Extended Model (2)

Cho (1994) also argues that Porter's original model is limited in its application to developing countries such as Korea. He emphasizes different groups of human factors and different types of physical factors in explaining a nation's competitiveness. Human factors include workers, politicians/bureaucrats, entrepreneurs, and professionals. Physical factors include endowed resources, domestic demand, related and supporting industries, and other business environment. An external factor, chance, is added to these eight internal factors to make a new paradigm, the ninefactor model.The differences between the nine-factor model and Porter's diamond model are in the division of factors, and in the addition of new factors. The diamond model includes both natural resources and labor in factor conditions, but the nine-factor model places natural resources under endowed resources, while labor is included within the category of workers. Human factors mobilize the physical factors, and people combine and arrange the physical factors with the aim of obtaining international competitiveness.So far, we have discussed determinants for a nation's competitiveness. Another important point is that competitiveness is meaningful only among the nations endowed with similar comparative advantages competing in similar industries. In other words, the relative competitive position among similar countries in a certain stage of economic development, but not among all the countries in the world is an important element for a nation's competitiveness. So, we need stage models for economic development. We will discuss this in Chapter 7 and Chapter 8.