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Competitiveness has now become a buzzword like globalization. It has received attention from researchers, governments and business organizations because of its close association with the success of an entity. In the past decades, many works on competitiveness with different perspectives have been published. But competitiveness is yet an elusive concept, the relevance of which is changing with time. There is a need for a comprehensive review of extant literature on the subject. This review article presents the state-of-the-art development of competitiveness research. To begin with, the article lays the foundation for basic understanding on competitiveness at various levels, such as nation, industry and the firm. After elaborating on the theories of competitiveness that have evolved over the years, it gives insight on the measurement models. The plethora of studies that signify different approaches to measure competitiveness are discussed at length. The future direction of competitiveness research is also suggested.
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Article
Competitiveness: Review,
Reflections and Directions
Pragya Bhawsar1
Utpal Chattopadhyay1
Abstract
Competitiveness has now become a buzzword like globalization. It has received attention from
researchers, governments and business organizations because of its close association with the success
of an entity. In the past decades, many works on competitiveness with different perspectives have
been published. But competitiveness is yet an elusive concept, the relevance of which is changing with
time. There is a need for a comprehensive review of extant literature on the subject. This review article
presents the state-of-the-art development of competitiveness research. To begin with, the article lays
the foundation for basic understanding on competitiveness at various levels, such as nation, industry
and the firm. After elaborating on the theories of competitiveness that have evolved over the years, it
gives insight on the measurement models. The plethora of studies that signify different approaches to
measure competitiveness are discussed at length. The future direction of competitiveness research is
also suggested.
Keywords
Competitiveness, comparative advantage, competitive advantage, diamond model
Introduction
Competitiveness today is as prominent as globalization. A google search on ‘competitiveness’ generates
more than 30 million results. It encompasses all the elements that can explain the success of a nation.
Competitiveness originates from a Latin word, competer, that means involvement in business rivalry
for markets. It is after Porter’s (1990) seminal work, The Competitive Advantage of Nations, that the
concept of competition and competitiveness was bolstered. Historically, the roots of competitiveness
study lie in the international economic theories of Adam Smith and his followers. It is during early
1980s, when the American economic dominance was emulated by European and Asian nations, that
the apprehension about international competitiveness gained strong momentum (Banwet et al., 2002;
Waheeduzzaman, 2011). The two other reasons behind the increased focus towards competitiveness are:
Global Business Review
16(4) 665–679
© 2015 IMI
SAGE Publications
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DOI: 10.1177/0972150915581115
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1 National Institute of Industrial Engineering (NITIE), Mumbai, India.
Corresponding author:
Pragya Bhawsar, Research Fellow, National Institute of Industrial Engineering (NITIE), Vihar Lake, Mumbai 400 087, India.
E-mail: pragyabhawsar.ib@gmail.com
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666 Global Business Review 16(4)
globalization, which has changed the role of nations in influencing competition and business competition
that is becoming fiercer both nationally and internationally (Chikan, 2008).
Competitiveness is a multifaceted concept whose understanding comes from economics, manage-
ment, history, politics and culture (Waheeduzzaman and Ryans Jr, 1996). It has been described as a
complex, multidimensional and relative concept, the relevance of which changes with time and con-
text (Chaudhuri and Ray, 1997; Flanagan et al., 2007). Researchers with different backgrounds have
attempted to study competitiveness, adding a different perspective in it. Despite abundance of literature,
the concept of competitiveness has remained elusive. Though Chaudhuri and Ray (1997), followed by
Banwet et al. (2002), provided a critical review of literature; however, after a decade, there seems a need
to re-look and synthesize the literature to incorporate further developments. Within our limitations, in
this article, an attempt has been made to synthesize various signicant themes in the competitiveness
literature.
Competitiveness has become synonymous with economic strength of nation, industry or individual
rm (Srivastava et al., 2006). The existence and success in turbulent times increasingly depends on com-
petitiveness (Ambastha and Momaya, 2004). As the competition becomes arduous, competitiveness
becomes the strength to deal with it. Gaining competitive edge has become the new goal of nations
(Mondal, 2012). In today’s prospect, competitiveness has become a rudimentary force in economics, like
gravity in physics (Dutta, 2007). It is linked with afuence because of its evident relationship with the
economic potential of a nation (Momaya, 1998). A denition of competitiveness, as given by Garelli
(2012), holistically includes the four levels of articulation, namely, efciency, choice, resources and
objective: ‘Competitiveness analyzes how nations and enterprises manage the totality of their competen-
cies to achieve prosperity or prot.’
Competitiveness is a complex subject that covers a range of studies at various levels. It has been con-
ceptualized and measured at country, industry, rm and product levels. Though not regularly, it has been
also measured at regional level (Dhingra et al., 2009; Peng et al., 2001). According to Moon and Peery
(1995), the depth of the concept can be understood by the fact that Porter in his book titled The Competi-
tive Advantage of Nations utilized ‘industry’ for understanding competition, and in the same book, he
emphasizes that rms, not nations, compete in international markets. The concept has two dimensions—
micro and macro (Siggel, 2007; Waheeduzzaman, 2011). Macro dimension deals with the competition
among nations, while micro dimension primarily involves competition among the rms within a nation.
Garelli (2012) claries the link between nations and enterprises in the conceptualization and measure-
ment of competitiveness. He emphasizes that rms are responsible for creating economic value, while
nations establish an environment to encourage/discourage rms to achieve that economic value.
Conceptualization of Competitiveness at Various Levels
National-level Competitiveness
A popular definition given by President’s Commission on Industrial Competitiveness (1985) says:
Competitiveness is the degree to which a nation under free and fair market conditions, produce goods and
services that meet the test of international markets while simultaneously maintaining or expanding the real
incomes of its citizen. (cited in Krugman, 1994; Waheeduzzaman, 2011; Waheeduzzaman and Ryans Jr, 1996)
Porter (1990) argues that ‘the only meaningful definition of competitiveness at national level is national
productivity’. Krugman (1994, 1996) criticizes the notion of national competitiveness. He argues that
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Bhawsar and Chattopadhyay 667
competitiveness is rhetoric and a poetic way of saying productivity. In his perspective, competitiveness
has nothing to do with the competition of nations. He stresses that firms compete for market share, not
the nations. According to Moon and Peery (1995), competitiveness should not be confused with
productivity as it is the relative position against competitors, while productivity is the internal capability
of an organization.
Moon, Rugman and Verbeke (1998) dene national competitiveness as ‘the capability of rms
engaged in value added activities in a specic industry in a particular country to sustain this value added
over long periods of time in spite of international competition’. It is dened as the set of institutions,
policies and factors that determine the level of productivity of a country (Global Competitiveness Report
[GCR], World Economic Forum, 2013). From the denitions given by various researchers, it can be
inferred that national competitiveness is the ability of a nation to provide conducive environment to its
rms, and hence industries, to prosper. The objective is to help in value creation, prot generation and to
raise the national prosperity at the same time.
Industry-level Competitiveness
According to McFetridge (1995), ‘A competitive industry can be defined as comprising inter-regionally
or internationally competitive firms…a firm is inter-regionally or internationally competitive if it is
consistently profitable in an open market.’ Momaya (1998) proposes an extended definition of industry
competitiveness by including stakeholders. According to him, it is the degree to which an industry grati-
fies the needs of customers, with the peculiar combination of products/services, price, quality and inno-
vation, and the needs of various stakeholders, like providing safe workplace to workers. It can be inferred
that an industry can be considered competitive if it comprises firms that yield lucrative returns on
investment.
Firm-level Competitiveness
Chikan (2008) defines ‘firm competitiveness is the capability of a firm to sustainably fulfil its double
purpose i.e. meeting customer requirements at profit’. This capability can be realized by offering goods
and services which customers value higher than those offered by competitors. According to Cetindamar
and Kilitcioglu (2013), ‘competitiveness is a capability and its potency has to be realised in firm’s
everyday operations’. It can be inferred from the above-mentioned definitions that a firm’s competi-
tiveness rests in its adaptability and its ability to realize long-run profit. An examination of the extant
literature reveals that a wide variety of notions has been used for the three levels of competitiveness.
There exists a paucity of all-encompassing conceptualization.
Evolving Theories of Competitiveness
Although the concept of competitiveness is an independent area of study that emerged in the recent past,
its root lies in the economic theories of past, beginning from Smith’s (1776) ‘absolute advantage theory’.
Smith’s theory projects a two-country, two-product model that stresses on the specialization of labour.
The emphasis is on the trade of goods in which a nation has an absolute cost advantage. It rests on certain
assumptions, the most prominent being labour as the only factor of production.
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Fixing the aw in Smith’s theory, Ricardo (1817), in ‘comparative advantage theory’, provides answer
to the question that rose in absolute advantage theory, that is, what if one of the two countries has abso-
lute advantage in both goods. Ricardo illustrated the theory by means of a two-country, two-product
model. As per this theory, mutually benecial trade is still possible if the advantageous nation trades in
the good where it has a greater comparative advantage. The country having absolute disadvantage in
both products should trade in a product in which its comparative disadvantage is lesser. Like Smith,
Ricardo’s theory is also based on a number of restrictive assumptions.
Ricardo’s theory was inadequate in explaining the reason for difference in labour productivity
between nations. The answer was offered by Heckscher (1919) and Ohlin (1933) through their works
which later on became popular as the Heckscher-Ohlin theory. In accordance with this theory, compara-
tive advantage is the result of differences in factor endowment. Nations differ in natural endowment and
factor endowment. The theory advises that a nation should export that product for which it uses large
amount of the relatively abundant factor. But this theory failed to stand the empirical test conducted by
Leontief (1953) for the United States (US), which is known as Leontief paradox. In subsequent studies
(Baldwin, 1971; Kravis, 1956) when capital was viewed separately as human capital (skilled labour) and
physical capital, Leontief paradox has been alleviated. The ‘product life cycle theory’ by Vernon (1966)
was also signicant in reconciling Leontief paradox. This theory explains the diffusion of technology
from developed nations to developing nations. The underlying objective is to project the shift in com-
parative advantage with the ow of technology over time. Finally, in a study conducted by Stern and
Maskus (1981) on US’ foreign trade data for the years 1958–1976, Leontief paradox was found no more
evident.
Comparative cost theory has its limitation in explaining intra-industry trade. A model proposed by
Krugman (1980) uncovers the reason behind trade between economies blessed with similar factor
endowments. The model projects imperfect competition and relies on the assumption that consumers
love product varieties. Thus, two imperfectly competitive economies can trade, each specializing in its
variant of product. A country thus can be a net exporter in the product whose production has economies
of scale. Melitz (2003) extended Krugman’s model by bringing in rm productivity heterogeneity under
perfect competition. The model suggests that only the rms with higher productivity supply to both
domestic and export markets, while the rest exit from the market.
Ricardo’s comparative advantage theory ruled for more than a century. But when it was observed that
countries like Singapore and Hong Kong, which were devoid of natural resources, have succeeded
in excelling international trade, transition of the notion of comparative advantage to competitive advan-
tage took place. Porter was the one who brought this issue to the forefront. It has been observed that at
the national level, comparative advantage and competitive advantage has been used interchangeably.
The two concepts, although related, are distinct.
Comparative advantage is the outcome of differences in cost of inputs such as labour or capital
(Mondal, 2012). Comparative advantage is at the heart of theory of specialization; it can be considered
a microeconomic concept, with focus on industry-specic trade. It is an equilibrium concept that
takes into account only prices and trade ows. It lacks various other macroeconomic factors necessary
to make a nation successful. With the advancement of economies around the globe, various other factors
like infrastructure, technology, etc., have come into play in determining the competitiveness of nations.
The ‘diamond model’ developed by Porter (1990) and various models developed by his followers bring
into account diverse new factors that contribute to economic competitiveness of nations.
Porter’s (1990) Diamond Model provides an explanation behind a nation’s global success in a
particular industry. The model illustrates the interaction of four country-specic factors and two external
factors in making a nation successful home base for a particular industry. The competitive advantage of
the nation is the result of the quality of the interaction within the diamond. The four endogenous variables
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of the diamond are: factor conditions; demand conditions; related and supporting industries; and rm
strategy, structure and rivalry. The two exogenous factors affecting the competitive advantage of a nation
are role of chance and government.
Rugman and D’Cruz (1993) criticized Porter’s diamond model for it being not applicable to small,
open trading economies. Unlike Porter, in their ‘double diamond model’, they brought into account the
role of trade agreements and foreign subsidiary. The model portrays that a country like Canada can
integrate itself with developed countries like the US for a more relevant diamond. This model incorporates
international context of national competitiveness.
Proposed by Moon et al. (1998), ‘generalized double diamond model’ incorporates both domestic and
international diamond to analyze a country’s international competitiveness. A nation’s competitiveness
depends partly on both the diamonds. The outer diamond represents the global diamond, while the inside
domestic diamond depends on the country’s size and its competitiveness. The difference between the two
diamonds is represented by outbound and inbound foreign direct investment (FDI) of the nation.
Moon and Cho (2000) proposed ‘nine-factor model’, which, like previous mentioned models, is an
extension of the diamond model. In addition to four endogenous variables of the diamond model, this
model incorporates the role of four human resource variables, namely, workers, politicians and bureau-
crats, entrepreneurs and professionals, and one external variable, chance/events. This model emphasizes
the role of human resource for achieving international competitiveness.
Cho, Moon and Kim (2009) introduced a more comprehensive model, ‘dual double diamond’, to
explain the competitiveness of countries with heterogeneous attributes. This model integrates inter-
national context of the generalized double diamond model and human factors of the nine-factor model.
The model covers four dimensions: domestic physical factors; domestic human factors; international
human factors and international physical factors.
The extended diamond models consider the role of FDI, human resources and international factors
that have applicability at national and industry levels. At the rm level, the concept of core competence
that is central to the resource-based view of rm is an emerging theory in the eld of competitiveness
(Grant, 1991; Hamel and Prahalad, 1989; Prahalad and Hamel, 1990).
Hamel and Prahalad (1989) view competitiveness with competency approach. As per this view,
resource endowment creates competitive advantage for a rm. Prahalad and Hamel (1990) emphasize
that in the short run, a rm’s competitiveness is the outcome of price/performance attributes of its exist-
ing products, while in the long run, it is in the rm’s ability to build products at lower cost and more
speedily than competitors. Core competence is the consolidation of ‘corporate wise technologies’ and
‘production skills’. This theory considers organization as a bundle of resources and capabilities.
Grant (1991) proposed a framework for a resource-based approach to strategy formulation for
gaining competitive advantage. In a model, Ambastha and Momaya (2004) bring out the importance of
strategic processes in enhancing competitiveness of rms. While the resource-based view is restricted to
resources (assets) and capabilities, the asset, process and performance (APP) model considers the impor-
tance of core processes like strategic, human resources and operations. Some researchers (Frain, 1992;
Porter, 1998) considered mutual interdependence and networking among rms and related organiza-
tions, including government, educational and training institutions, etc., signicant for competitiveness
at the regional level.
Measurement of Competitiveness
The theoretical approaches become significant when paired with the suitable framework for
measurement. Similar to the complication in agreement on conceptualization, the measurement of
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competitiveness also suffers from predicament because of involvement of diverse disciplines and
approaches. The measurement technique varies with the unit of analysis, for example, firm, industry or
country. Researchers have widely selected productivity, product quality, balance of trade, technology
indicators, market share, profitability and growth rate, etc., as the broad measures of competitiveness.
Buckley, Christopher and Prescott (1988) have categorized various measures into three groups—
competitive performance, competitive potential and competitive process—termed as ‘3P Framework’.
The integration of the 3P measures can only complete the measurement of competitiveness. Indicators
of measurement advised by McFetridge (1995), at country level, are per capita income, export com-
position and current account balance. At the industry level, the suggested measures are total factor
productivity and productivity growth. Cost, protability, productivity and market share are the measures
suggested at rm level (see Table 1).
The GCR is an important source for benchmarking country competitiveness. World Economic Forum
(WEF) has been publishing GCR since 1979. The report uses global competitiveness index (GCI) that
captures both microeconomic and macroeconomic foundations of national competitiveness. The GCI
has 12 pillars categorized in three main sub-indices. International Institute of Management Develop-
ment (IMD) publishes World Competitiveness Yearbook (WCY), which ranks nations on various criteria
that involve 20 sub-factors grouped into four major factors.
Table 1. Classification of Competitiveness Literature
Level Definition Theory Measurement Major Contributors
National Is the ability
of a nation to
provide conducive
environment to its
firms and industries
in order to raise the
prosperity of the
nation.
Absolute advantage
theory; comparative
advantage theory; factor
endowment theory;
diamond model;* double
diamond model;*
generalized double
diamond model;*
nine-factor model; dual
double diamond.
National productivity;
balance of trade; labour
productivity; foreign
exchange rate; FDI.
Smith (1776); Ricardo
(1817); Heckscher
(1919) and Ohlin
(1933); Porter (1990);
Rugman and D’Cruz
(1993); Moon et al.
(1998); Moon and
Cho (2000); Cho et al.
(2009).
Industry The extent to which
a business sector
offers potential
for growth and
attractive returns
on investment.
APP model* Productivity; cost
competitiveness; export
market share; balance
of trade; export growth;
profitability; technology
indicators.
Momaya (1998);
Abastha and Momaya
(2004) and Fetscherin
and Pillania (2012).
Firm Ability of the firm
to offer better
products than
competitors.
Strategic intent, core
competence, resource-
based theory
Cost; quality;
deliverability of products
and services; core
competencies; market
share; information
technology applications;
human resources;
technology.
Hamel and Prahalad
(1989); Prahalad
and Hamel (1990);
Grant (1991).
Source: Authors’ compilation.
Note: * used at more than one level of analysis.
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Although WEF and IMD reports have gained popularity over the years, they have been criticized on
several grounds. Lall (2001) found a few theoretical and conceptual deciencies in the methodologies
used in the reports. Both WEF and IMD reports assume markets being efcient; and deliberately avoid
the role of government in favouring certain activities. Unlike WEF, IMD does not consider gross domes-
tic product (GDP) as the measure of country competiveness. The reports consider multiple variables
from various disciplines, ignore non-linearity in relationship and have never attempted to test for the
performance of the guidelines suggested in the previous reports.
Approaches to Competitiveness
Studies on National-level Competitiveness
The studies on national-level competitiveness attempt to suggest various policies and reforms. Several
strategies for enhancing national competitiveness include financial programmes to increase savings,
managed exchange rates, tax policies and macroeconomic policies. Besides financial strategies, pro-
grammes to enhance workers’ skill, quality management, establishment of educational standards and
moral standards also figure prominently in a nation’s endeavour to boost competitiveness.
In the category of studies on competitiveness of advanced nations, Amin and Hagen (1998) investi-
gated the reasons behind the worsening competitiveness of the US. The identied major barriers behind
loss of US’ competitiveness in international market are: challenged productivity; ineffective investment
pattern in research and development (R&D); widening trade decit; technological development being
caught by other nations; losing ground in product quality; and lack of strong political and legal environ-
ment. In a report for the Economics and Social Research Council, Porter and Ketels (2003) addressed the
status of the United Kingdom’s (UK’s) competitiveness. The country’s economic status was assessed
by measures like prosperity, productivity, internationalization, innovation and productivity growth.
Kiggundu and Uruthirapathy (2010) compared Canada’s competitiveness with its two, strong traditional
economic partners, the US and the UK, and two emerging nations, India and China. The comparison was
based on three broad factors consisting of nine pillars of growth competitiveness index (later became
GCI), on business competitiveness and on domestic competition and cluster development for the years
1998–2006.
In emerging nation’s category, Pillania (2008) studied the competitiveness of India with both macro
and micro aspects for the period 1999–2006. In the study, heavy emphasis was given to the manufactur-
ing sector in shaping the competitiveness of the country. Adams, Gangnes and Shachmurove (2004)
investigated the factors responsible for rising competitiveness of China relative to its East Asian rivals.
Export performance was used as an empirical indicator of the Chinese competitiveness. The four deter-
minants of Chinese competitiveness identied in the study are: revealed comparative advantage (RCA);
exchange rate; labour cost and FDI. Liu and Hsu (2009) compared Taiwan and Korea’s national competi-
tiveness using generalized double diamond model for the period 2000–2004. Bhaumik and Banik (2006)
investigated the reasons behind the failure of Caribbean economies, unlike East Asian economies, in
exploiting the opportunity of being geographically close to the highly developed economies of the world.
Lack of FDI, limitation in the availability of skilled labours and the imbalance in domestic savings to the
investment were reported as the primary reasons behind competitive disadvantages of the Caribbean
economies.
In a comparative study of group of emerging versus advanced nations, Waheeduzzaman (2011)
explored the competitiveness and convergence of G71 nations with big emerging markets (BEM)2
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nations, using longitudinal data and cross-sectional popular comparative indices. The comparative
performance of the nations was measured using several economic, demographic, trade, investment
and freedom and governance criteria. Though BEM was found growing at a faster pace, they still lag
behind G7 nations in competitiveness performance. Fagerberg, Srholec and Knell (2005) studied
the reasons behind the difference in trade performance between countries. An econometric model
illustrating competitiveness of a nation being dependent on the country’s ability to compete in techno-
logy, capacity (delivery), price and demand was presented in the study. Country competitiveness was
measured by growth of market share and GDP. The result underscores technology and capacity as
the two major factors behind good growth performance of countries and undermines the importance
of price and demand.
Studies on Industry-level Competitiveness
Competitiveness has been widely studied at firm and country levels, but at industry level, it has not
received sufficient attention. Public policies, trade agreements, etc., are all dependent on industry-level
competitiveness, making it pivotal in a country’s competitiveness (Momaya, 1998). According to Porter
(1990), the basic unit of analysis for understanding competition is ‘industry’. In the following paragraphs,
competitiveness of industries in manufacturing and service sectors has been discussed.
In a study on the transition of industries in US from local to global, Mitchell, Shaver and Yeung
(1993) examined relationship between rm performances with the change in its international presence
during the period 1978–1989. International expansion was found necessary for survival when foreign
rms begin to capture domestic market, but rms with experience and considerable market share can
only become successful.
Chandra and Sastry (1998) studied the status, strategies, strength and weaknesses of rms in Indian
manufacturing sector. The objective was to help rms benchmark their performance by disseminating
best practices in industry. The sample consisted of 56 medium and large rms in India. In comparison to
world-class manufacturers, concern was raised that Indian rms are not giving any importance to prac-
tices like just in time (JIT), strategic outsourcing, customer and supplier partnership, use of statistical
process control, value engineering, computer-aided design and product redesign. Chattopadhyay (2010)
raised concern regarding lagging contribution of India’s manufacturing sector in country’s competi-
tiveness. Various reasons such as protection to domestic units, higher duties, low labour productivity and
infrastructural bottlenecks, etc., were found crippling the manufacturing sector competitiveness in the
study. It is also worth mentioning that unlike developed countries, emerging nations lack commercial
activities by small and medium enterprises (SMEs). In the developing countries, SMEs may be signi-
cant in numbers, but in terms of industrial competitiveness, their contribution is rather low. This can
be attributed to two major reasons: restricted business environment and the lack of access to nance
by these SMEs. This has now become a major concern in the world economy and is termed as ‘missing
middle’.3
Momaya (1998) attempted to explore new approaches to evaluate international competitiveness at
the industry level. He realized the drawback of Porter’s theory being applicable only to high-tech
industries and not to service industries like construction. The study involved evaluation of the competi-
tiveness of construction industry of Canada, Japan and the US between years 1990 and 1993. Construction
export was used as the criterion for competitiveness evaluation. APP framework was employed for the
generation of criteria. Overall, Japan’s construction industry was found to be the most competitive
among the three nations because of better processes.
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Sardy and Fetscherin (2009) compared automotive industry of China, India and South Korea using
double diamond model. Competitiveness index of Chinese automobile industry was found to be better
in both domestic and international conditions as compared to that of South Korea and India. Narayanan
(1997) analyzed the impact of deregulation policy in India during mid-1980s on the technology
acquisition of automobile rms. The study concluded that the difference in technological acquisition
is the prime cause of variance in competitiveness of Indian automobile rms.
Shafaei and Shahriari (2009) investigated the competitive performance of leather value chain (LVC)
of Iran and compared it with that of nine other major exporting countries. RCA was used to investigate
the competitive performance. The result revealed that Iran’s competitive performance is signicantly
low as compared to other nine countries.
Sun, Fan, Zhou and Shi (2010) analyzed the regional real estate industry competitiveness by taking
Beijing and Tianjin, two cities of China. Diamond model was utilized for analyzing the competitiveness.
The empirical evidence supports that related industries followed by the demand factors have signicant
inuence on competitiveness of real estate industry.
Alon, Fetscherin and Johnson (2010) attempted to measure export competitiveness of alcoholic
beverage industry across countries for the period 2001–2005. A two-by-two framework using export
growth rate and industry specialization was developed. On the basis of comparison, the sample export-
ing rms were grouped into four categories: global dynamic, domestic dynamic, global static and domes-
tic static. Using the same framework, Fetscherin and Pillania (2012) analyzed the export competitiveness
of 97 Indian industries during 2001–2006 and found majority of Indian industries shifting to global
dynamic category.
Studies on Firm-level Competitiveness
The destiny of both firms and nations is intertwined because a nation provides the environment for
firms to grow (or hinder), while a firm creates economic value for the nation (Garelli, 2012). A model
to connect macro and micro-level research on competitiveness using diamond model has been deve-
loped by Chikan (2008). Literature has been enriched with the studies on various factors contributing
to firm-level competitiveness, ranging from activities in the Porter’s (1985) value chain to various
independent diverse factors like leadership, learning, R&D, quality and labour productivity.
Chacko, Wacker and Asar (1997) found that cost, quality, delivery and exibility are the goals a rm
should strive for in order to achieve competitiveness. To meet these goals, enterprises should create
techno-managerial practices, like automation, total quality management, benchmarking and JIT, etc., and
human resource practices, like employee empowerment and training, etc.
Shee, van Gramberg and Foley (2010) examined the role of leadership in enabling organizational
values, capabilities and practices of rms to deliver exceptional value to customers that lead to rm
competitiveness. Salazar, Vilchez and Pozo (2012) analyzed the effectiveness of coaching, an extensively
used technique for training and personal development, in enhancing business competitiveness. Similarly,
Gronhaug and Stone (2012) found the inuence of process of learning on rm competitiveness.
In today’s globalized world driven by technological advancements, role of technology is the most
prominent in delivering competitive advantage to a rm. Lollar, Bheshti and Whitlow (2010) reported
that use of integrative technologies reduces cost of doing business and enhances speed to respond to
marketplace changes.
To compete successfully, integration of rm’s internal function is required with the external funct-
ions. Thus, supply chain management (SCM) practices inuence competitiveness of rms. In a study
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674 Global Business Review 16(4)
conducted by Agus (2011), the impact of critical variables of SCM on product quality and business
performance was measured. Results revealed that variables of SCM, that is, lean production, new
technology and innovation, strategic supplier partnership and postponement conformance, impact com-
petitiveness of product and rm.
The role of product is signicant in boosting a rm’s competitiveness. Akroush (2012) proposed a
model examining the effect exerted by organization capabilities, namely, technological, marketing mix
and customer relational capabilities, over new product competitive advantage (NPCA) and the effect
exerted by NPCA on customers and nancial performance. The result revealed that among the three
types of organizational capabilities, marketing mix capability affects both dimensions of NPCA, that is,
new product quality and new product speed.
Cetindamar and Kilitcioglu (2013) developed a comprehensive generic measurement model for
rm competitiveness. Growth, exports, prots, and customer and society, together were used as outcome
indicators. Under managerial process and system, leadership, ability to develop processes and systems
and sustainability of strategies were measured. Technology, human resource and nance were the
major resources used in the model.
Directions for Future Research
As competition lies at the heart of competitiveness, most of the research efforts have been on analyz-
ing competitiveness with respect to competition. Assessment of competitiveness at national level
(Adams et al., 2004; Amin and Hagen, 1998; Kiggundu and Uruthirapathy, 2010; Liu and Hsu, 2009;
Porter and Ketels, 2003; Waheeduzzaman, 2011), at industry level (Alon et al., 2010; Momaya, 1998,
2008; Sardy and Fetscherin, 2009; Shafaei and Shahriari, 2010; Sun et al., 2010) and at firm level has
been made with focus on competition. With the changing dynamics of global competition, competitive
advantage can be short lived. Therefore, firms and organizations must always look for new sources of
competitive advantage. For an entity to remain competitive in a number of areas, it must think and act
lean (Milgate, 2001). In order to compete, individual entities must cooperate by means of partnership.
At national level, partnership between nations may work through trading agreements like Free Trade
Agreements (FTAs) or Preferential Trade Agreements (PTAs). FTAs or PTAs are more observed between
countries that have complementary economic structures. In case of business organizations, both coop-
eration and competition can coexist, and hence emerged the term ‘co-opetition’ that combines both
competition and cooperation. Co-opetition involves two or more competitive firms belonging to the
same industry working together towards a mutual goal of achieving higher competitive advantage.
Quite a few studies (Bengtsson and Kock, 1999; Brandenburger and Nalebuff, 1996; Gueguen et al.,
2006; Osarenkhoe, 2010) have explored co-opetition via means of case studies. What is required in the
competitiveness research is further exploration of the impact of co-opetition on the competitiveness of
partnering firms.
According to Hongphisavivat (2011), only ‘market-based view’ that focuses on customers to create
competitive advantage and ‘resource-based view’ that focuses on the strategic use of rms resources
are not sufcient. There is an ‘emergent view’ that looks for new ways to generate competitive advan-
tages through means of cooperation among stakeholders. The stakeholders can range from investors,
employees, customers to the society at large. The cooperation can range from intra-organizational
network to partnership in the external business environment. The integration of the three views can only
lead to the foundation of a sustainable competitive advantage. As networks inuence rm level com-
petitiveness, there is a need for undertaking more exhaustive studies incorporating various network
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Bhawsar and Chattopadhyay 675
partners (Centidamar and Kilitchioglu, 2013). Similarly, according to Feurer and Chaharbaghi (1994),
shareholders are of extreme signicance because of their nancial contribution and inuence over busi-
ness decisions. A balance between shareholders, customers, along with the people and technology, is
required for maintaining sustainable competitive advantage. These three together constitute the three
dimensions of sustainable competitiveness. Flanagan et al. (2007) report lack of empirical evidence
indicating linkages between competitiveness and stakeholders’ perspective. Although there could be
difculties associated with the quantication of stakeholders’ preferences, there is a need to dene indi-
cators in this direction and link them with measurement of competitiveness at rm and/or industry
level. Future studies on competitiveness may attempt this.
In the studies on rm-level competitiveness, multiple factors have been considered as the source of
competitive advantage. These diverse factors include Porter’s value chain elements (Cetindamar and
Kilitcioglu, 2013; Chacko et al., 1997; Lollar et al., 2010) as well as various intangible dimensions like
leadership (Shee et al., 2010) and learning (Gronhaug and Stone, 2012; Salazar et al., 2012). There is still
enough space left for undertaking studies that highlight the role of less tangible factors, like culture and
freedom, that impact competitiveness of nations and also rms operating in such nations.
Changing environment has shortened product life cycles, thus role of increased exibility can be
considered as a new source of maintaining competitive advantage. Flexibility lies in an organization’s
ability to adapt to changing environmental dynamics with minimum effort, time and cost. It seems neces-
sary to examine whether exibility can lead to competitive advantage or it is an expensive solution to
deal with environmental uncertainty (Beach, Muhlemann, Price, Paterson and Sharp, 2000).
The studies reviewed reveal that research in competitiveness is more inclined towards the manu-
facturing sector. Presently, many services like tourism, health care, nancial services and commercial
services, besides information technology services, are among the upcoming sectors that can be con-
sidered signicant for a nation’s competitiveness. However, only a few studies on competitiveness-
related issues have been undertaken covering the important service sectors. The only exception may the
tourism sector. Therefore, further initiatives are required in undertaking competitiveness research in
other service sectors.
Previous studies on competitiveness have considered only economic aspects, but economic growth
can be an outcome of ignoring environmental and social aspects. Thus, besides economic aspects, there
is a need to incorporate social dimensions like freedom and equal opportunities, etc., and environmental
aspects like natural capital and resources. Starting from the year 2011, WEF has also adjusted GCI for
sustainability to look into these two dimensions. There is a need for further research considering these
dimensions of competitiveness.
Conclusion
Competitiveness has existed inevitably since the inception of international trade among nations. As a
concept, competitiveness has travelled a long distance from its birth by the classical economist, Adam
Smith, to Michael Porter and others, who presented the extended versions of the Diamond model.
However, the credit of stimulating a large-scale debate on ‘competitiveness’ goes to Michael Porter. With
changing times, the notion of competitiveness kept on varying, while the basic purpose of studying it
remained more or less unchanged. The prime objective of achieving competitiveness is to strengthen a
nation’s economy and to make it prosperous. As the world is undergoing rapid transformation, none
of the existing models can be a perfect fit forever, but each model/theory has uncovered interesting
insights in explaining a nation’s success in the international economic scene. It can be inferred that
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676 Global Business Review 16(4)
incessant globalization is leading to blossoming of newer theories on competitiveness. The horizon of
competitiveness is expanding from economic to social aspects.
The length and breadth of competitiveness analysis is not restricted to nations alone. It spans across
industries, rms and occasionally, to smaller geographic regions. Scholars from various disciplines have
added different perspectives in understanding the concept and have used heterogeneous indicators to
measure it. Competitiveness as a subject is still perplexing and on many occasions becomes a topic for
intense debate because of its different interpretations ranging from productivity to exports, market
shares, technological capability, etc.
The reviewed studies indicate that the three levels of competiveness are closely interlinked. The
nation is responsible for providing a conducive environment. Industries are the targets for directing
policies and other means to get beneted by the favourable environment. But it is the rms where the
root or source of competitiveness lies. Ultimately, economic values created by the rms make industries
competitive, which, in turn, contribute to national competitiveness.
Competitiveness is a hot topic of interest for all, including academia, government and the business.
Its implication, however, can be different for each of the interest groups. As globalization has ushered in
an era of incessant competition, the competitiveness has become topical. At the macro level, it has its
implications for policymakers, but its signicance is critical at micro level. The business managers
should attach due importance to competitiveness and apply it in their day-to-day operations for achieving
higher levels of performance. Competitiveness is vital because it is the lifeline of a nation’s economy.
Acknowledgements
We are grateful to the anonymous reviewers for their valuable suggestions to improve the quality of the article.
Notes
1. Group of seven (G7) industrialized nations—the US, the UK, France, Germany, Italy, Canada and Japan—began
in 1975.
2. South Korea, South Africa, Turkey, Brazil, China, Egypt, India, Indonesia, Mexico, the Philippines, Poland and
Russia.
3. For details, please refer to http://www.hks.harvard.edu/centers/cid/programs/entrepreneurial-finance-lab-
research-initiative/the-missing-middle
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... En la actualidad, se utiliza a menudo en diferentes contextos, significando cosas diferentes para diferentes investigadores". De igual forma (Waheeduzzaman y Ryans, 1996), citados por (Chattopadhyay, 2015), consideran que "la competitividad es un concepto multifacético cuya comprensión proviene de la economía, la gestión, la historia, la política y la cultura". ...
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