Stage Model (2)

In Chapter 1, we discussed absolute advantage and comparative advantage. In today's global economy, the strategic implication concerning absolute advantage is to beat other countries, while that concerning comparative advantage is to complement other countries. Countries with similar characteristics in a certain stage (e.g., Korea and Taiwan) compete with each other, based on absolute advantages; but countries in different stages (e.g., Korea and the United States; Korea and Vietnam) complement each other, based on comparative advantages. Therefore, defining stages of economic development is important to derive strategic implications for a nation's competitiveness.A nation's competitiveness strategy is an art of balancing and enhancing a country's absolute advantages and comparative advantages. In each stage of development, the country has to decide which factors to utilize; in which industries to invest; and where to innovate. Porter's (1990) classifications of factor-driven, investment-driven, innovation-driven and wealth-driven stages are important in development. However, factors can be firther classified into physical factors and human factors, which can again be subcategorized. For this purpose, Cho (1994) presented a life cycle model and applied it to the Korean economy. Cho and Moon (1998) extended this model by adding the government variable, and studied several Asian economies.By using two dimensions (i.e., quantity and quality) of development, Cho and Moon classifi four different stages of development. In each stage they explain diflerent sources of international competitiveness in terms of physical factors, human factors, and government. This new model fits well for explaining the development patterns and strategies of Asian countries.