ti

How to Operationalize
Porter's Diamond of
International
Competitiveness
Alan M. Rugman and Alain Verbeke

Michael Porter*s "diamond" framework has as its focus a set of

home country national determinants of international
competitiveness. For applications to international business this
presents analytical difficulties because Dunning's eclectic theory of
the multinational enterprise demonstrates that it is the interaction
between national and international determinants that leads to the
competitive success of global industries. This article suggests a
method of extending Porter's framework to incorporate the modern
theory of the multinational enterprise; in particular, a variant of
SWOT analysis is used to operationalize the Porter diamond, 1993
John Wiley & Sons, Inc.
INTRODUCTION: THE PORTER DIAMOND
A recent contribution by Porter (1990) on the competitive advantage
of nations has led to an extensive discussion among academics and
practitioners on the sources of international competitiveness (Grant,
1991; Gray, 1991).
/
Porter's focus is on the impact of national determinants on international competitiveness. The main question answered in his work is
Alan M. Rugman is Professor of International Business at the University of Toronto, Faculty
of Management, 246 Bloor Street West, Toronto, Ontario M5S 1V4.
Alain Verbeke is Professor of International Business at the University of Brussels, (V.U.B.J,
Solvay Business School, Pleinlaan 2, 1050, Brussels Belgium.
The International Executive, Vol. 35(4) 283-299 (July/August 1993)
1993 John Wiley & Sons, Inc.
CCC 0020-6652/93/040283-17
283

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RUGMAN AND VERBEKE

"Why does a nation become the home base for successful international competitors in an industry?" (Porter, 1990: 1) Porter measures
international success as an industry's ability to export and to engage
in outbound foreign direct investment.
Two important problems arise in terms of managerial applicability
of the Porter diamond framework. First, it is not clear why the national level would necessarily be the best geographic indicator for an
industry's "proximate environment," shaping its success over time
(Dunning, 1990). Other geographic levels may be important, such as
the local, regional, foreign, or global, level, for particular determinants of international success. This problem is acknowledged by Porter (1990: 154-159, 606-607) but did not lead to an adaptation of his
framework. Rugman (1991, 1992) has explored this issue in the context of Porter's application of his framework to Canada (Porter and
the Monitor Company, 1991).
Second, six forces and their mutual interactions are recognized as
determining an industry's international competitiveness: factor conditions; demand conditions; related and supporting industries; firm
strategy, structure, and rivalry; government; and chance. The two
latter elements are not included in the four basic determinants of the
diamond but their role is important because either of tbem can infiuence the entire diamond. These six forces and their interactions were
studied for 100 industry case studies (see Porter, 1990: 26-27 for a
complete list). However, Porter's case studies lack a homogenous analytical tool to determine the importance and precise impact of each
determinant on the industries' competitive position. In short, it is
extremely difficult to "operationalize" Porter's diamond. By operationalize we mean put the diamond theory into practice, as a consultant or strategic planner would try to do.
The aim of this article is to correct these two weaknesses in Porter's seminal contribution to improve the managerial relevance of the
diamond framework. More specifically, this article will extend Porter's model through explicitly introducing four additional geographic
levels relevant to the analysis of international competitiveness and
linking this framework with the ,weU-known and operationally
simple SWOT-analysis (strengths, /weaknesses, opportunities, and
threats) in strategic management theory.
OPERATIONALIZING PORTER ACROSS MULTIPLE
GEOGRAPHIC LEVELS
Porter (1990) focuses his attention on the international success of a
national industry based on the analysis of determinants at the national level. Two comments should be made here. First, from a mana-

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285

gerial perspective it is not always evident that an analysis of a national industry is sought (although this was of course explicitly the
case in Porter's work). A useful framework for the study of an industry's competitiveness should explicitly allow for an analysis of the
competitiveness of a regionally based industry (e.g., the computer
software industry in Silicon Valley) or an industry that is located
across a number of nations (e.g., the consumer electronics industry in
the European Community, EC). For purposes of clarity, however, the
remainder of this paper will also focus on the competitiveness of an
industry at the national level.
Second, whatever the chosen geographic level for the definition of
an industry, it sbould be recognized tbat the six determinants could
be important at other levels than the national one. In some cases an
industry may be infiuenced by particular determinants at the local
level (e.g., the impact of transportation facilities on the petrochemical industry in Rotterdam). Sometimes, some determinants in a region may be of major importance (e.g., factors of production in the
French Champagne region for the sparkling wine industry). Finally,
any of the determinants may infiuence an industry's competitiveness
from outside the geographic locus of a home nation. For example, a
strong infiuence may be exerted by demand conditions in another
country. This is especially the case for small, open economies such as
Austria, Canada, or New Zealand, where firms take into account
demand conditions prevailing in larger foreign trading partners
from the outset even when designing new products or engaging in
R & D. Rugman and D'Cruz (1991, 1993) have explored the reasons
for a "double diamond" across the Canadian-U.S. economic space. In
some cases, such as the pharmaceutical industry, even global trends
in demand or in any other determinant may stimulate firms in a
particular nation to engage in specific strategic behavior (Hamel and
Prahalad, 1988).
An industry's international competitiveness may then result from
responding effectively to, and building on, the determining factors at
any of the various geographic levels, as suggested by White and
Poynter (1990). Hence, it is the successful combination by a particular firm or industry of particular determinants at the relevant geographic levels, that leads to international competitiveness, not an
exclusive or primary focus on national or local determinants (Diagram 1).
In Diagram 1, the international competitive performance ofa firm
or industry is determined by tbe six elements identified by Porter
(1990), but potentially at five different geographic levels.
This leads to a possible impact of 30 infiuences on a particular
firm or industry. In practice, it may not be feasible, nor desirable, to
study each of these 30 infiuences. A more limited number of infiu-

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RUGMAN AND VERBEKE

Government
Factor Conditions

Related and supporting

Industries

Firm Rivalry

Local
Raglonal
Nallonal
Foreign
Global

Local
Raglonsl
Nnllonal
Foreign
Global
Chance
Demand Conditions
Local
Raglonal
NatlonBt
Foraign
Global

Diagram 1. An extension of Porter's international competitiveness framework.

ences considered as critical and their mutual interaction may be selected for in-depth investigation. In any case, the important conclusion of the above analysis is that a firm or industry's competitiveness
may or may not result primarily from influences at the national or
subnational level. Determinants in the international environment
may be just as important for national competitiveness as elements
inside a nation. International competitiveness depends on the ability
of a firm or industry to adequately respond to these determining
influences, at any of these geographic levels, to its own advantage.
Porter (1990: 606-607) recognizes the possibility of "tapping selective advantages in other nations," for example, when developing a
global strategy, but he does not believe that determinants in other
nations can contribute as much to the competitiveness of an industry
as determinants at the national level. This view is based on the
assumption that a firm can only have one true home base for each
distinct business or segment, 'if | the firmi attempts to have several,
it will divide strategic authority, fragment technology development,
and forego the synergistic benefits of concentrating the critical
skills. Most importantly, it will sacrifice the dynamics that arise
from true integration in a national 'diamond'" (Porter, 1990: 606607).
Three comments should be made here. First, Porter's statements
above were not substantiated in his work with case data, nor with
relevant examples. In fact, a report on New Zealand using the same

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287

methodology (Crocombe, Enright, and Porter, 1991), was severely

criticized by Cartwright (1991). The latter author demonstrated the
limited usefulness of focusing on national determinants of competitiveness for home-based industries tbat export a high proportion of
their production.
Second, a firm or national industry may fee! tbat particular determinants at tbe international level may be as crucial for its international competitiveness as determinants inside a so-called home base
(Ohmae, 1987). These international determinants would include:
serving large foreign customers; responding to global trends in consumption; respecting the toughest environmental standards in tbe
world; using inexpensive factors of production in developing nations;
using the best component suppliers at a global level; etc.
Third, a crucial distinction should be made between those determinants of competitiveness that are largely exogenous (outside the system) and those that can be potentially endogenous (inside the system). In the first case, the determinant of competitiveness is given to
tbe firm or industry and cannot be altered. In tbe second case, attempts are made to use or transform tbe external factor into a proprietary, internal, firm, or industry characteristic. Porter's (1990) view
implies that the second case would primarily be observed inside a
country, where an industry could upgrade itself over time, whereas
tbis would be much more difficult in the international context. In
reality, numerous examples of multinational strategic management
behavior demonstrate bow determinants of competitiveness emanating from foreign environments may be used and appropriated by
firms from particular nations, thus boosting their international competitiveness as much as national determinants (Bartlett and
Gboshal, 1989; Douglas and Craig, 1989; Bartlett and Ghoshal, 1992;
Julian and Keller, 1991).
In fact, it may be precisely a synergistic combination of determinants at the national or subnational level and determinants at the
foreign or global level that may generate international success. In
this case, it would be sensible to attribute international competitiveness primarily to a mutual reinforcement among national and international factors leading to success, although a simultaneous response to critical factors at different geographic levels may obviously
lead to tensions among competing influences (Westney, 1990).
We will need to know why international influences, whether at tbe
level of one or more foreign nations or at the global level, would have
a specific impact on a particular national industry. After all, rivals in
other nations would be confronted with similar influences. The reason is that firms in a national industry may be characterized by
sharing conceptual maps and ongoing interactions leading to conver-

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RUGMAN AND VERBEKE

gent responses to international infiuences. Such behavior was observed by Ghoshal (1988), in the context of environmental scanning
by Korean firms.
In this context, leanings toward similar strategic behavior result from country-specific organizational structures (isomorphisms).
(Sub)National determinants lead to isomorphic leanings toward specific managerial behavior in an industry, in terms of using foreign
building blocks for improved competitiveness; but it may be the content of these foreign elements that actually contributes to international competitiveness. For example, superior organizing principles
in a national industry may lead to a comparatively more effective
adoption of foreign innovations, but it is obviously the combination
of the two influences, at different geographic levels, that leads to
lower or higher international competitiveness. An example ofa successful case is the adoption of quality management systems in Japan
(Yoshida, 1989). A less successful case is the use of JIT-systems in the
United States (Daniel and Reitsperger, 1991). In these cases, (sub)national and international determinants of competitiveness cannot be
separated.

SWOT-ANALYSIS AND PORTER^S DIAMOND

If the view is accepted, in principle, that six determinants can infiuence a firm or industry's competitiveness through working at five
geographic levels, then how should these 30 potentially relevant
infiuences be studied? In Porter's (1990) work, in-depth case studies
analyzing the determinants at the national level were used for the ex
post rationalization of observed success in terms of exports and/or
foreign direct investment. Firm managers and public policy makers,
however, are primarily interested in a tool that would allow a systematic analysis of these different infiuences on international competitiveness, as well as their strategic implications for the firm or industry. The use of the well known SWOT-analysis allows both such a
systematic analysis and a focus on strategic management implications. The conventional SWOT-analysis (Thompson and Strickland,
1989; Weihrich, 1990) provides a tool for the analysis of both the
external and internal environments of firms.
The analysis of the external environment leads to the classification of critical exogenous influences on international competitiveness as opportunities and threats. In the context of the framework
developed in this paper, each of the six determining factors, at any of
the five geographic levels, can constitute the source of such opportunities or threats. The main characteristic of opportunities and

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PORTERS DIAMOND OF INTERNATIONAL COMPETITIVENESS

threats is that they act as environmental constraints on business

firms' operations and strategic decision making.
The study of the firm's or industry's internal environment allows
the identification of strengths and weaknesses. Strengths refer to
categories of skills or assets, where the firm or industry is better
positioned than foreign rivals. Weaknesses imply a lack of such skills
or assets, relative to foreign competition. In the context of the international competitiveness framework, each of the six determinants at
any of the geographic levels may have been transformed into a firm
or industry specific skill or asset, in a more or less effective way, as
compared to foreign rivals.
For example, a firm or industry in a particular nation may have
developed network linkages with related and supporting industries
at various geographic levels. Special government relations may have
been established with a variety of public agencies both nationally
and internationally. A chance event such as a scientific innovation,
occurring anywhere in the world, may have been turned into a distinctive competence. IVends in local or global demand conditions may
have led to the creation of unique marketing skills. The perceived
availability of particular factors of production, again in any nation or
region, may have led to a specific choice of production process.
The analysis above is visualized in Diagram 2, suggesting that a

Government
Factor Conditions

Strengiha
Weshnassaa
OpponunldM
Tbnst*

Local
Regional
rtatlonal
Foreign
Global

Sirenglhs
Weaknesses
OppoMunltlaft
Thtaais

Related and supporting

Industries
Local
Raglonal
National
Foralgn
Global

Firm Rivalry

Slranglhi
WeaknaBBOB
Oppotiunlllai
TDraaiB

Local
Regional
Natlonnl
Foreign
Global

SIrangtha
WeaknasaaB
Op port unit las
Thraala

Oemand Conditions
Local
Regional
National
Foralgn
Global

Siranglha
WeaknaauB
OpponunlilaB
ThreatB

Diagram 2. A SWOT-analysis of international competitiveness determinants.

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RUGMAN AND VERBEKE

SWOT-analysis could be performed for the six determinants at five

geographic levels, leading to 30 SWOT-assessments. In practice, a
SWOT-analysis may only be performed for those factors considered
critical. However, each determinant such as factors of production
may itself be unbundled into several subdeterminants for which a
SWOT-analysis may be required. In addition, the SWOT-results for
some critical factors may be related to SWOT-outcomes for other
determinants.
The use of a SWOT-analysis for each of the six influencing determinants at five geographic levels does not imply that national or
subnational influences are less important for competitiveness than
suggested in Porter's (1990) framework. It does imply, however, that
the national determinants should be viewed as part of a broader
spectrum of influences at a variety of geographic levels, including
subnational and international ones. Hence, the competitive advantages of a firm or industry originating in a particular nation are
undoubtedly largely influenced by (sub)national determinants of
competitiveness, but, depending upon firm and industry characteristics, international influences may be just as important.
Porter's (1990) proposed hierarchy of influences, discriminating
between primary "national diamond characteristics" and secondary
determinants in other nations that can only be "tapped into selectively" should be dismissed as a general rule. It could even be argued,
especially for small, open economies, that nationally and subnationally driven opportunities and strengths can often be exploited
only when linked to opportunities prevailing, and strengths developed, at the international level.
The need for an outward focus for strategy operationalization is
exemplified by the attempts of business firms to become "insiders"
into at least one of tbe "triad" powers (see Burgenmeier and Muccbielli. 1991) for an analysis of outsiders' motivations to become insiders in the EC. Porter is correct that in the past a sequential exploitation of opportunities and development of strengths at the national
level and international level needed to take place, whereby the latter
was not possible without the former. The reality of today's international business implies, however, that firms, obviously building on
national or subnational determinants, often also consider elements
in tbe international environment such as opportunities and threats
or sources of strengths and weaknesses of equal importance when
engaging in strategic decision making as suggested by Reich (1991).
Firms in a national industry may be prevented from gaining a
competitive advantage relative to foreign rivals. This occurs for several reasons; differences in technological and organizational capabilities and trajectories; institutional inertia; behavioral constraints

PORTERS DIAMOND OF INTERNATIONAL COMPETITIVENESS

291

on the identification and adoption of superior organizing principles;

the absence of isomorphic pulls to adopt the best practice in a global
industry; etc. But here it is precisely the difference in responses
among nations to determinants at a foreign or global level that determines the ultimate competitiveness of the.se firms.
There is no scientifically grounded rationale to dismiss such international factors or classify them as less important than national
determinants, although many case studies on the historical growth
patterns of industries may suggest that national influences were
indeed prevailing during their initial development (Dunning, 1983).
Even if organizational and institutional capabilities of nations are
different for long periods of time and diffuse relatively slowly to
firms of another nation, specific international determinants of competitiveness may be crucial for the long-run survival and success of
these firms, as suggested by the creation of the European single
market (Emerson, 1998).

PRACTICAL VALUE OF SWOT-ANALYSIS

FOR THE DIAMOND
We now discuss the practical use of the various SWOT-analyses performed for the influencing factors considered to be critical in the
formulation and implementation of strategy. From a strategic management perspective, it is important to position the main results of
each of the SWOT-analyses in a comprehensive framework that could
lead to corporate or industry-wide responses to those SWOT-results
perceived as most important.
Diagram 3 provides such as framework. In this matrix, the different critical influencing factors can be positioned in two ways. First,
according to the extent to which they constitute an endogenized
strength or weakness, vis-a-vis foreign rivals. Second, the extent to
which this present internal capability could be challenged in the
future as a result of environmental threats, or reinforced through
capitalizing on external opportunities.
Diagram 3 is largely capability driven. To operationalize Porter
requires first a positioning of the determinants on the horizontal
axis as strengths or weaknesses, and second that these internal positions are linked to external (exogenous) circumstances providing
threats or opportunities.
Each cell of the matrix obviously leads to different strategy implications. We shall discuss the "core" cases of cells 1, 2, 4, and 5 first
and then turn to the other cases. Determinants of competitiveness in
cell 1 constitute both the major positive force for present internation-

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RUGMAN AND VERBEKE

Internal Capabilities
Attractiveness
of External
Environment

Strengths

Weaknesses

Opportunities

Threats

NauUal

Neutral

Diagram 3. The SWOT-positioning of competitiveness determinants.

al competitiveness and the source of new competencies in the future.

In principle, a firm or industry would like to have as many critical
competitiveness determinants as possible in this ceil.
The second cell means that a company or industry built core competencies for this determinant of competitiveness but is now faced
with environmental threats that may lead to a weakening of the
existing strengths relative to rivals better positioned to respond to
these new environmental factors. For example, the availability of
government support in another nation may be a threat for an industry. The local industry may have endogenized this factor, whereas it
remains largely exogenous and unavailable to outsiders, even if good
business-government relations traditionally constituted a strength
for these outsiders. The case of the Canadian lumber industry exporting to the United States is a case in point. This industry traditionally benefited strongly from good business-government relations in the United States, but became seriously threatened in the
early eighties by the capture of U.S. trade policy by U.S. lumber
producers seeking shelter (Gold and Leyton Brown, 1988). Here, the
main challenge is to improve and maintain existing strengths in the
face of environmental threats. Examples of this strategy are discussed, using the theory of shelter, by Rugman and Verbeke (1990).
The fourth cell refers to the case where a competitiveness determinant represents significant opportunities for improved competitiveness, but where the firm or industry has not been able to capitalize on
past or present opportunities through the development and use of
distinctive competencies relative to rivals. This occurs when a divergence exists between competitive opportunities with a particular geographic scope and a firm or industry's ability to build competitive

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293

advantages on the basis of critical influencing factors with the same

geographic locus. For example, the world automobile industry undoubtedly is faced with a number of global opportunities, but firms
from some nations may not be able to adequately respond to these
opportunities as a result of their lack of internal strengths at a global
level (Casson, 1987). Then we need to know the firm's or industry's
capability to develop the required strengths in order to be able to
respond adequately to opportunities.
The fifth cell reflects the situation whereby a firm or industry is
confronted with both external threats and internal weaknesses for
particular competitiveness determinants. In the best case scenario,
this quadrant may reflect selective factor disadvantages, pushing
firms to improve their position for other critical determinants in
other cells. In the worst case, if several critical determinants are
positioned in this cell, this may be an indication of declining international competitiveness, requiring actions such as mergers or even
liquidation.
Cells 3, 6, 7, and 8 are cases whereby either the exogenous factors
or internal capabilities are thought to have a neutral effect. For
example, in the area of production factors, cells 3 and 6 could include
firms with particular internal capabilities in international human
resources systems, but where the environment would not lead to
substantial opportunities or threats in the area of managementlabor relations in the near future. Cells 7 and 8 could reflect firms
with innovation strategies that constitute neither a strength nor a
weakness, vis-a-vis foreign rivals, but where global technological
changes may pose a threat or opportunity in terms of, for example,
the required speed of innovation. Finally, cell 9 implies that the
determinant in question is really not a critical factor because it constitutes neither the source of a weakness or strength, nor an external
opportunity or threat relative to rivals.
The case studies described in Porter (1990) do not allow managers
to clearly analyze how particular determinants can lead to improved
or deteriorated competitive advantage, nor do they allow a prediction
of future competitiveness based upon strategic decision making.
Through using Diagram 3 in a dynamic fashion, however, these two
problems can be solved.
First, a SWOT-positioning of competitiveness determinants can
occur at several points in time that allows managers to clearly visualize changes in Diagram 3. Second, an analysis of the present set of
SWOT-studies may result in strategic decisions to shift certain critical factors from the weakness side to the strength side of Diagram 3
(or to maintain a number of factors on the strength side). This should
lead to an improved internal compatibility between strength and

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RUGMAN AND VERBEKE

strategy. New trends in opportunities and threats emanating from

specific competitiveness determinants may also be identified or anticipated, thus stimulating external compatibility between the firms'
strategy and their environment. Hence, a set of sequential SWOTpositioning matrices may be developed, describing the dynamics of
international advantage of a national industry over time.
DIAMOND SWOT-ANALYSIS AND THEORY OF
MULTINATIONAL ENTERPRISE
In the case of multinational enterprises with several strategic business units (SBUs), the conceptual tools developed in this article can
be applied for each SBU. If an SBU has its headquarters in a foreign
nation, that country becomes the unit of analysis for the study of
national or subnational influences on competitiveness. The international environment will almost invariably be of major importance,
for example, if the SBU operates with a world product mandate (but
is still largely influenced by the corporate home base), or if it coordinates the activities of a number of globally rationalized businesses in
various nations (Etemad and Seguin Dulude, 1986). Foreign subsidiaries with strong internal capabilities and the ability to capitalize
on host country opportunities may take strategic initiatives that are
as important to a firm or industry as home country determinants
(Morrison and Crookell. 1991).
In a more general sense, the framework described in the previous
sections can be linked to the eclectic paradigm developed by Dunning
(1988). According to Dunning, the international competitiveness and
patterns of international production of a particular national industry are seen as the result of three elements: ownership advantages;
location advantages; and internalization advantages. The ownership
advantages are strengths that may derive from unique corporate
attributes. They may also result from the endogenization, by a particular national industry, of environmental characteristics related to
any of the six determinants recognized by Porter (1990), but not only
at the national level. In fact, ownership advantages derive from acquiring or developing strategically relevant skills or assets, both tangible and intangible, at various geographic levels.
Dunning (1988) also makes a distinction between asset and transaction advantages of multinational enterprises. Whereas the former
may be largely dependent on (sub)national determinants, the latter
can obviously be reaped only as a result of international influences.
Transactional advantages reflect the capacity of multinational enterprises to capture transactional benefits (or economize on the transac-

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295

tional costs) arising from the common governance of a network of

assets, located in various countries. Although a national industry's
administrative heritage may be an important input for realizing
transactional advantages, as suggested by Bartlett (1986), it cannot be dissociated from internationally driven opportunities and
strengths built up in foreign subsidiaries to realize such advantages.
Porter's (1990: 60-61) view that home-based advantages are intrinsically more valuable than systemic advantages does not seem to be
compatible with the Dunning framework.
Location advantages refer to external opportunities or potential
sources of internal strengths, again at various geographic levels.
They lead to strategic decisions on the configuration of an industry's
asset base. The determinants of internal capabilities, and external
attractiveness prevailing in the home country, are linked to possibilities for developing complementary capabilities and building on
the attractiveness of host nations. Dunning (1988) recognized that
home country and host country elements cannot be separated. For
example, the formation of customs unions and regional trading blocs
and the reduction of transportation costs on particular international
routes have led to a strengthening of ownership advantages of multinational enterprises.
In contrast, Porter's view of foreign direct investment is out of
date. In Porter, horizontal foreign direct investment would be viewed
primarily as an international transfer of organizing capabilities developed in the home country. Vertical foreign direct investment
would merely imply "tapping into" host nations for sourcing inputs,
producing intermediate outputs, or marketing final outputs, without
substantial learning. In contrast to Porter's view, the endogenization
of foreign location advantages and international learning among
subsidiaries have become core sources for the development of new
ownership advantages or improvement of initial ones (Bartlett and
Ghoshal, 1989; Johanson and Mattsson, 1988).
Finally, Porter's (1990) analysis suggests that internalization
through FDI takes place to exploit tangible and intangible skills, and
assets developed in the home base as the result of (sub)national determinants. This assumes the nonlocation bound nature of these
skills and assets can be best exploited internationally through their
use within the MNE rather than through their sale. Three important
comments should be made here.
First, a large literature on the requirements for both national
responsiveness and integration (Roth and Morrison, 1990) suggests
that knowledge developed in a home nation cannot always be transferred abroad easily without substantial adaptation. This demon-

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RUGMAN AND VERBEKE

strates the need for taking into account international determinants

of competitiveness as much as national determinants.
Second, the formation of global networks and the rise in international cooperation strategies (Contractor and Lorange, 1988) suggests that determinants of competitiveness emanating from foreign
environments are just as important, if not more important, as domestic ones. International cooperation may be crucial for an effective
and rapid acquisition and diffusion of knowledge.
Third, the choice of entry mode in foreign markets is critical to the
likely success of a foreign operation. Even at the stage of initial
entry, the exploitation of home-based ownership advantages cannot
be dissociated from foreign location advantages and internalization
advantages. The latter may depend as much on global technological
factors and perceived opportunities in foreign markets as on domestically driven internalization capabilities.
To summarize, the operational framework developed in this paper
is entirely consistent with Dunning's (1988) eclectic paradigm of international production, whereas Porter's (1990) diamond cannot fully
deal with the complexity of interactions among ownership advantages, location advantages, and internaiization advantages in multinational strategic management.
CONCLUSIONS
Many factors may influence the competitiveness of a national industry. National determinants and their mutual interactions undoubtedly play a major role in this respect. The relative stability of international success (or lack of success) of a particular industry over a
long period of time and the observation that firms from a particular
nation often adopt similar competitive strategies, demonstrates the
importance of Porter's national "diamond." However, the role of international determinants cannot be reduced to secondary status, as
compared to the role of (sub)national ones. From Dunning's (1988)
eclectic theory of the multinational enterprise we know that it is
precisely the interaction among (sub)national and international determinants that leads to competitive success in global industries. The
framework presented in this article can operationalize the study of
the complex nature of international competitiveness by analyzing
Porter's six influencing factors at five geographic levels. It also suggests that all the factors considered as critical by Porter can be operationalized through a SWOT-analysis, thus allowing a consistent and
homogeneous managerial approach to each determinant.
Porter's exclusive focus on national determinants of global compet-

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297

itive success may turn the attention of managers and public policy
makers away from the need to monitor international threats and
opportunities, as well as the requirement to build up strengths and
reduce weaknesses in foreign nations. Such an inward diversion of
focus in the long run would serve neither the affected firms or industries nor the home nations involved.

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