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The Competitive Advantage of Nations

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The Competitive Advantage of Nations

Free Press,

15 min read
10 take-aways
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What's inside?

Nations build economic advantages by encouraging industries to resist complacency and pursue innovation.

Editorial Rating



  • Innovative


The causes of national advantage include much more than a country’s reserve of affordable workers and raw materials. This in-depth study of 10 nations from the post-World War II period through the 1980s provides a useful framework for fully assessing national economic prowess and momentum. Although Michael Porter’s research covers a limited time period, the seminal author and Harvard Business School professor has developed a clear method for distinguishing economic cause from effect and for demystifying complex global trends. His four-point “diamond”-shaped analysis of national advantage in the world economy remains apt and applicable. Porter, a pioneer, says some readers may prefer “shorter paths through the book,” a nearly 900-page tome. To that end, he organizes the content into self-contained, thematic sections of selective readings. getAbstract recommends his enlightened explanation of why certain industries, and their home nations, either grow or shrivel in the heat of world competition.


The Luster of “Diamonds”

Since the end of World War II, globalization has triggered big shifts in national economic competitiveness, benefiting some countries and punishing others. It also is raising new questions about how a nation can compete economically with the rest of the world. But theorists generally have failed to agree on the multifaceted reasons for these swings in economic advantage.

The best gauge of national economic advantage is labor productivity. Economic output per worker must be the center of any analysis of national competitiveness. Increasing productivity is the clearest sign that a nation has strong industries with leading positions in global markets. Other purported proxies for national competitiveness – including low-cost labor and trade surpluses, among others – are misleading measures of a nation’s competitive might and momentum. Ideally, the internationalization of a nation’s economy will have a positive impact on its growth, but it will weaken national competitiveness if industries move high-skill jobs to foreign markets and keep low-skill jobs at home.

The Four “Determinants of National Competitive Advantage”

A four-point ...

About the Author

Michael E. Porter is a professor at the Harvard Business School and the author of Competitive Strategy and Competitive Advantage. He served on President Ronald Reagan’s Commission on Industrial Competitiveness.

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