgariaRomania
Lithuania
Cyprus
Hungary
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Total Factor Productivity GrowthJapan vs. Selected Countries
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
China
Germany
United Kingdom
United States
Japan
Source: Marcel P. Timmer, Gerard Ypma and Bart van Ark (2003), IT in the European Union: Driving Productivity Divergence?, GGDC ResearchMemorandum GD-67 (October 2003), University of Groningen, Appendix Tables, updated June 2005
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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Decomposing Japans GDP per Capita Growth
-$600
-$400
-$200
$0
$200
$400
$600
$800
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Contribution to change in real GDP
per Capita (PPP adjusted)
Labor ForceParticipation
LaborProductivity
Note: Data before 2001 not available.Source: EIU (2007)
2006 value of $558 represents a 1.8% increase in GDP per capita
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0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
Mexic
o
Polan
d
Czechr
epublic
Hung
ary
Slovakr
epublic
Turke
y
Portu
gal
Korea
Unite
dStat
es
Gree
ceSp
ain
NewZe
alandIta
ly
Austr
alia
Unite
dKing
dom
Cana
daJapa
n
Belgi
um
Nethe
rland
s
Austria
Luxemb
ourg
Fran
ce
Germ
any
Swed
en
Finlan
d
Switz
erlan
d
Irelan
d
Denm
ark
Norway
Icelan
d
Ratio of U.S. to Local Prices, September 2007
Comparative Domestic Cost LevelsSelected OECD Countries
Note: Calculated from comparative price levels, defined as the ratio of PPP factors to exchange rates. Ratio of U.S. to local prices represents the volume of a representativebasket of goods that can be purchased for a given amount of U.S. currency.Source: OECD (2007), authors calculations.
Higher local prices relative tothe United States
Lower local prices relativeto the United States
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Productivity
Competitive Environment
Imports Domesticinvestment
Outbound
foreign directinvestment
Domesticinnovation
Inbound
foreign directinvestment
Exports
Indicators and Enablers of Competitiveness
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
-5% 0% 5% 10% 15% 20% 25% 30% 35%
Import SharesSelected Countries
Import Share in GDP,in %, 2006
Change of Import Share in GDP, 1996 to 2006
Russia Japan
Malaysia Singapore(38.7%, 180.6%)
Thailand
Estonia
Hungary
Lithuania
Netherlands
Costa RicaSlovenia
Kyrgyzstan
Ukraine
Latvia
China
Macedonia
Poland
Germany
Switzerland
Bahrain
Georgia
UKCanada
France
South Africa
Ireland(-14.1%)
US
Cyprus
Norway
Senegal Austria
Brazil
Mauritius
Barbados
Honduras
Morocco
New Zealand
Source: UN Comtrade (2007), authors analysis
Croatia
IndonesiaAustralia
Ghana
Finland Sweden
TurkeyMexico
Portugal KoreaIceland
Pakistan
Colombia
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-10% -5% 0% 5% 10% 15% 20%
Export IntensitySelected CountriesExports as %
GDP (2006)
Change in Growth Exports (as % of GDP), 2001 - 2006
Spain
Czech Republic
Norway
Slovakia
Macedonia Austria
Portugal
Germany
Bulgaria
Netherlands
Poland
Sweden
Latvia
Slovenia
Hungary
JapanIceland
Denmark
Estonia
Bosnia &Herzegovina
Finland
Lithuania
Greece
Russia
Romania
Ireland(-29.5%)
Ukraine
Belarus
Moldova
Italy
USD 75M =
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: EUI (2007), authors analysis
China
Brazil
Cyprus
New ZealandTurkey
Ghana
Costa Rica
Colombia
Chile
Indonesia
Pakistan
Philippines
Thailand
Taiwan
Vietnam
USA
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Inbound Foreign Investment PerformanceStocks and Flows, Selected Countries
Source: UNCTAD (2007)
-5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Inward FDI Stocks as % of
GDP, Average 2002 - 2006
FDI Inflows as % of Gross Fixed Capital Formation, Average 2002 - 2006
Japan
Saudi Arabia
Turkey
Slovenia
Hungary
Tunisia
Slovakia
Bahrain
Czech Republic
Australia
Ghana
Cyprus
Lebanon
(63.8%)
Kuwait
Poland
Rwanda USA
Libya
Jordan
Malaysia
Thailand
United Arab Emirates
New Zealand
Egypt
Morocco
ChinaYemen
Canada
India
Brazil
80%
70%
60%
50%
40%
30%
20%
10%
0%
PakistanKorea
Ireland (114.1%) Estonia
Netherlands
Vietnam Chile
Sweden
Cambodia
RomaniaColombia
Norway
South Africa
Germany
Taiwan
Indonesia
Russia
Finland
SpainPortugal
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0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
-2% 0% 2% 4% 6% 8% 10% 12%
Innovative CapacityInnovation Output of Selected Countries
Source: USPTO, 2006
Annual U.S. patents per 1million population, 2006
Compound annual growth rate of US-registered patents, 1998 2006
USA
Russia
Japan
Sweden
France
Germany
Spain
Austria
South Africa
South Korea
Denmark
Switzerland
NorwayUKIreland
Finland
Netherlands
India (24.2%)China (31.9%)
Brazil
Taiwan
Singapore(16.7%)
3,500 patents =
Poland
Canada
Israel
Hong Kong
Australia
New ZealandItaly Hungary
Mexico
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Share of countryspatents that are
highly cited, 1999*
* The share of a countrys patents filed between 1994 and 1998 that were highly cited in 1999.
Source: CHI Patent, National Science Foundation and Council on Competitiveness data. Authors analysis.
Enablers / Indicators of CompetitivenessComparative Innovation Quality
0
2
4
6
8
10
12
14
16
18
20
Unite
dStat
es
Singa
pore
Israel
Cana
daJapa
n
Swed
en
Finlan
d
Unite
dKing
dom
Nethe
rland
s
Fran
ceKo
rea
Germ
any
Denm
ark
Switz
erlan
dIta
ly
Norway
Austria
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Top Japanese Originators of U.S. Patents, 2002- 2006
Source: Patenting By Geographic Region (State and Country), Breakout By Organization, USPTO (2008)
166264Japan Total (1454 organizations)
1376NISSAN MOTOR COMPANY, LIMITED
1475TOYOTA JIDOSHA K.K.
1552SEMICONDUCTOR ENERGY LABORATORY CO., LTD.
1556OKI ELECTRIC INDUSTRY CO., LTD.1664MURATA MANUFACTURING CO., LTD.
1980SANYO ELECTRIC CO., LTD.
2100RENESAS TECHNOLOGY CORPORATION
2257RICOH COMPANY, LTD.
2600SHARP KABUSHIKI KAISHA (SHARP CORPORATION)
2954DENSO CORPORATION
3285HONDA GIKEN KOGYO KABUSHIKI KAISHA (HONDA MOTOR CO., LTD.)
4110SEIKO EPSON CORPORATION
4166FUJI PHOTO FILM CO., LTD
4534MITSUBISHI DENKI KABUSHIKI KAISHA
5105NEC CORPORATION
6143FUJITSU LIMITED
6158SONY CORPORATION
6473TOSHIBA CORPORATION
7848HITACHI, LTD
8760MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
9372CANON KABUSHIKI KAISHA
# of PatentsPATENTOR
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Determinants of Competitiveness
Microeconomic CompetitivenessMicroeconomic Competitiveness
SophisticationSophistication
of Companyof Company
Operations andOperations and
StrategyStrategy
State of ClusterState of Cluster
DevelopmentDevelopment
Macroeconomic, Political, Legal, and Social ContextMacroeconomic, Political, Legal, and Social ContextMacroeconomic, Political, Legal, and Social Context
A sound macroeconomic, political, legal, and social context creates the potentialfor competitiveness, but is not sufficient
Competitiveness ultimately depends on improving the microeconomic capability
of the economy and the sophistication of local competition
Quality of theQuality of the
BusinessBusiness
EnvironmentEnvironment
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Assessing the Business Environment: The Diamond
Context for
FirmStrategy
and Rivalry
Context for
FirmStrategy
and Rivalry
Related andSupportingIndustries
Related andSupportingIndustries
Factor(Input)
Conditions
Factor(Input)
Conditions
DemandConditions
DemandConditions
Access to high qualitybusiness inputs
Natural endowments Human resources
Capital availability
Physical infrastructure
Administrative infrastructure(e.g. registration, permitting)
Information infrastructure(e.g., transparency)
Scientific and technologicalinfrastructure
Availability of suppliers and
supporting industries Presence of clusters instead of
isolated firms
Sophistication of localcustomers and needs
Strict quality, safety, andenvironmental standards
Successful economic development is a process of successive upgrading, in which the business
environment improves to enable increasingly sophisticated ways of competing
Local rules and incentivesthat encourage investment andproductivity
e.g. salaries, incentives forcapital investments,intellectual property protection
Vigorous local competition Openness to foreign and local
competition
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Issues in Diamond Analysis
Categorizing influences by part of the diamond
Arrows in the diamond Understanding cause and effect
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Context forFirm
Strategyand Rivalry
Context forFirmStrategy
and Rivalry
Related andSupporting
Industries
Related andSupporting
Industries
Factor(Input)
Conditions
Factor(Input)
Conditions
DemandConditions
DemandConditions
Levels of Influence on the DiamondSelected Examples
National E.g., capital market conditionsRegional E.g., local public education
system; university assetsCluster E.g., cluster-specific
research institutions
Regional E.g., breadth of regional economy; IFCs
Related Clusters E.g., common local suppliers
Cluster E.g., existence of supplier industries
National E.g., intellectual property
legislation; antitrust policyRegional
E.g., state tax policyCluster
E.g., number of localcompetitors
Cross-National E.g., Nordic Mobile Telephone
network; character-basedAsian languages
National E.g., environmental regulation;
consumer rights legislationRegional
E.g., state consumerprotection laws
Cluster E.g., sophistication of local
customers
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Measuring Microeconomic Capacity
The Business Competitiveness Index
Measures the overall level of sustainable prosperity that can be supportedgiven a countrys current competitiveness
Highlights strengths and weaknesses of a countrys business environmentrelative to its overall level of current prosperity
Reveals patterns of competitive evolution of individual countries
Country-level BCI data will be distributed to project teams once countries areselected.
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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000United States
Switzerland
Italy
DenmarkIreland
India
Business Competitiveness Index
2006 GDP per Capita(PPP- adjusted)
Malaysia
Source: Global Competitiveness Report 2007
SwedenKuwait Finland
Germany
Qatar
Norway
HighLow
Greece
Argentina
SpainBahrain
Libya
IndonesiaKenya
Tunisia
Korea
Colombia
Variation in BCI score explains 82%of variation in GDP per capita
Ranking Microeconomic CompetitivenessBusiness Competitiveness Index, 2007
IcelandHong Kong
New Zealand
Estonia
Japan
Chile
Thailand
Costa Rica
Jordan
Russia
Venezuela
Hungary
Cyprus
SloveniaPortugal
Israel
TaiwanFrance
Australia
LatviaPoland
SlovakiaLithuania
Czech Republic
Saudi ArabiaSouth Africa
China
Brazil
TanzaniaNigeria
Pakistan Philippines
Peru
Ukraine
Canada
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Company SophisticationRelative Position of Japanese Companies, 2007
Extent of incentive compensation 46
Willingness to delegate authority 19
Competitive DisadvantagesRelative to GDP per Capita
Competitive AdvantagesRelative to GDP per Capita
Change up/down of morethan 5/10 ranks since 2002
Note: Rank versus 74 countries; overall, Japan ranks 19th in 2006 PPP adjusted GDP per capita and 10h in Business Competitiveness.Source: Institute for Strategy and Competitiveness, Harvard University (2007)
Degree of customer orientation 1
Production process sophistication 2
Capacity for innovation 3Company spending on research and 3development
Nature of competitive advantage 4
Breadth of international markets 5
Extent of regional sales 5Value chain breadth 5
Extent of staff training 6
Control of international distribution 10
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Availability of scientists and engineers 1
Railroad infrastructure 2
Quality of electricity supply 3
Quality of telephone/fax infrastructure 6
Cooperation in labor-employer relations 7
Local equity market access 8
Quality of scientific research institutions 11
Overall infrastructure quality 13
Efficiency of legal framework 15
University/industry research collaboration 16
Reliability of police services 17
Competitive DisadvantagesRelative to GDP per Capita
Competitive AdvantagesRelative to GDP per Capita
Quality of management schools 52
Decentralization of economic policymaking 51
Ease of access to loans 34
Low business costs of corruption 29
Financial market sophistication 29
Air transport infrastructure quality 28
Venture capital availability 27
Laws relating to ICT 24Quality of primary education 22
Quality of math and science education 22
Judicial independence 19
Quality of port infrastructure 18
Factor (Input) ConditionsJapans Relative Position 2007
Factor(Input)
Conditions
Factor(Input)
Conditions
Change up/down of morethan 5/10 ranks since 2002
Note: Rank versus 74 countries; overall, Japan ranks 19th in 2006 PPP adjusted GDP per capita and 10h in Business Competitiveness.Source: Institute for Strategy and Competitiveness, Harvard University (2007)
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0
20
40
60
80
100
DoingBusiness
Closing aBusiness
ProtectingInvestors
GettingCredit
EmployingWorkers
TradingAcrossBorders
EnforcingContracts
Dealingwith
Licenses
Starting aBusiness
RegisteringProperty
PayingTaxes
Ease of Doing Business RankingsJapan, 2007
Ranking, 2007 (of178 countries)
Source: World Bank Report, Doing Business (2008)
Favorable Unfavorable
Median Ranking,OECD
Japans per capita GDP rank: 10
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RankRank
Innovative Capacity Index2004 Rankings
123
456789
10111213141516
17181920
123
456789
10111213141516
17181920
Scientists &Engineers Index
Cluster Environ-ment Index
Operations andStrategy Index
FinlandIceland
Japan
SwedenUnited States
NorwaySingapore
SwitzerlandRussia
DenmarkAustraliaGermanyCanadaBelgiumKoreaFrance
TaiwanUnited Kingdom
NetherlandsGeorgia
SingaporeLuxembourg
Taiwan
FinlandCanada
United KingdomUnited States
MalaysiaAustralia
IrelandJapanIsrael
AustriaGermany
NetherlandsNorway
Hong KongTunisia
DenmarkFrance
JapanUnited States
Taiwan
FinlandHong Kong
United KingdomKorea
SingaporeDenmark
CanadaSwitzerlandGermanySweden
IndiaItaly
Norway
MalaysiaFranceAustriaU.A.E.
United StatesFinlandSweden
TaiwanJapanIsrael
SingaporeGermany
Switzerland
DenmarkUnited KingdomHong Kong
IcelandNetherlands
AustraliaCanada
AustriaNorwayIreland
New Zealand
Germany
JapanDenmark
IsraelFinland
SwitzerlandSweden
United StatesNetherlands
BelgiumFranceUnited Kingdom
TaiwanSingapore
AustriaNorway
LuxembourgHong Kong
IrelandIceland
Innovation PolicyIndex
LinkagesIndex
Source: Unpublished data using the methodology described in Michael E. Porter and Scott Stern, Ranking National Innovative Capacity: Findings from the NationalInnovative Capacity Index, Global Competitiveness Report 2003-2004.
Note: This dataset willbe made available on
course website.
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BCI Value, 2007
Dynamism Score, 2002 - 2007
Rate of Competitiveness Improvement2002 - 2007
High
Low
Below average Above averageAverage
High-incomeMiddle-incomeLow-income
ItalyHungary
Trinidad and Tobago
Zambia
Brazil
Finland
Dominican Republic
Australia
Zimbabwe
United Kingdom
Spain
France
United States
Netherlands
New Zealand
Sweden
Canada
China
Uganda
Poland
Tanzania
Latvia
Jamaica
Czech Republic
Guatemala
Honduras
Malaysia
Indonesia
Korea
TurkeySri Lanka
Peru
Ecuador
Lithuania
Romania
Mali
Kenya
Chad
Thailand
Norway
Estonia
Pakistan
Costa Rica
Panama
Nicaragua
India
Bangladesh
JapanHong Kong
Slovenia
Slovakia
Source: Global Competitiveness Report 2007
Chile
Denmark
Ireland
Taiwan
Germany
Greece
Switzerland
Argentina
Paraguay
Mozambique
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0
5
10
15
20
25
30
35
40
45
Hourly Wage in
Manufacturing (USD),2005
Brazil
Finland
Denmark
Canada
Hungary
Italy
Mexico
Korea
Norway
Germany
Hong Kong
TaiwanSingapore
Source: Global Competitiveness Report2005-2006 and US Bureau of Labor Statistics
Competitiveness versus Wage Level Across Countries
Business Competitiveness Index 2005 HighLow
Australia
AustriaBelgium
France
Greece
Czech Republic
Ireland
Israel
Japan
Poland
Netherlands
New Zealand
Portugal
Spain
Sweden Switzerland
UKUSA
Sri Lanka
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Backup
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Demand ConditionsJapans Relative Position 2007
Competitive DisadvantagesRelative to GDP per Capita
Competitive AdvantagesRelative to GDP per Capita
DemandConditions
DemandConditions
Buyer sophistication 5Stringency of environmental regulations 10
Government procurement of advanced 12technology products
Presence of demanding regulatory 12
standards
Change up/down of morethan 5/10 ranks since 2002
Note: Rank versus 74 countries; overall, Japan ranks 19th in 2006 PPP adjusted GDP per capita and 10h in Business Competitiveness.Source: Institute for Strategy and Competitiveness, Harvard University (2007)
R l d d
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Related and Supporting IndustriesJapans Relative Position 2007
Competitive DisadvantagesRelative to GDP per Capita
Competitive AdvantagesRelative to GDP per Capita
Related andSupportingIndustries
Related andSupportingIndustries
Local availability of process machinery 1
Local supplier quantity 2
Local supplier quality 3
Local availability of specialized research 5and training services
Change up/down of morethan 5/10 ranks since 2002
Note: Rank versus 74 countries; overall, Japan ranks 19th in 2006 PPP adjusted GDP per capita and 10h in Business Competitiveness.Source: Institute for Strategy and Competitiveness, Harvard University (2007)
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Context for Strategy and RivalryJapans Relative Position 2007
Extent of market dominance 3
Intensity of local competition 4
Lack of favoritism in decisions of 12government officials
Effectiveness of antitrust policy 14
Intellectual property protection 15
Competitive DisadvantagesRelative to GDP per Capita
Competitive AdvantagesRelative to GDP per Capita
Absence of trade barriers 42
Property rights 32
Efficacy of corporate boards 23
Context for FirmStrategy
and Rivalry
Context for FirmStrategy
and Rivalry
Change up/down of morethan 5/10 ranks since 2002
Note: Rank versus 74 countries; overall, Japan ranks 19th in 2006 PPP adjusted GDP per capita and 10h in Business Competitiveness.Source: Institute for Strategy and Competitiveness, Harvard University (2007)