V. The Competitive Advantage of Nations
A. Overview
Porter is a famous Harvard business professor. He conducted a comprehensive study of 10 nations to learn what leads to success. Recently his company was commissioned to study Canada in a report called "Canada at the Crossroads".
Porter believes standard classical theories on comparative advantage are inadequate (or even wrong).
According to Porter, a nation attains a competitive advantage if its firms are competitive. Firms become competitive through innovation. Innovation can include technical improvements to the product or to the production process.
B. The Diamond - Four Determinants of National Competitive Advantage
Four attributes of a nation comprise Porter's "Diamond" of national advantage. They are:
a. factor conditions (i.e. the nation's position in factors of production, such as skilled labour and infrastructure),
b. demand conditions (i.e. sophisticated customers in home market),
c. related......
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