Competitiveness: A brief introduction to the different conceptualizations of competitiveness

Competitiveness as a concept has evolved in the last three decades. While there are parallels among leading publications about their understanding of competitiveness, there are other conceptualizations of competitiveness that differ in their focus-point. In what follows, we present some of the different definitions of the concept of competitiveness.

Academic definitions of competitiveness move from a general perspective about strategic choices without specifying a unit of analysis to definitions focused at the country level. Buckley et al. (1988), for example, understand competitivenesss to include "efficiency (reaching goals at the lowest possible cost) and effectiveness (having the right goals)." For Buckley et al., the choice of "industrial goals" is crucial. They indicate that "competitiveness includes both the ends and the means toward those ends."Scott and Lodge (1985), move the focus of competitiveness to the country level proposing that competitiveness is a "country's ability to create, produce, distribute and/or service products in international trade while earning rising returns on its resources."

Others, however, differ from such understandings and put more emphasis on the economic structure of countries. For the OECD (1992), "competitiveness is the degree to which a nation can, under free trade and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real income of its people over the long-term." Such understanding brings to the fore a proposition that competitiveness is embedded in the type of economic system. The US Competitiveness Policy Council (1992) adopt the same line of thought and defines competitiveness as "the ability to produce goods and services that meet the test of international markets while citizens earn a standard of living that is both rising and sustainable over the long-run."

There are understandings of competitiveness that focus on a different the level of analysis—rather than contemplating competitiveness at a country-level, these conceptualizations focus on the firm-level. For example, the Report of the Select Committee of the House of Lords on Overseas Trade (Low, 1985) puts emphasis on the competitiveness of enterprises. According to the Committee "competitiveness is synonymous with a firm's long-run profit performance and its ability to compensate its employees and provide superior returns to its owners." For Feurer and Chaharbaghi (1994), competitiveness "depends on shareholder and customer values, financial strength which determines the ability to act and react within the competitive environment and the potential of people and technology in implementing the necessary strategic changes." Feurer and Chaharbaghi go on to state that for competitiveness to be sustained there needs to be an "appropriate balance" between all factors involved which can be of "conflicting nature."

Among leading publications such as the Global Competitiveness Report and the World Competitiveness Yearbook, there are conceptual similarities between their understandings of competitiveness. For the Global Competitiveness Report competitiveness is "the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be reached by an economy" (WEF, 2014). According to the World Competitiveness Yearbook, competitiveness is the "ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people"; or to put it shortly, competitiveness refers to the way in which a country "manages the totality of its resources and competencies to increase the prosperity of its people" (IMD World Competitiveness Center, 2014). Both conceptualizations underline prosperity as the fundamental outcome of competitiveness.

 

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Recommended readings

Buckley, P. J., Pass, C. L., & Prescott, K. (1988). Measures of international competitiveness: A critical survey. Journal of marketing management, 4(2), 175-200.

Feurer, R., & Chaharbaghi, K. (1994).Defining competitiveness: a holistic approach. Management Decision, 32(2), 49-58.

IMD World Competitiveness Center (2014). IMD World Competitiveness Yearbook 2014. Lausanne: IMD World Competitiveness Center.

Low, T. (1985). Report of the Select Committee of the House of Lords on Overseas Trade. London: H.M.S.O.

OECD (1992). Technology and the Economy: The Key Relationships. Paris: OECD.

Scott, B. R., & Lodge, G. C. (1985).US competitiveness in the world economy. The International Executive, 27(1), 26-26.

US Competitiveness Policy Council. (1992). "Building a competitive America."The First Report to the President and Congress, Competitiveness Policy Council, Washington, D.C.

WEF (2014). The Global Competitiveness Report 2014–2015. Geneva: World Economic Forum.


Suggested Websites

The IMD World Competitiveness Center's Yearbook

The WEF Global Competitiveness Report