Books by Michael E. Porter Competitive Advantage: Creating and Sustaining Superior Performance (1985) Cases in Competitive Strategy (1982) Competitive Strategy: Techniques for Analyzing Industries and Competitors (1980) Competition in the Open Economy (with R.E. Caves and A.M. Spence) (1980) Interbrand Choice, Strategy and Bilateral Market Power (1976) THE FREE PRESS A Division of Simon & Schuster Inc. 1230 Avenue of the Americas New York, NY 10020 www.SimonandSchuster.com Copyright © 1990 by Michael E. Porter Introduction copyright © 1998 by Michael E. Porter All rights reserved, including the right of reproduction in whole or in part in any form. First Free Press Edition 1990 THE FREE PRESS and colophon are trademarks of Simon & Schuster Inc. Manufactured in the United States of America 20 19 18 17 16 Library of Congress Cataloging-in-Publication Data Porter, Michael E. The competitive advantage of nations: with a new introduction/Michael E. Porter. p. cm. Originally published: New York: Free Press, cl990. Includes bibliographical references and index. 1. Industrial policy. 2. Competition, International. 3. International business enterprises. 4. Strategic planning. 5. Economic development. 6. Industrial management. I. Title. HD3611.P654 1998 338.9—dc21 98-9584 CIP ISBN 0-684-84147-9 eISBN-13: 978-1-45165-149-2 For Deborah Contents Introduction Preface 1: The Need for a New Paradigm Conflicting Explanations Asking the Right Question Classical Rationales for Industry Success The Need for a New Paradigm Toward a New Theory of National Competitive Advantage The Study A Broader Concept of Competitive Advantage PART I FOUNDATIONS 2: The Competitive Advantage of Firms in Global Industries Competitive Strategy Competing Internationally The Role of National Circumstances in Competitive Success 3: Determinants of National Competitive Advantage Determinants of National Advantage Factor Conditions Demand Conditions Related and Supporting Industries Firm Strategy, Structure, and Rivalry The Role of Chance The Role of Government The Determinants in Perspective 4: The Dynamics of National Advantage Relationships Among the Determinants The Determinants as a System Clustering of Competitive Industries The Role of Geographic Concentration The Genesis and Evolution of a Competitive Industry The Loss of National Advantage The Diamond in Perspective PART II INDUSTRIES 5: Four Studies in National Competitive Advantage The German Printing Press Industry The American Patient Monitoring Equipment Industry The Italian Ceramic Tile Industry The Japanese Robotics Industry 6: National Competitive Advantage in Services The Growing Role of Services in National Economies International Competition in Services The Relationship Between Services and Manufacturing National Competitive Advantage in Services Case Studies in the Development of Competitive Service Industries PART III NATIONS 7: Patterns of National Competitive Advantage: The Early Postwar Winners American Postwar Dominance Stable Switzerland Sweden’s Choices Renewing German Dynamism 8: Emerging Nations in the 1970s and 1980s The Rise of Japan Surging Italy Emerging Korea 9: Shifting National Advantage The Slide of Britain Crosscurrents in America Postwar Development in Perspective 10: The Competitive Development of National Economies 10: The Competitive Development of National Economies Economic Development Stages of Competitive Development The Stages and the Postwar Economies of Nations Postwar Economic Progress in Perspective PART IV IMPLICATIONS 11: Company Strategy Competitive Advantage in International Competition The Context for Competitive Advantage Improving the National Competitive Environment Where and How to Compete Tapping Selective Advantages in Other Nations Locating the Home Base The Role of Leadership 12: Government Policy Premises of Government Policy Toward Industry Government Policy and National Advantage Government’s Effect on Factor Conditions Government’s Effect on Demand Conditions Government’s Effect on Related and Supporting Industries Government’s Effect on Firm Strategy, Structure, and Rivalry Government Policy and the Stages of Competitive Development Targeting Government Policy in Developing Nations The Role of Government 13: National Agendas The Agenda for Korea The Agenda for Italy The Agenda for Sweden The Agenda for Japan The Agenda for Switzerland The Agenda for Germany The Agenda for Britain The Agenda for the United States National Agendas in Perspective Epilogue Appendix A. Methodology for Preparing the Cluster Charts