A Note on the Competitiveness Debate
Competitiveness is technically a firm level concept. However, it is oftentimes extended to the national level--the idea of a country's 'international competitiveness' with the following analogies: market share-->export share of country; price-->real effective exchange rate or unit labor cost; profitability-->long-run economic growth. The concept of national competitiveness is faulty, in the words of Paul Krugman it has become a 'dangerous obsession.' However, national or government policies do have an impact on firm level competitiveness. The only concept related to firm level competitiveness that can be extended to the national level without ambiguity is technological capability. Meanwhile, the Global Competitiveness Report (GCR) presents two measures of national competitiveness: the Global Competitiveness Index (GCI) and the Current Competitiveness index (CCI). The GCI is simply a measure of a country's potential for economic growth which is not equivalent to competitiveness. The CCI is an exercise in tautology. It simply shows that countries with a higher level of development are 'more competitive.' The issue of the appropriate development policies is not addressed. Since technological capability is at the heart of competitiveness, countries must address this issue squarely. One course of action is to adopt a strategic approach to foreign direct investment--as opposed to a passive strategy--similar to what Malaysia and Singapore did.
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- Krugman, Paul R, 1996. "Making Sense of the Competitiveness Debate," Oxford Review of Economic Policy, Oxford University Press, vol. 12(3), pages 17-25, Autumn.
- Lall, Sanjaya, 2001. "Competitiveness Indices and Developing Countries: An Economic Evaluation of the Global Competitiveness Report," World Development, Elsevier, vol. 29(9), pages 1501-1525, September.
- Hooper, Peter & Larin, Kathryn A, 1989. "International Comparisons of Labor Costs in Manufacturing," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 35(4), pages 335-55, December.
- Jan Fagerberg, 1996.
"Technology and Competitiveness,"
Working Papers Archives
1996548, Centre for Technology, Innovation and Culture, University of Oslo.
- Fagerberg, Jan, 1988.
Royal Economic Society, vol. 98(391), pages 355-74, June.
- Austria, Myrna S., 2000. "Competitiveness of the Philippine IT Industry: What Lies Ahead," Philippine Journal of Development JPD 2000 Vol. XXVII No. 2, Philippine Institute for Development Studies.
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