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Porter's Diamond/Double Diamond

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Constantina Pastellidou

on 22 October 2012

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Transcript of Porter's Diamond/Double Diamond

PORTER'S DIAMOND AND
DOUBLE DIAMOND STRUCTURE/TABLE OF CONTENT PART 1
INDUSTRIAL CLUSTERS IDENTIFICATION PORTER'S DIAMOND Its a configuration of four sets of attributes which, Porter's theory, determine a nation's competitive advantage. What is Porter's Diamond? Porter's diamond model consists of:
Endogenous variables: Factor Conditions, Demand Conditions, Related and Supporting industries and Firm strategy, structure and rivalry.
Exogenous variables: Chances and Government. TACKLED CRITICS SINCE 2008 ANKIT INTODIA LUTZ BRYSCHE KONSTANTINA PASTELLIDOU MOKSHA SHAH PANKAJ SHARMA ANLAN YIN BOCHAO YU GENERAL CRITICS Data from 10 affluent countries
Model has to be modified every time
It looks on a national level
MNEs are not mentioned
Outward FDI can create competitive advantage only
Little predictive power
Inter-dependencies between countries (clusters) are not mentioned Porter's diamond, Rugman and
D' Cruz double diamond
Lots of research has been done
Lots of case studies in all fields and sectors

Focus on work since 2008
Focus on the concept/model and its development/improvement APPROACH/FOCUS How can we measure the future success of clusters? Every operating cluster has some common characteristics (Bergmann, Feser 1999):
Clusters are managed by entrepreneurs and public subjects,
Cooperation and competition are fundamental,
Fixed relations between companies and public administration institutions,
A cluster is a system where every member is of the same importance,
Cluster members have the common technologies, customers, distribution channels or labour markets, and human capital.
Stejskal & Hajek (2012) CHARACTERISTICS OF A CLUSTER The new method Use bottom-up and top-down approach (Sternberg & Litzenberger, 2004)
Combination of qualitative and quantitative data

Collect qualitative data (questionnaires)
- Find porter‘s factors

LQ: Localization quotient (turnover/employees)
Merge the two data by PCA-method Introduction
Our approach
Part 1: Industrial clusters identification
Part 2: Dual double diamond
Part 3: The regional and global competitiveness of MNCs firms
Summary Result: Get the competitive advantage of a cluster By: Will the investment be successful? Regions can give grants to industrial clusters Paper develops a model, based on Porter, to predict the success of a cluster in the future PART 2
DUAL DOUBLE DIAMOND TO (Stejskal and Hajek, 2012) (Cho, Moon and Kim, 2008) Porter’s diamond focuses only on physical factors in domestic context.
Extension of the model into Generalized Double Diamond (GDD) and Nine Factor (NF) models.
Extended models need to be integrated into a single model because none of the existing modes was analyzing the role of international human factors.
Necessity of integration to the existing models into a single model covering four dimensions (Physical and Human Factors in both Domestic and International context). Does one size fit all? CSAs Porter's diamond model and its extension models CHANGING RANKINGS OF INTERNATIONAL COMPETITIVENESS PART 3
THE REGIONAL AND GLOBAL COMPETITIVENESS OF MNC FIRMS (Rugman, Oh and Lim, 2012) The FSA/CSA matrix—an extension to international competitiveness.They relate this to the diamond framework for national competitiveness (Porter 1990), and the double diamond model (Rugman and D’Cruz 1993).
This research provides empirical evidence to demonstrate the merits and usefulness of the modified FSA/CSA matrix using the Fortune Global 500 firms.
These firms account for over half the world’s trade (on an intra-firm basis as well as with arm’s length customers) and over 90% of the world’s foreign direct investment (FDI) (Rugman 2005). Introduction to their research Quadrant 1 represents a situation in which only CSAs are important.The competitiveness of the MNEs in this quadrant depends upon natural endowments of minerals, oil wells, forest products, hydro-electric power, and other natural resources in their home country as well as cheap labor or cheap skilled labor. FIRST QUADRANT Quadrant 4 is a pure management explanation for the success of MNEs. Here, only FSAs matter. THE FOURTH QUADRANT THE SECOND QUADRANT In quadrant 2, neither CSAs nor FSAs are important. Firms in this quadrant need to move to either quadrant 1 (building upon CSAs) or to quadrant 4 (by improving FSAs). Otherwise firms in quadrant 2 are not sustainable. Quadrant 3 is a special quadrant only applicable for international business. THE THIRD QUADRANT In quadrant 3 both FSAs and CSAs matter. The better managed MNEs successfully combine FSAs and CSAs (Rugman 1996). This is a quadrant reflecting the resource based view. The firms have strong FSAs that are unique and proprietary, which in turn are protected by isolating mechanisms (entry barriers) which prevent rival firms from acquiring the similar FSAs. SOLUTIONS/FINDINGS Despite the international competitiveness much of this was still being achieved within their home region. “In other words, international competitiveness is a regional not a global phenomenon” (Rugman et al., 2012:218). In summary, it is believed that Porter’s diamond framework and Rugman and D’Cruz’s double diamond framework provide a useful perspective to extend the original. Dual Double Diamond (DDD) New model on national competitiveness that integrates the four dimensions of national competitiveness into a single framework. Our Approach: BIBLIOGRAPHY Adapted from Alan M. Rugman and Joseph R. D’Cruz, “The ‘Double Diamond’ Model of International Competitiveness: the Canadian Experience,” Management International Review, vol. 33, Special Issue 2 (1993), p. 32 THANK YOU FOR YOUR ATTENTION QUESTIONS???? Bergmann, E. M.; Feser, E. J. (1999). Industrial and Regional Clusters: Concepts and Comparative Applications. Virginia: WVU Regional Research Institute.

Cho, D-S., Moon, H-C., and Kim, M-Y (2008) Does one size fit all? A dual double diamond approach to country - specific advantages. Asian Business and Management, Vol.8, pp.83-102.

Morrison, J. (2009) International Business: Challenges in a Changing World. Palgrave Macmillan
Porter, M. E. (1990). The competitiveness advantage of nations. New York: Free.

Rugman, A. M. (1996). The theory of multinational enterprises. Cheltenham: Edward Elgar.

Rugman, A. M. (2005). The regional multinationals: MNEs and “Global” strategic management. Cambridge: Cambridge University Press.

Rugman, A. M., & D’Cruz, J. R. (1993). The “Double diamond” model of international competitiveness: the Canadian experience. Management International Review, 33(2), 17–39.

Rugman, A. M., Oh, C. H., and Lim, D.S.K. (2012) The regional and global competitiveness of multinational firms. Journal of the Acad. Mark. Sci., 40:218–235.

Rugman, A.M. and D’Cruz, J.R., (1993) The ‘Double Diamond’ Model of International Competitiveness: the Canadian Experience. Management International Review, vol. 33, Special Issue 2, p. 32.

Stejskal, J., and Hajek, P. (2012) Competitive Advantage Analysis: A Novel Method for Industrial Clusters Identification. Journal of Business Economics and Management, Volume 13(2): 344–365.

Sternberg, R.; Litzenberger, T. 2004. Regional clusters in Germany: their geography and their relevance for entrepreneurial activities, European Planning Studies 12(6): 767–791. Checking the hypothesis in Pardubice region (Czech Republic) According to these results, the most significant factors of competitive advantage analysis are firms strategy and demand, followed by resources availability and related industries. Localization quotient has only a low impact on the resulting score 1. All models use more data.
2. Modification has been decreased.
3. DDD and global competitiveness model focus on international level.
4. DDD and global competitiveness model are taking MNEs into account.
5. DDD takes inward FDI into account.
6. Cluster approach has good predictive power.
7. Cluster approach focuses on inter-dependencies between companies. IMPROVEMENTS Questionaire: In the questionnaire there are questions addressing the following issues:
– accessibility of specialized sources needed for production in the industrial branch (human, capital, infrastructure, nature),
– relations among the firms in the region (aggressive relations, evaluation of entrepreneur climate, etc.),
– suppliers chains (suppliers for the end customers),
– local subcontractor systems, flexibility of local firms,
– relations among the firms in the region and their branch orientation.
Likert-scale range 4
-100% - +100% due to tetragon
Branch/branch region approach
LQ > 1 : Specialisation in a sector BACKUP SLIDES Sternberg and Litzenberger (2004) distinguish between bottom-up and top-down approaches.
Bottom-up approaches are represented by expert opinions or social network analysis. Top-down approaches include (Brachert et al. 2011):
– measures of spatial concentration such as Gini coefficient and Hirschmann-Herfindahl index of concentration (Titze et al. 2011),
– location quotients, cluster index (Sternberg, Litzenberger 2004) and Ellison-Glaeser index,
– input-output methods. BACKUP SLIDES Cho, D-S., Moon, H-C., and Kim, M-Y (2008) Does one size fit all? A dual double diamond approach to country - specific advantages. Asian Business and Management, Vol.8, p.94. Stejskal, J., and Hajek, P. (2012) Competitive Advantage Analysis: A Novel Method for Industrial Clusters Identification. Journal of Business Economics and Management, Volume 13(2), p.356 Rugman, A. M., Oh, C. H., and Lim, D.S.K. (2012) The regional and global competitiveness of multinational firms. Journal of the Acad. Mark. Sci., Vol. 40, p.221. CRITICS 1. Data from 10 affluent countries.
2. Model has to be modified every time.
3. It looks on a national level.
4. MNEs are not mentioned.
5. Outward FDI can create competitive advantage only.
6. Little predictive power.
7. Inter-dependencies between countries (clusters) are not mentioned. First: Second: Cho, D-S., Moon, H-C., and Kim, M-Y (2008) Does one size fit all? A dual double diamond approach to country - specific advantages. Asian Business and Management, Vol.8, p.88 Cho, D-S., Moon, H-C., and Kim, M-Y (2008) Does one size fit all? A dual double diamond approach to country - specific advantages. Asian Business and Management, Vol.8, p.89. Bruce, T., and Pitts, E. (1998). Competitiveness in the Food Industry. Porter (1990, p. 127). Springer. p. 19. Countries with high international connectivity and human factors boast higher rankings in the DDD model than Porter's single diamond.
Switzerland, Singapore, Belgium, Hong Kong, UK and Taiwan - countries with both high international connectivity and human factors show increase in their rankings.
China, India, Russia, Saudi Arabia - countries with both low international connectivity and human factor show decreasing rankings. Survey + LQ-formula (turnover/employments)
PCA method (Janné 2001) PCA-Method Standardization of data first, of course
(4 point Likert scale + LQ) Porter's Factors
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