Understanding National Advantage


  • The nature of competition and the sources of competitive advantage differ widely among industries.
  • Global competitors often perform some activities outside their home country.
  • At the core of explaining national advantage in an industry must be the role of home nation in stimulating competitive improvement and innovation.
  • We must explain why firms from particular nations move early and aggressively to exploit change in particular industries.


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  • Four broad attributes of a nation that provide environment for creation of competitive advantage

Factor Conditions

Demand Conditions

Related and Supporting Industries

Firm Strategy, Structure, and Rivalry

  • The four determinants as a system are called national “diamond”.


  • The effect of one determinant is contingent on the state of other determinants.
  • Two additional variables can influence the national system in important ways: chance and government.
  • Chance event are such as pure inventions, breakthrough in basic technologies, war, major shift in foreign market demand.
  • Government policy such as competition policy, regulation, education can influence determinants of national advantage.