New Model: Debate

Since Porter published his book (1990) and the report on Canada's competitiveness (1991), debates have continued over the diamond model and its application in the real world. This chapter summarizes the pros and cons of the Porter model, and highlights the debate between Porter and Rugman. An overall evaluation on the debates will then be provided.In his first article, "Diamond in the Rough," Rugman argues that Porter's single diamond has two flaws. First, multinational activity is not properly incorporated. Second, the government's role is understated. While he talks primarily about conceptual issues of the diamond model in his previous article, Rugman discusses more policy issues in his second article, "Porter Takes the Wrong Turn."Porter and Armstrong respond that Rugman fails to distinguish between the geographic scope of competition for example, North American or global) and the geographic locus of competitive advantage as reflected in the diamond. For example, competition in the automobile industry is global, but Japanese firms use a strong local diamond Rugman counter-responds that Porter and Armstrong's alleged dichotomy between scope and locus is operationally meaningless. Rugman argues that the appropriate size of the diamond need not be national; it is determined by the strategy of the firm.The debate in this Chapter, like that in Chapter 2, is sometimes very acute. However, they do not criticize each other personal—just what they say about competitiveness. Anyway, there is no perfect theory. Porter's single diamond model has been extended to the double diamond model (Rugman & D'Cruz), the generulized double diamond model (Moon, Rugman & Verbeke) and the nine-factor model (Cho). We will discuss these extended models in Chapters 5 and 6.