Competitive Advantage of Nations by Michael Porter

Does Porter’s ‘Diamond’ concept convincingly explain the achievements of major national business systems, or are their weaknesses, theoretically and empirically, in his arguments?

In The Competitive Advantage of Nations, which was published in 1990, Michael Porter – who has dedicated most of his career to studying businesses and how they can develop a competitive advantage (Competitive Strategy, 1985) – the author offers a theoretical framework, which outlines the underlining factors that contribute to national competitiveness. Michael Porter’s work was met with contrasted views. While some academics praised the model for its wealth of information and the convenient framework it generated (Greenway, 1993), many other academics in international business criticized the model for its theoretical flaws and lack of empirical evidence.

After offering a brief overview of Porter’s Diamond concept, this essay will examine the academic criticism that this model has attracted since its publication in 1990.

Porter’s Diamond Model Theory furthers foundational work laid out much earlier by Adam Smith (1776) and Ricardo (1817), which sought to explain the success of certain Nations based on these countries’ factors of production. Although these theories functioned well at the time they were published, they failed to accurately reflect the radically different economic landscape of the 20th century, one characterized by relentlessly evolving technologies and deeply interconnected nations.

At the core of Porter’s theory is the idea that in order to be successful in the global marketplace, firms must first have a strong ‘home base’ to start launch from. Once this condition is established the firm will be able to engage in exports and FDIs ...

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