In Chapter 1 (Theory), Professor Porter begins by clarifying the meaning and source of competitiveness, pointing out that an increase in productivity (the value of output per unit of labor and capital) is the key to national productivity and competitiveness. Immediately thereafter, Prof. Porter demonstrated the "Diamond Model", a modeling tool for increasing a country's competitive advantage and a method for evaluating its position. He centered on the evaluation and construction of national competitiveness, the "five forces analysis" and "value chain" framework of important concepts organically applied to the book's most central "diamond model". It also discusses the four major elements and two auxiliary elements, the dynamics of the Diamond Model, and the mutual influence of the Diamond Model.
In the second chapter (industry chapter), Prof. Porter analyzes the process and reasons for the formation and enhancement of industrial competitiveness by showing the cases of four dominant countries and four dominant industries. The cases include the role of clustering and specialization in Germany's printing press industry; the value of the U.S. medical testing equipment industry's focus on domestic demand and its supporting industries; the significance of domestic market competition in the development of Italy's ceramic tile industry; and the role of the government in improving the state of demand in the domestic market and stimulating the conditions of production in the process of the development of Japan's industrial robotics industry, which has been aptly named. In the 2nd article, Prof. Porter also specifically mentioned the relationship and significance of the service industry and national competitive advantage.
Professor Porter, in the third chapter (country chapter), analyzes the current situation, causes and prospects of the competitiveness of eight countries by comprehensively applying the analytical methods of the "diamond model" in the four major factors of factors of production; enterprise strategy, enterprise structure, peer competition; conditions of demand; and the related and supportive industries, as well as the role of the two auxiliary factors of opportunity + government. It analyzes the current situation, causes and prospects of the competitiveness of the eight countries. It is interesting to note that the United States, on the one hand, is ranked as a post-war winner due to its industrial diversification (other post-war winners included in the analysis include Switzerland, which emphasizes on trade, Germany, which emphasizes on science, education and high standardization, and Sweden, which has a centralized economy), while at the same time, due to the high proportion of its natural resource industries and its poor performance in industrial clusters, it is ranked among the declining powers along with the once-fading empire of the United Kingdom. In addition, Japan, Italy and South Korea, which have performed well in all elements of the Diamond Model, are among the emerging countries. In this article, Prof. Porter also puts forward the four stages of economic development, and points out the process and law of the four stages of development, crossing and cycling.
(1) Factor-oriented stage: basic factors of production are an important source of competitive advantage; it is difficult to move to the next stage.
(2) Investment-oriented stage: basic factors of production and domestic demand growth are advantages.
(3) Innovation-oriented stage: domestic demand begins to internationalize; related and supporting industries develop well; enterprises expand overseas.
(4) Affluence Oriented Stage: social value hangs on and economic dynamism declines; polarization issues.
Professor Porter, in Part 4 (Application), synthesizes corporate and government strategies and proposes guidelines for 10 countries based on the strengths and weaknesses of the Diamond Model and the Stages of Economic Development Assessment Methodology.
The Diamond Model: A Leap from Comparative Advantage to Competitive Advantage
The preface to the reprint of National Competitive Advantage presents the Diamond Model as an important analytical tool for the analysis of national competitive advantage, and the Diamond Model as an important analytical tool for the analysis of national competitive advantage. Comparative Advantage Theory is actually also a theory of competition, although it emphasizes the participation of industries and products in which a country has a relative advantage in international competition, rather than the participation of all industries and products of a country in international competition to form an overall competitive advantage.
Porter's "diamond model" that competitiveness and national prosperity is not a zero-sum game. As a new way to understand the global competitive position of a country or region (including provinces, cities and regions), the central idea of the theory of national competitive advantage is that a country's rise and fall in the international competition is the root of whether to win the advantage, which emphasizes that not only all of a country's industries and products to participate in the international competition, and more importantly to form the country's overall competitive advantage and its conditions for the promotion and creation. And the country's competitive advantage, the key to the following interactions, dynamically connected to the four basic elements and two auxiliary elements of the *** with the role (as shown in the figure below), the four elements include:
(1) factors of production: a country in the competition in a particular industry in the performance of the relevant production, such as the quality of manpower or the infrastructure of the good and the bad.
(2) Demand conditions: how well the country's market demands the products or services offered by the industry.
(3) Performance of related and supporting industries: whether the related and upstream industries of these industries are internationally competitive.
(4) Strategy, structure and competitors of the enterprise: the foundation, organization and management pattern of the enterprise in a country, and the performance of competitors in the domestic market.
In addition, there are two auxiliary elements, "opportunity" and "government", in the relationship between national environment and enterprise competitiveness. Opportunities for industrial development usually wait for major changes and breakthroughs in basic inventions, technology, wars, political environment development, foreign market demand, etc., which can be controlled by the enterprise government. As for the government's influence on the "diamond model" is more comprehensive, indirect and profound. (For more details on government policies, see Part III)
The core idea of the book, i.e., how to evaluate and enhance the competitiveness of industries and even the country, is the Diamond Model, which is used throughout the book and proves its unique value and attraction in empirical analyses. Comprehensive discussion of the authors of the 3rd and 4th articles, for the "diamond model" of the elements of the following elements are worth emphasizing the explanation:
(I) Demand elements: emphasize the discerning domestic consumers
Firstly, Porter very much emphasizes the role of domestic demand in stimulating and improving the country's competitive advantage. Secondly, Porter believes that if a country's domestic consumers are sophisticated and demanding, it will help the country's firms to gain an international competitive advantage because sophisticated and demanding consumers will force the country's firms to strive for high product quality standards and product innovation.
Porter emphasizes domestic demand and places foreign markets in the "opportunity" element. In general, firms are most responsive to the needs of their closest customers. Thus, the characteristics of domestic demand play a particularly important role in shaping the characteristics of domestic products and generating pressure for technological innovation and quality improvement.
Porter's emphasis on sophisticated and demanding consumers, rather than on the quantity of demand alone, is instructive. Sophisticated and demanding customers in Europe's Scandinavian region have prompted two major local telecom equipment manufacturers, Finland's Nokia and Sweden's Ericsson, to take a step back in time, long before other developed countries did. "Nokia (Finland) and Ericsson (Sweden), the two major local telecom equipment manufacturers, to start investing massively in cell phone technology long before the demand for cell phones in the rest of the developed world took shape. As a result, "Nokia" and "Ericsson" are ranked among the top three giants in the global cell phone equipment industry today. Professor Ning Xiangdong of the School of Economics and Management at Tsinghua University, in his article "Navigating Porter's Sword", has questioned in this regard: China has the world's largest consumer group of cell phones, and consumers in some aspects of the requirements of the more demanding, but why we can not form a sustained competitiveness of cell phone R & D and manufacturing industry? Of course the role of each element can only answer part of the question.
(ii) on corporate strategy, structure and peer competition
Professor Porter throughout the book, always uphold the "peer competition" point of view, he asserted that strong domestic competitors is a difficult to measure national assets, and emphasized that fierce competition in the domestic peer industry is the industry to generate a competitive advantage and a strong and sustainable. He rejects the traditional theory that "domestic competition is a waste of resources" and believes that the policy of special care provided by the government to support the growth of a small number of domestic enterprises must be abandoned, otherwise enterprises will not be able to get out of the "government protection - no thought of innovation - no competition". -Otherwise, enterprises will not be able to get out of the circle of "government protection - not thinking of innovation - weak competition - further protection". It is true that the competition between domestic enterprises may lose some resources in the short term, but in the long run, the benefits outweigh the disadvantages. Domestic competition brings a series of pressures on enterprises to innovate, improve quality, reduce costs, and upgrade high-level factors of production through investment, all of which are conducive to the emergence of enterprises with global competitiveness. At the same time, fierce domestic competition will also directly weaken the enterprise relative to foreign competitors may enjoy some advantages, thus promoting enterprises to strive to "hard work", and strive to obtain a more durable and more unique advantageous position, and finally, it is also the fierce competition at home, forcing enterprises to expand externally, and strive to meet and exceed the international advanced level, to occupy the international market. The last is also the fierce domestic competition, forcing enterprises to expand to the outside, and strive to meet and exceed the international advanced level, occupy the international market.
What needs to be pointed out here is that Prof. Porter warned against disorderly and inefficient competition in the same industry in his book, and this disorderly and inefficient competition includes simple price wars in the absence of core competitiveness, and this kind of rough and inefficient competition in the same industry is not only unfavorable to enhance the competitiveness of the industry and even of the country but on the contrary, it is a kind of damage. Unfortunately, Professor Porter's book does not cover much of this area, and it is worth further research and analysis.
(3) The Efficacy of Primary and Advanced Factors and Inferior Factors of Production
Professor Porter divides the factors of production into two categories, namely, basic factors (or primary factors) and advanced factors. The former refers to factors that a country possesses innately or can obtain without much cost, such as natural resources, climate, geographic location, and demographic characteristics, while the latter refers to factors that must be created through long-term investment and cultivation, such as communication infrastructure, complex and skilled labor, scientific research facilities, and specialized technical knowledge. National competitive advantage recognizes that superior factors play a more important role in competitive advantage, and that unfavorable factors of production, i.e., disadvantages, often have the effect of stimulating certain industries or firms to compensate for them through sustained innovation, which promotes a country's economic development. Factor-rich countries, on the other hand, often fail to gain a competitive advantage because of a lack of incentives.
Professor Porter, who seems to share the "resource curse" theory, uses the examples of Italian steelmakers and the Dutch flower industry to support this view, and the example of the Japanese firms that created a "just-in-time" competitive advantage because of their space constraints. The example of the Japanese firm that created a "just-in-time" competitive advantage despite being space-constrained is used to emphasize the importance of learning to develop a competitive advantage without relying solely on abundant resources and a comfortable environment.
(4) "Spillover effect" of "cluster effect"
Professor Porter puts forward the concept of "cluster" when discussing related and supporting industrial factors.
Professor Porter introduced the concept of "clusters" in his discussion of related and supporting industrial factors, arguing that industrial clusters are like a tightly interconnected system that promotes and encourages sustained industrial upgrading and innovation through positive interactions and exchanges between firms, both vertically and horizontally. Especially when cultures are similar and geographic locations are close, regular contacts and exchanges between firms will help them seize opportunities, discover and apply new technological methods, and realize significant cluster effects.
In addition, Porter used the examples of Sweden's global competitive advantage in the manufacture of assembled metal products (thanks to the leading technology of the relevant specialties) and the United States' global competitive advantage in computer products (thanks to the advanced technology of the semiconductor industry) to illustrate the fact that the availability of internationally competitive suppliers and relevant supporting industries in the country is an important condition for the trade of a country or a region to be able to achieve an international competitive advantage. The benefits of investment in advanced factors of production in related and supporting industries will spill over from industry to industry, thus helping these industries to achieve a favorable position in international competition.
The Role of Government and its Boundaries: Explanations and Practical Reflections
Professor Porter introduces the diamond system in Chapter 3, where government is introduced as a complementary factor at the end of the chapter, and then in Chapter 12, where he discusses government policy and its impact throughout the chapter. He points out that the importance of government policy lies not in the policy itself, but in the effect it has on the diamond system, i.e., any government policy will enhance or weaken the four key elements to a greater or lesser extent. So Porter is by no means subscribing to the libertarian idea of government doing nothing. But what the government should and should not do, and to what extent is enough, these are precisely worth deeper investigation. Specifically, Porter for the government as a discussion focused on the following two points:
One is for the government's industrial support policy, he believes that the strong support for certain designated industries, or the establishment of subsidies based on the investment for the country to enhance the competitiveness of the level of the industry are not helpful, he wrote "look around the countries, if the government is strongly involved in the industry, the vast majority of them can not stand on the basis of international competition. He writes, "Looking around the country, if the government is strongly involved in the industry, the vast majority of them can not get a foothold in international competition. In the international competition of industries, the government certainly has its influence, but never the protagonist." Porter believes that subsidies for some industries are precisely unfair to other industries, their utility is relatively poor, or even go to the opposite direction. And he believes that government intervention in notification is more effective only in sub-industries.
The second is how the government can more effectively incentivize the four elements in the "diamond model" to play their roles, and then play a role in enhancing competitiveness. In particular, he emphasized the role of the government in "setting the stage", that is to say, if it can set up a good environment for industrial development, reduce the cost of communication and transportation, and pay attention to education and research and development as the basic work, it will be of great significance to enhance industrial competitiveness without distorting market value and the laws of development and competition.
The logic of the original book is simple and easy to understand, but in reality there is a big gap and room for discussion. From the point of view of the government's industrial support policy, in the case of China, the government has never been dominant in industrial development and has been actively involved. From the financial crisis after the central government launched the ten industry revitalization plan to the local industry planning, and then to the large aircraft industry, etc. Examples, the government obviously played a big role, some people think that the government's support for the ten industries is exactly the unequal treatment of other industries, and some people doubt that the government's initiatives will produce the relevant industry's own driving force, and then inertia and dependence, which may be somewhat similar to the viewpoint of Professor Porter. This may be similar to Prof. Porter's view, and Porter thinks that the government should focus more on the universal system, environment, and the construction of the basic structure or can avoid these troubles. However, from the perspective of historical experience, the government's support for industry in China is not lacking in successful examples, in the process of China's leap from more primary elements to advanced elements, the state focuses on a number of large total volume, long industrial chain, for the protection of the national industry, finance, social employment and protection of people's livelihood and other aspects of the industry has a significant position, to focus on the support and intervention or is the accumulation of capital, to achieve the One of the ways to realize leapfrog development. But as for the depth of intervention and the time point of government withdrawal need to grasp the appropriate, to prevent the formation of over-dependence of the relevant industries.
The explanation of the government's role as a "stage-maker" is of strong practical significance to China. Domestic attraction of investment and development of industry is usually achieved by means of lowering (or even waiving) land prices, tax breaks, financial subsidies, etc., in order to increase investment and develop the economy. However, there is a big gap in education and training, R&D technical support, development of entrepreneurial environment and other soft construction. For example, due to the lack of significant investment in education and training, there is a shortage of talent in the high-end equipment manufacturing industry, so that China's attractiveness to the high-end equipment manufacturing industry has always been insufficient. Obviously, the Chinese government is more accustomed to doing something in the obvious and fast-acting infrastructure construction, direct industrial intervention, etc., but still lacks interest and insufficient investment in the invisible and long-term basic software environment construction. Prof. Ye Yumin in the course of urban economics has introduced the United States in Tennessee in order to attract General Motors enterprises layout in the state of Spring Hill, in addition to the construction of infrastructure, in particular, proposed to subsidize the enterprise to carry out worker training, the value of $ 4 per car. This funding initiative to cultivate outstanding industrial workers for the entire industrial structure of the enhancement and progress are fundamental and long-term value, while such initiatives in China is rare and urgently needed.
Four Regrettable Points of the Original Essay
Obviously, Prof. Porter's argument that no country is invincible in every industry (with varying factor endowments and strengths) is well-founded, and thus limited resources are applied to the most productive areas, i.e., competitive industries expanding, uncompetitive industries leaving, and government protective policies for the already uncompetitive are all needed. The government's protective policies for the already uncompetitive are not conducive to economic upgrading and competitiveness.
From a purely rational point of view, Prof. Porter's insights are understandable and logically valid, but there is always a difference between reality and idealization. The existence of some industries in the country is not to profit and enhance competitiveness as the first goal, such as energy industry (petroleum, petrochemical and nuclear energy industry), defense industry, electric power, communications and telecommunications industries whose existence is of great value to the national security and core interests, although many of the industries have low productivity and competitiveness (not that there is no need to enhance their productivity), but not hindered by the needs of the country. Prof. Porter's argument on this point may be further refined.
In constructing the four stages of economic development, Prof. Porter creatively proposes four stages that are oriented and can move forward and may be cyclical among each other. The whole text is mainly textual narrative, but lack of data specific discussion, followed by more perceptual understanding than quantitative indicators. For example, in the case of the investment-oriented stage of development, according to the empirical analysis of the horizontal and vertical data of eight or ten countries, the proportion of investment (as a percentage of, for example, GDP) reaches what interval can be regarded as investment-oriented. In fact there are limitations to the use of quantitative indicators, but if they can be combined with a perceptual narrative, they may produce better results.
Professor Porter focuses mostly on the developed countries, which have now gained significant competitiveness globally, and does not say much about the difficulties of economic development encountered by developing countries, especially the ways of upgrading and development methods. As Prof. Porter said, "At present, almost all developing countries, planned economies are in the stage of factor-oriented economic development (the first stage). Generally speaking, not many countries have been able to step out of the factor-oriented stage and successfully move to the next stage." But for the international trade rules system of unjust and reasonable order structure on the development of developing countries how to evaluate and eliminate the impact of the development of developing countries, developing countries to solve the problem of development, etc. Professor Porter did not or basically less mentioned.