. . . should be made of sterner stuff

Tim Congdon

THE COMPETITIVE ADVANTAGE OF NATIONS by Michael E. Porter

Macmillan, £25, pp.848

The publication of Michael E. Porter's The Competitive Advantage of Nations a few months ago was accompanied by much

razzamatazz. No other book this year has attempted to discuss, at such length and with such self-consciousness, a subject as basic as the causes of the relative prosper- ity of nations. It was undoubtedly the 'event' in international business publishing in 1990. With its 850 pages, its tone of high academic seriousness and its claim to have found new insights into big issues, it could fairly be described as the Cecil B. de Mille epic of recent writing on economics and current affairs.

But what, at the end of the day, has Professor Porter added to the sum of human understanding? He assures the reader in Chapter 1 (called, too predict- ably, 'The need for a new paradigm') that his central question is 'why do firms based in particular nations achieve international success in distinct segments and indus- tries?' It follows that his search is for

the decisive characteristics of a nation that allow its firms to create and sustain competi- tive advantage in particular fields, that is, the competitive advantage of nations.

But in Chapter 2, on 'The competitive advantage of firms in global industries', he remarks that

In modern international competition, firms need not be confined to their home nation. They can compete with global strategies in which activities are located in many coun- tries.

Straightaway there is a problem and, on the face of it, self-contradiction. Is Profes- sor Porter talking about nations or com- panies? Are nations economically success- ful because of their characteristics as na- tions or because of the characteristics of companies based in them? The reader can battle through the first 273 pages and still not find a simple answer to this question.

On page 33 he is told in successive sent- ences that 'The principles of strategy will define what attributes of a nation are relevant' to competitive advantage, and that The basic unit of analysis for under- standing competition is the industry'. The words 'nation', 'industry' and 'company' then cavort around each other, in a clumsy verbal gavotte, for over 200 pages, without clarifying which of the three really matters.

It would be helpful if, despite this basic ambiguity, Professor Porter were actually able to throw some light on the source of competitive advantage, whether of the nation, industry or company. After all, he has over 250 pages to do so. But he does not. Instead, there are countless sentences of the kind 'x is x because x is x'. They involve words for their expression, are syntactically and grammatically correct, absorb space on the page and require the reader's attention. But they say nothing at all. A crucial section in the book illustrates the point. Between pages 71 and 73 Profes- sor Porter writes on the 'Determinants of national advantage' and introduces the key concept of the national 'diamond' which determines competitive strength. The sent- ence before he mentions the diamond reads

Ultimately, nations succeed in particular industries because their home environment is the most dynamic and the most challenging, and stimulates and prods firms to upgrade and widen their advantages over time.

Now what does this sentence say? It is obvious enough that a home environment which is 'dynamic and challenging' is likely to encourage success, and that 'firms which upgrade and widen their advantages over time' are by definition also successful. So the sentence could be re-worded, 'Ulti- mately, nations succeed in particular indus- tries because their home environment is the most likely to encourage success, and stimulates and prods firms to be the most successful over time'. The sentence is a void. It could have been struck out without any loss of meaning or content.

The diamond itself is completely fatuous. Its message is that competitive advantage depends on the interplay of 'factor conditions' (ie, skilled labour and infrastructure), 'demand conditions', 're- lated and supporting industries' and 'firm strategy, structure and rivalry'. Again, what does this add? It is like being told that ships sail in a northerly, easterly, southerly or westerly direction or that troops can be moved by land, by sea or by air. What is your point, Professor Porter?

From pages 273 to 683 the book moves from concepts and ideas to facts, reviews the different 'Nations' and derives 'Im- plications' from the so-called analysis. The treatment is extraordinarily ambitious. Chapter 13 provides Korea, Italy, Sweden, Japan, Switzerland, Germany, Britain and the United States (in that order) with separate agenda and concludes with a section on 'National agendas (sic) in pers- pective'.

But the ambition, scale and pretension of his research does not mean that Profes- sor Porter knows what he is talking about. He is hopelessly adrift in his comments on Britain. He says that Britain has been 'plagued in the postwar period with high unemployment and pressure on living stan- dards'. On the contrary, for 25 years after 1945 unemployment was under 3 per cent of the workforce while living standards rose continually. At present, despite all the short-term difficulties, unemployment here is almost the lowest in Europe and living standards have increased in the last six years faster than in any other period of comparable length in our history.

Why has this book been published? Of course, professors at Harvard Business School need to write books and establish reputations, and publishers have to sell books and make profits. Whatever Profes- sor Porter's many other problems, there is no doubt that he has been a superb salesman. To persuade an important pub- lishing firm like Macmillan that a book as bad as this deserved heavy promotional expenditure suggests that he has formid- able powers of self-advertisement. He must be well-worth employing as a market- ing consultant. If he makes a small fortune from The Competitive Advantage of Na- tions, he would be living proof of the doctrine that a success is a success because it is a success. But Macmillan really ought to have known better.