National Competitiveness and Porter's Diamond Model: The Role of MNE Penetration and Governance Quality

Abstract

Plain language summary This study examines how national competitiveness, measured as productivity per worker, is fostered within an economy using a sample of 90 developed and developing economies. We build upon Porter's popular Diamond Model, but extend it by adding the quality of public governance and extent of multinational enterprise penetration as two additional elements. Our study shows that not all four elements of the original Diamond Model are required for an economy to be competitive. Instead, we find that there are four distinct paths to high levels of national competitiveness. Context for intense rivalry among firms appears in all four paths. Results also suggest that public governance quality is key to national competitiveness. The extent of multinational enterprise penetration, however, is not. Technical summary We examine Porter's Diamond Model in conjunction with multinational enterprise (MNE) penetration and governance quality as a system of elements that collectively affect national competitiveness. Utilizing fuzzy‐set analysis and data on 90 nations, we identify four configurations sufficient for high national competitiveness, all of which exhibit high governance quality as a core condition. In these four configurations, the extent of MNE penetration is either absent or does not matter, and strength in all Diamond Model elements is neither necessary nor sufficient for high national competitiveness. Uncovering these patterns allows us to advance a more comprehensive theoretical framework emphasizing public governance and the ways in which elements of the Diamond Model, governance quality, and MNE penetration combine as complements or substitutes to affect national competitiveness. Copyright © 2016 Strategic Management Society.

Past, ongoing, and future debate on the interplay between internationalization and digitalization

“…From a strategic perspective, we distinguish (a) the specific variables of the task environment (i.e., external variables) and (b) organizational structures, processes and resources (i.e., internal variables), which appear to be the key drivers of a firm's decision to internationalize (Hitt et al 2006). The main external variables are the stability and effectiveness of the political and legal environment (Tan and Chintakananda 2016), governance quality (Fainshmidt et al 2016), and the similarity of industry architectures of home and host countries (Jacobides and Kudina 2013). Internal variables relating to international growth are focus on product differentiation (Bloodgood et al 1996), proprietary capabilities (in technology and marketing, for instance) (Asmussen and Goerzen 2013), learning from early entries (Chang 1995), and financial resources (Dagnino et al 2019).…”

Porter’s Diamond Approaches and the Competitiveness Web

“…3) At the same time, a severe criticism to the model is whether it includes elements of national culture (Van Den Bosch & Van Prooijen, 1992) and human factors, except the physical factors that the model takes into account (Cho, 1994). 4) Finally, to a lesser extent, there are criticisms about the historical aspect that the diamond model of national competitiveness can incorporate (O'Shaughnessy, 1996), as well in the relationship of the model with the role of governmental quality in enhancing national competitiveness (Fainshmidt et al, 2016).…”

Competitiveness Evaluation of Chinese Dairy Industry Based on Accelerated Genetic Algorithm Projection Pursuit Model

“…Based on the theory of comparative advantage, the authors in [3] proposed the "diamond model," which has become a relatively perfect analytical framework for the theory of industrial competitiveness. Many experts revised and supplemented the theory of industrial competitiveness based on factor endowment theory, dynamic comparative advantage theory, or "diamond model" [4][5][6][7][8][9][10].…”