How To Measure Competitiveness

The two most popular institutes publishing competitiveness reports are the International Institute for Management Development (IMD) and the World Economic Forum (WEF. From I989 to 1995 these two institutes had published the report in cooperation, but since 1996 they have been publishing two separate reports. Although they are separate, both institutes use almost the same variables to measure competitiveness. However, there are significant discrepancies in the rankings of countries between the two reports, mainly because they use different methodologies, including different weights on each variable. We will critically evaluate the theoretical and the methodological approaches of these reports.The main problem of existing reports is due to their lack of strong theoretical background. Without a rigorous theoretical explanation, it is not clear why some factors are important while others are not. In order to solve the problems of existing competitiveness reports, we introduce a new competitiveness report, based on the nine-factor model, an extension of Porter's diamond model. We have chosen the nine-factor model because it is particularly useful in understanding the role of different types of people for a nation's competitiveness.In this new report, a nation's competitiveness is defined as a nation's relative competitive position in the international market among the nations of a similar economic development. In this regard, the report contains rankings among similar nations, as well as the overall rankings. Among the factors of competitiveness, the current report focuses on resources, which are classified into human, natural, and capital resources. Other factors will be studied in the future issues of this report. Although the current report does not include all the variables, the results of this report support some of the interesting arguments of the new competitiveness models we have discussed in previous chapters and provide important implications to understand the real world.