Competitiveness
From Wikipedia, the free encyclopedia
- This page refers to the economic and econometric sense of the word. For other uses, see Competition.
Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market. The usefulness of the concept, particularly in the context of national competitiveness, is vigorously disputed by economists, such as Paul Krugman [1].
The term may also be applied to markets, where it is used to refer to the extent to which the market structure may be regarded as perfectly competitive. This usage has nothing to do with the extent to which individual firms are "competitive'.
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[edit] Market Competitiveness
At the market level, the two academic bodies of thought on the assessment of competitiveness are the Structure Conduct Performance Paradigm and the more contemporary New Empirical Industrial Organisation model. Predicting changes in the competitiveness of business sectors is becoming an integral and explicit step in public policy making.
[edit] Firm competitiveness
Within capitalist economic systems, the drive of enterprises is to maintain and improve their own competitiveness.
[edit] National Competitiveness
The term is also used to refer in a broader sense to the economic competitiveness of countries, regions or cities. Recently, countries are increasing looking at their competitiveness on global markets. Ireland (1997), Croatia (2004), Greece (2003) and the Philippines (2006) are just some examples of countries that have advisory bodies or special government agencies that tackle competitiveness issues.
National competitiveness is said to be particularly important for small open economies, which rely on trade, and typically foreign direct investment, to provide the scale necessary for productivity increases to drive increases in living standards. The Irish National Competitiveness Council uses a Competitiveness Pyramid structure to simplify the factors the affect national competitiveness. It distinguishes in particular between policy inputs in relation to the business environment, the physical infrastructure and the knowledge infrastructure and the essential conditions of competitiveness that good policy inputs create, including business performance metrics, productivity, labour supply and prices/costs for business.
International comparisons of national competitiveness are conducted by the World Economic Forum, in its Global Competitiveness Report, and the Institute for Management Development, in its World Competitiveness Yearbook.
[edit] Criticism
Krugman argues that "As a practical matter, however, the doctrine of 'competitiveness' is flatly wrong. The world's leading nations are not, to any important degree, in economic competition with each other." As Krugman notes, national economic welfare is determined primarily by productivity in both traded and non-traded sectors of the economy. [2].
