Porter - Overview of The Framework - 12082016

Microeconomics of Competitiveness
Core Concepts and Course Structure
Faculty Workshop
December 8th, 2016
Professor Michael E. Porter

Boston, MA
This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), “Building the Microeconomic
Foundations of Competitiveness,” in The Global Competitiveness Report (World Economic Forum), “Clusters and the New Competitive Agenda for Companies and Governments” in On
Competition (Harvard Business School Press, 2008), “Clusters and the Great Recession” (Delgado-Porter-Stern, Working Paper 2014), “Defining Clusters of Related Industries” (Delgado-
Porter-Stern, NBER 2014), “Clusters, Convergence, and Economic Performance” (Delgado-Porter-Stern, NBER 2012), “Cluster and Entrepreneurship” (Delgado-Porter-Stern, CES 2010),
“The Economic Performance of Regions” (Regional Studies 2003), and ongoing related research. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter. For further materials, see the
website of the Institute for Strategy and Competitiveness (www.isc.hbs.edu).
What is MOC?
The course is… The course is not…
• A course on the competitiveness and • A course only on company
the economic development of locations strategy or multinational business
• Provides a holistic framework, but focuses • Emphasis on macroeconomic

especially on the microeconomic policy
foundations of competitiveness and the
organizational and political issues
involved in improving competitiveness in
practice
• Describes how to develop an overall • Detailed discussion of specific policy
economic strategy for a country or region areas
• Develops implications for multiple • A mainstream course on development,

constituencies: federal, state and local focusing primarily on government policy
governments, firms, industry associations,
universities, and others
• The course is built on a unified framework • A survey course that summarizes the
together with in-depth case studies literature
20161205—CSV Workshop Introduction Session 2 Copyright 2016 © Professor Michael E. Porter

Prosperity Performance
PPP-Adjusted Real
GDP per Capita, 2015
OECD Countries
($USD at 2005 prices)
$55,000
High but Declining High and Improving
Norway
$50,000
USA
$45,000 Ireland
Switzerland
Netherlands
$40,000 Iceland Sweden
Canada Australia
United Kingdom Austria Germany
$35,000
Denmark Belgium
Average: $30,873 Japan South Korea
$30,000 Finland France Israel
Italy New Zealand
Spain
$25,000 Slovenia Czech Republic
Slovakia
$20,000 Portugal Estonia Poland

Greece Hungary
Chile
$15,000 Turkey
Mexico
Low and Declining Average: +1.00% Low but Improving
$10,000
-3% -2% -1% 0% 1% 2% 3% 4% 5%
Growth in Real GDP per Capita (PPP $US at 2005 prices), CAGR, 2005-2015
Source: EIU (2016), authors calculations
20161208—MOC Workshop Framework Overview 3 Copyright 2016 © Professor Michael E. Porter
PPP-Adjusted Real GDP Low and Lower Middle Income Countries
per Capita, 2015
$9,000
High but Declining Average Prosperity Growth: +2.9% High and Improving
$8,000 Nigeria
Armenia Georgia
Swaziland
$7,000 Ukraine El Salvador Morocco Guyana
Guatemala Bhutan
Samoa
Philippines
$6,000
Ghana
Bolivia
India
$5,000 Sudan
Vietnam
Uzbekistan
Pakistan Laos
Moldova
Honduras
$4,000 Congo
(Brazzaville) São Tomé
Kyrgyz
and… Zambia Average Real GDP per
Côte d'Ivoire Republic
$3,000 Cambodia Capita: $3,552
Vanuatu Cameroon Djibouti
Bangladesh
Central African Republic Kenya Lesotho Papua New Guinea
(-3.8%, $505) Senegal Tanzania Tajikistan
$2,000 Chad Benin Nepal
Madagascar Gambia Haiti
Uganda Solomon Islands Ethiopia
Mali Rwanda
Comoros Mozambique
$1,000 Eritrea Sierra Burkina…
Guinea
Leone Liberia
Burundi Congo (D.R.)
Low and Declining Guinea-Bissau Niger Malawi
Low but Improving
$0
-2% 0% 2% 4% 6% 8%
Growth in Real GDP per Capita (PPP $US at 2005 prices), CAGR, 2005-2015
Source: EIU (2015), authors calculations.
Note: Low and Lower Middle Countries according to World Bank Income Groups based on GNI per capita.
Income Inequality
PPP-Adjusted Real GDP
Per Capita, 2012
Selected Countries
$50,000
Norway Average: 37.5
$45,000 United States

Switzerland
$40,000 Netherlands Austria Ireland
Iceland
$35,000 Sweden
UK
Belgium
Finland Denmark France
$30,000 Italy
Cyprus Spain
$25,000 Slovenia Czech
Republic Portugal
Slovakia Lithuania
Greece
$20,000 Kazakhstan Poland Argentina Dominican Republic
Hungary
Latvia Iran
Uruguay Panama Average: $15,391
Croatia Chile
$15,000 Belarus Russia Mexico
Mauritius Turkey Brazil
Romania Iraq Thailand Costa Rica
$10,000 Albania Sri Lanka Ecuador Colombia South Africa
Mongolia Peru
Ukraine Georgia Paraguay
Armenia Bhutan Philippines Guatemala
$5,000 Cambodia Vietnam Bolivia
Moldova Congo (Brazzaville) Honduras
Kyrgyz Republic Sierra Leone Tanzania Djibouti
Niger Uganda Togo Haiti
$0
20 Low 30 40 50 60 High 70
inequality inequality
Index of Inequality, 2012
Note: Earlier data used in some cases.
Source: World Bank, World Development Indicators, 2015 and EIU, 2015
Topics
I. Course Overview and Core Concepts
1. Defining Competitiveness
2. Indicators and Enablers of Competitiveness
3. Determinants of Competitiveness: The Core Framework
4. Geographic Influences on Competitiveness
5. Cluster-Based Economic Development Policy
6. National (and Regional) Economic Strategy
7. Organizing for Competitiveness
8. Prosperity and Social Progress
II. Course Structure

Topics

What is Competitiveness?
A nation or region is competitive to the extent that firms operating there are
able to compete successfully in the national and global economy while
maintaining or improving wages and living standards for the average
citizen
• Competitiveness depends on the long-run productivity of a location as a

place to do business
- Productivity of existing firms and workers
- Enabling high participation of citizens in the workforce
• Competitiveness is not:
- Low wages
- A weak currency
- Jobs per se
• Successful economic development requires improving competitiveness

The Dual Elements of Competitiveness
Competitiveness
Labor
Productivity
Utilization
• Labor productivity • Workforce participation rate
• Capital productivity – Population age profile
• Total factor productivity • Working hours

Topics

Competitiveness Indicators and Enablers
Productivity Level and Growth
Domestic Inbound Outbound

Domestic innovation
Exports Imports foreign direct foreign direct
investment (Including assimilation
of foreign technology) investment investment
Country Competitive Environment

Composition of Exports
Japan’s Exports By Type of Good
World Export Market
Share (current USD) Processed
Semi-processed
9.0%
Unprocessed
Services
8.0%
Total
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics.
Inbound Foreign Investment Performance
Stocks and Flows, OECD and BRIC Countries
Inward FDI Stocks as
% of GDP, Average
2004-2014
90%
High but Lagging Average: +13.8% High and Improving
Switzerland
Netherlands Belgium
80%
Estonia 40.2%, 131.4%
Ireland
43.2%, 112,9%
70%
Hungary
Chile
Sweden
60% Slovakia
Czech Republic Iceland
50%
Portugal
New Zealand Spain UK
40% Australia Norway Poland Average: 40.2%
Austria
Denmark Finland Canada
30%
Mexico
France Israel
Slovenia USA Brazil
Russia
20% Germany
Turkey
Italy
Greece
10% China
South Korea
India
Japan Low and Lagging Low but Improving
0%
0% 5% 10% 15% 20% 25% 30% 35% 40%
FDI Inflows as % of Gross Fixed Capital Formation, Average 2004-2014
Note: Luxembourg omitted from OECD average.
Source: UNCTAD, World Investment Report (2015)
Innovation Output
Average U.S. patents per
1 million population, 2013-2015
Selected Countries
500
Taiwan
450
United States
Japan Israel
400
350
South Korea
300 Switzerland
Sweden
250 Finland
200 Germany Canada

Denmark
Singapore
150 Iceland Netherlands
Belgium Austria
Luxembourg
United Norway
100 Kingdom Ireland
France
Australia Hong
Kong New Zealand
50 Czech India
Italy Saudi Arabia Kuwait
Spain Hungary Ukraine Thailand Republic China
Malaysia Greece Romania
South Africa Mexico Brazil Portugal Poland
0
Argentina
0% 5% 10% Russia 15% 20% Chile 25% 30% Turkey 35%
CAGR of US-registered patents, 2005-2015 2,500 patents =
Source: USPTO (2015), EIU (2015)
Topics

What Determines Competitiveness?
Endowments
• Endowments, including natural resources, geographical location, population, and land area, create a
foundation for prosperity, but true prosperity arises from productivity in the use of endowments

Macroeconomic Competitiveness
Human Development
Sound Monetary
and Effective
and Fiscal Policies
Public Institutions
Endowments
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but is not
sufficient to ensure productivity

Sound Monetary
and Fiscal Policies
Human Development
Sound Monetary
• Fiscal Policy: and Fiscal Policies
and Effective
Public Institutions
Public spending aligned
with revenues over time
• Monetary Policy: Endowments
Low levels of inflation
• Economic Stabilization:
Avoiding structural
imbalances and cyclical
overheating

Human Development
and Effective
Public Institutions
Human Development
Sound Monetary
and Effective
• Human Development:
and Fiscal Policies
Public Institutions Basic education, health
care, equal opportunity
• Rule of Law:
Endowments
Property rights, personal
security, and due process
• Government Institutions:
Stable and effective
political and governmental
organizations and
processes

Microeconomic Competitiveness
Sophistication
Quality of the
State of Cluster of Company
Business
Development Operations and
Environment
Strategy
Human Development
Sound Monetary
and Effective
and Fiscal Policies
Public Institutions
Endowments
• Productivity ultimately depends on improving the microeconomic capability of the economy and the
sophistication of local competition, revealed at the level of firms, clusters, and regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but is not
sufficient to ensure productivity
The internal skills,
capabilities, and
Microeconomic Competitiveness management practices that
enable companies to attain
Quality of the Sophistication the highest level of
National State of Cluster of Company productivity and innovation
Business Development Operations and possible
Environment Strategy
Human Development
Sound Monetary
and Effective
and Fiscal Policies
Public Institutions
Endowments

Foundations of Company
Competitive Advantage
Differentiation
(Premium Price)
Competitive
Advantage
Lower Cost
• Operating Cost
• Utilization of Capital
Competitive Advantage and the Value Chain
Firm Infrastructure
(e.g., Financing, Planning, Investor Relations)
Human Resource Management

Support (e.g., Recruiting, Training, Compensation System)
Activities
Technology Development
(e.g., Product Design, Process Design, Market Research) M
Value
Procurement a
(e.g., Services, Machines, Advertising, Data) r What
g buyers are
Inbound Operations Outbound Marketing After-Sales i willing to
Logistics Logistics & Sales Service pay
n
(e.g., Customer (e.g., Branch (e.g., Order (e.g., Sales (e.g., Installation,
Access, Data Operations, Processing, Force, Customer
Collection, Assembly, Warehousing, Promotion, Support,
Incoming Component Report Advertising, Complaint
Material Fabrication) Preparation) Proposal Resolution,
Storage, Writing, Repair)
Service) Website)
Primary Activities
• The value chain is the set of activities involved in delivering value to customers
• Strategy is reflected in the choices about how activities are configured and
linked together
Operational Effectiveness Versus
Strategic Positioning
Operational Strategic
Effectiveness Positioning
Assimilating and extending Creating a unique competitive

best practices position
Doing the same things better Doing things differently

The quality of the
external business
environment conditions
supporting company Microeconomic Competitiveness
productivity, innovation,
and growth Quality of the Sophistication
National State of Cluster of Company
Business Development Operations and
Human Development
Sound Monetary
and Effective
and Fiscal Policies
Public Institutions
Endowments

Assessing the Quality of the Business Environment
The Diamond Model
Context
for Firm
Strategy
and Rivalry
• Local rules and incentives that

encourage investment and productivity
– e.g. incentives for capital investment,
Factor IP protection Demand
(Input) – Sound corporate governance Conditions
Conditions and accountability
• Open and vigorous local competition
• Improving access to high quality − Openness to competition
− Strict competition laws • Sophisticated and demanding local
business inputs needs
– Qualified human resources – e.g., Sophisticated demand in the
– Capital availability private sector and government
Related and
– Physical infrastructure – Strict quality, safety, and
– Scientific and technological
Supporting environmental standards
infrastructure Industries
– Administrative and regulatory
infrastructure • Availability and quality of suppliers and
supporting industries
• Many things in the business environment matter for competitiveness

• Successful economic development is a process of successive upgrading, in which the
business environment improves to enable increasingly sophisticated ways of competing
20160922—Philanthropy for Better Cities –FINAL 26 Copyright 2016 © Professor Michael E. Porter
Assessing the National Business Environment
Peru, 2012
Context
for Firm
Strategy
and Rivalry
+ Openness to foreign investment,

trade, capital flows
+ Improvements in investor protections
Factor ± Efforts to strengthen competition policy Demand
(Input) – Rigidity of employment
Conditions
Conditions – Difficulty in business formation
– Low intensity of local competition
– High Informality of the economy
+ Abundant resources: mineral, agricultural, + Improving consumer protection
fishing, and cultural regulation
+ Advantageous location ± Improving sophistication of local buyers
+ Improving administrative infrastructure Related and − Weak environmental standards
± Sound banking system, but high interest Supporting enforcement
spreads and limited venture capital Industries
availability
– Poor physical infrastructure
– Low skill levels in the labor force, – Limited local suppliers and
mismatch with demand supporting industries
– Weak university-industry research – Shallow clusters
collaboration
– Few high-quality research and scientific
institutions
Business Environment Indicators
Ranking, 2015
Ease of Doing Business Rankings, Israel
(vs. 189 countries)
Favorable Unfavorable
160
150
140
130
120
110
100
90
80
70
60
50
40 Israel’s GNI
per capita
30 rank: 25
20
10
0
Source: World Bank Report, Doing Business (2015).

Geographic concentrations
of firms, suppliers, and
Microeconomic Competitiveness related institutions in
particular fields (e.g.
tourism, automotive) that
Quality of the Sophistication
National State of Cluster of Company enable productivity and
Business Development Operations and innovation
Human Development
Sound Monetary
and Effective
and Fiscal Policies
Public Institutions
Endowments

What is a Cluster?
Tourism Cluster in Cairns, Australia
Public Relations & Local Retail,
Market Research Travel Agents Tour Operators Health Care, and
Services Other Services
Food Local
Suppliers Transportation
Attractions and
Hotels Activities
e.g., theme parks,
casinos, sports
Property Souvenirs,
Services Duty Free
Airlines,
Restaurants
Cruise Ships Banks,
Maintenance
Foreign
Services
Exchange
Government Agencies
Educational Institutions Industry Groups
e.g. Australian Tourism
e.g. James Cook University, e.g. Queensland Tourism
Commission,
Cairns College of TAFE Industry Council
Great Barrier Reef Authority
Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden
Clusters in Developing Countries
Cut Flower Cluster in Kenya
Horticultural Agencies, NGOs & Industry Associations Post-Harvest
Cooling
Horticultural Crops Development Authority (HCDA) Technology
Government Export Policies Targeting Horticulture
Plantstock Grading / Packaging

Non-Government Organizations Sheds
(e.g., The Rural Enterprise Agri-Business Promotion Project)
Greenhouse;
Shading Trade & Industry Associations Packaging &
Structures (e.g., Kenya Flower Council) Labeling Materials
Irrigation
Technology Refrigerated Trucks
Pre-Cooling Post-Harvest
Technology Flower Farming Handling;
Transport to Market Freight Forwarders
Fertilizers,
Pesticides, Clearing and
Herbicides Forwarding Agents
Education, Research & Quality Standards Organizations
Research Institutions Air Carriers

(e.g., Kenya Agricultural Research Institute) (Commercial /
Charters)
Agricultural Cluster Public Universities with Post Graduate Degrees in Horticulture
(e.g., University of Nairobi)
Horticultural Quality & Standards

Cluster (e.g., EUREGAP Standard, Kenya Plant Health Inspectorate Services) Tourism Cluster
Sources: MOC student team research by Kusi Hornberger, Nick Ndiritu, Lalo Ponce-Brito, Melesse Tashu, Tijan Watt, Harvard Business School, 2007
Institutions for Collaboration (IFCs)
The Australian Wine Cluster
Winemakers’ Federation of Australia Cooperative Centre for Viticulture
 Established 1990  Established 1991
 Focus: Public policy representation of companies  Focus: Coordination of research and education
in the wine cluster policy in viticulture
 Funding: Member companies  Funding: Cluster organizations
Australian Wine Export Council Grape and Wine R&D Corporation

 Established 1992  Established 1991 as statutory body
 Focus: Wine export promotion through international  Focus: Funding of research and development
offices in London and San Francisco activities
 Funding: Government; cluster organizations  Funding: Government; statutory levy
Wine Industry National

Wine Industry Information Service Education and Training Council
 Established 1998  Established 1995
 Focus: Information collection, organization, and  Focus: Coordination, integration, and standard
dissemination maintenance for vocational training and education
 Funding: Cluster organizations  Funding: Government; cluster organizations
Source: Porter/Solvell, The Australian Wine Cluster – Supplement, HBS 2002

Impact of Clusters on
Regional Economic Performance
Research Findings
• Presence of strong clusters • Job growth
• Breadth of industries within a • Higher wages

cluster
• Higher patenting rates
• Strength in related clusters
• Greater new business
• Presence of a region‘s clusters formation, growth and survival
in neighboring regions
• Resilience in downturns
• Build on the region’s existing and emerging clusters rather than chase hot fields
• Economic diversification occurs within clusters and across related clusters
Source: “Clusters and the Great Recession” by Mercedes Delgado, Michael E. Porter, and Scott Stern (2014), “Clusters, Convergence, and Economic Performance” by Mercedes Delgado,
Michael E. Porter, and Scott Stern (2012), “Cluster and Entrepreneurship” by Mercedes Delgado, Michael E. Porter, and Scott Stern (2010); “The Economic Performance of Regions” by
Michael E. Porter (2003)
Cluster Emergence and Development
The Australian Wine Cluster
1930 1965 1980 1991 to 1998
First oenology Australian Wine Australian Wine New organizations

course at Bureau and Brandy created for education,
Roseworthy established Corporation research, market
Agricultural established information, and export
College 1990 promotions
1955 1970
Winemaking Winemaker’s
Australian Wine
school at Charles Federation of
Research Institute
Sturt University Australia
founded
founded established
1950s 1960s 1970s 1980s 1990s and 2000s

Import of Recruiting of Continued inflow Creation of large Surge in exports
European winery experienced of foreign capital number of new and international
technology foreign investors, and management wineries acquisitions
e.g. Wolf Bass
Source: Michael E. Porter and Örjan Sölvell, The Australian Wine Cluster – Supplement, Harvard Business School Case Study, 2002
Related Clusters and Economic Diversification
BCR ≥ 95th pctile Nonmetal Wood Forestry
& RI ≥ 20% Mining Products
Jewelry & Vulcanized
BCR 90th-94th Precious Materials
Livestock
pctile Agriculture Metals
Processing
& RI ≥ 20%
Aerospace Lighting Furniture
Next closest
clusters
Recreation Construction
Fishing & Water & Electric
Fishing Transport Goods
Products
Video IT & Medical
Production Analytical Devices
Performing Instruments
Arts Down-
Comm- stream Upstream
unications Metals Metals
Equip. & Transport
Music & Services
Sound &Logistics
Recording
Plastics Production
Down-
Distribution stream
& eComm. Chemicals
Hospitality Marketing
Services Biopharma
& Tourism Metal-
Education &
Knowledge Upstream working Automotive
Creation Chemicals
Trailers &
Insurance Appliances
Printing
Food
Business Services
Leather Processing
Services
Environ-
mental Financial
Oil & Gas
Services Services
Paper & Apparel Textiles

Packaging
Electricity
Tobacco Coal Metal

Footwear Mining Mining
Related Clusters and Economic Diversification
World Export Share Japan 2014
Nonmetal Wood Forestry
Jewelry & Mining Products
Vulcanized
> 10% Precious Materials
Livestock
Agriculture Processing Metals
6% - 9.9%
Aerospace Lighting
4% - 5.9% Furniture
Recreation Construction
Fishing & Water & Electric
Fishing Transport Goods
Products
Video IT & Medical
Production Analytical Devices
Performing Instruments
Arts Down-
Comm- stream Upstream
unications Metals Metals
Equip. &
Music & Services Transport &
Sound Logistics
Recording
Plastics Production
Down-
Distribution stream
& eComm. Chemicals
Hospitality Marketing
Services Biopharma
& Tourism Metal-
Education &
Knowledge Upstream working Automotive
Creation Chemicals
Trailers &
Insurance Appliances
Printing
Food
Business Services
Leather Processing
Services
Environ-
mental Financial
Oil & Gas
Services Services
Paper & Apparel Textiles

Packaging
Electricity
Tobacco Coal Metal

Footwear Mining Mining

Note: Japan’s overall share of world exports in 2014 is 3.5%. * Data reflects Communications Services only.
Benchmarking Competitiveness
ISC Competitiveness Model for Peru, 2015
Country Competitiveness
83
Macroeconomic Microeconomic
Competitiveness Competitiveness
87 72
Public Macroeconomic National Business Company Operations

Institutions Policy Environment and Strategy
94 31 68 86
Factor Demand
Rule of Law
Conditions Conditions
112
85 91
Related and Context for

Human Development Supporting Strategy and Peru’s GDP per
95 Industries Rivalry capita rank is 75th
72 44 vs. 134 countries
Significant Moderate Moderate Significant
Neutral
weakness weakness advantage advantage
Note: Rank versus 134 countries, *Color coding based on comparison relative to income.
Source: Institute for Strategy and Competitiveness, Harvard University (2015), based in part on survey data from the World Economic Forum; analysis prepared based on
research findings by Scott Stern, Mercedes Delgado, and Christian Ketels
Stages of National Competitive Development
Shifting Policy Imperatives
Factor-Driven Investment- Innovation-

Economy Driven Economy Driven Economy
Low Cost Inputs Productivity Unique Value
• Monetary and fiscal, political, • Increasing local rivalry • Building advanced skills
and legal stability • Creating advanced • Creating world class
• Market opening infrastructure scientific and technological
• Improving basic human capital • Setting incentives and rules institutions
• Efficient basic infrastructure encouraging productivity • Setting incentives and rules
• Lowering the regulatory costs • Cluster formation and encouraging innovation
of doing business activation • Cluster upgrading
• Efficient access to endowments
Source: Porter, Michael E., The Competitive Advantage of Nations, Macmillan Press, 1990
Topics

Geographic Influences on Competitiveness
Nation
States, Regions
and Cities
• Regions are the most important economic unit for

competitiveness in larger countries, especially countries
beyond subsistence development
The Role of Sub-National Regions in
Economic Development
• Economic performance varies significantly across sub-
national regions (e.g., provinces, states, metropolitan areas)

Gross Domestic Product
per Capita, 2014
(2005 Indian Rupees)
Indian States, 2005-2014
₹ 160,000
High but Lagging Goa High and Improving
₹ 140,000
Delhi
₹ 120,000
Puducherry
₹ 100,000 Chandigarh
Sikkim
Andaman & Nicobar Islands Haryana Maharashtra

₹ 80,000
Gujarat
Himachal Pradesh Tamil Nadu Uttarakhand
Kerala
₹ 60,000 Punjab
Nagaland Karnataka Telangana
Andhra Pradesh
Meghalaya Tripura India Overall: ₹45,750
West Bengal Mizoram
₹ 40,000 Arunachal Pradesh
Rajasthan
Jammu & Kashmir Odisha
Madhya Pradesh
Manipur Assam Jharkhand
Chattisgarh
₹ 20,000 Uttar Pradesh Bihar
Low and Lagging India Overall: 6.6% Low but Improving

₹0
1% 3% 5% 7% 9% 11% 13%
Gross Domestic
Gross Product
Domestic per Capita
Product Real Real
per Capita Growth Rate,Rate,
Growth 19992005
to 2009
to 2014
Note: Growth Workshop
20161208—MOC rate is calculated as compound annual growth rate. Source: CEIC.
Framework Overview 42 Copyright 2016 © Professor Michael E. Porter
Real GDP per
Prosperity Performance of U.S. States
Capita, 2014
2004-2014
$70,000
High but declining High and rising prosperity
prosperity versus U.S. versus U.S.
Alaska New York
$65,000 North Dakota
Connecticut Wyoming (+4.9%, $65,225)
Massachusetts
$60,000
New Jersey
$55,000 Washington
California Texas
Illinois Maryland
Minnesota Nebraska
U.S. Average GDP Per Virginia Colorado Oregon
Capita, 2014: $49,469 New Hampshire
$50,000 Hawaii
Pennsylvania Iowa
Rhode Island
Louisiana South Dakota
Ohio Wisconsin Kansas
$45,000
Georgia North Carolina
Nevada Indiana Utah
(-1.9%, $42,539) Missouri
Michigan Tennessee Vermont Oklahoma
$40,000 New Mexico Kentucky
Florida Arizona Maine Montana
Arkansas
Alabama West Virginia
South Carolina
$35,000 Idaho
Low and declining Low but rising prosperity

Mississippi
prosperity versus U.S. versus U.S.
$30,000
-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%
Real Growth in Gross Domestic Product per Capita, 2004 to 2014

Source: BEA. Notes: GDP in real 2009 dollars. Growth rate is calculated as compound annual growth rate.
• Many essential levers of competitiveness reside at the

regional level
• Regional economies include both local and traded clusters.

Regions specialize in different traded clusters

The Composition of State and Regional Economies
• Serve almost • Serve national and
exclusively the local global markets
market Traded • Exposed to competition
• Little exposure to Clusters from other regions and
international or Local nations
cross-regional Clusters ``
36% of U.S.
competition for Employment − Much higher average
64% of U.S. wages with 51% of payroll
employment
Employment − Much higher rate of
innovation with 91% of
patents issued
• In traded clusters, productivity, wage, and patenting are significantly

higher than in the average of the economy
• Roughly 44% of traded employment is in strong clusters (i.e.
regional clusters with significant critical mass)
• Regions at all stages of development benefit from cluster presence
Note: Cluster data includes all private, non-agricultural employment. Source: Michael E. Porter, Economic Performance of Regions, Regional Studies (2003); Updated via Cluster Mapping
Project, Institute for Strategy and Competitiveness, Harvard Business School (2008)
Traded Cluster Composition of the Nashville Metro Area
Nashville Share of
National Employment
2.0% 2014
Overall change in the Nashville MSA Share Music and Recording
of US Traded Employment: 0.01% 5%, 9.8%
Performing Arts
Automotive
1.5%
Construction Products and
Services
Insurance Services
1.0% Printing Services
Water Transportation Furniture
Vulcanized and
Fired Materials Metal Mining
Distribution and Electronic Downstream Chemical
Commerce Products
Business Services
Plastics Financial Services Nashville MSA Overall Share of
0.5% Wood Products US Traded Employment: 0.64%
Marketing, Food Processing and
Design, and Hospitality and Manufacturing Employment
Publishing Tourism 2004-2014
Nonmetal Mining Apparel
Added Jobs
Production Technology and Lost Jobs

Heavy Machinery
0.0%
-0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0%
Change in Nashville Share of National Employment 2004-2014
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Employees 25,000 =
Note: Clusters with fewer than 100 employees not shown.
20161208—MOC Workshop Framework Overview
• Many essential levers of competitiveness reside at the

regional level
• Regional economies include both local and traded clusters.

Regions specialize in different traded clusters
• The cluster portfolio and strength directly impacts not only

regional performance but the path of development

The Evolution of Regional Economies
Singapore
IT
Labor/ Water
HR-intensive Aerospace Technology
Electronics
& Defense
Med.
Devices
Capital/ Biotech Media &

HR-intensive Petro- Pharma Design
chemicals
Business Higher
Services Education
Services Regional
Financial HQs
Services
Tourism
Logistics: Logistics:
Logistics Logistics:
Docks, Trans-
Air Travel
Bunkering shipment
1900-1960 1970s 1980s 1990s 2000s

• Economic performance varies significantly across sub-national regions
(e.g., provinces, states, metropolitan areas)
• Many essential levers of competitiveness reside at the regional level
• Regions specialize in different sets of clusters
• The cluster portfolio and strength directly impacts not only regional
performance but the path of development
• Regions are a critical unit in competitiveness
• Each region needs its own distinctive strategy and action agenda
– Business environment improvement
– Cluster upgrading
– Improving institutional effectiveness
• Economic development is enhanced if significant resources and policy

responsibility are decentralized to regions
Geographic Influences on Competitiveness
Neighboring “The
Neighborhood”
Countries
Nation
States, Regions
and Cities
Models of Regional (Neighborhood)
Economic Cooperation
Traditional Model Broader Model
Market Competitiveness
Opening Upgrading
• Establish free trade • Pursue regional economic

areas, customs integration and
unions or common coordination to open trade
markets and investment as well as
enhancing multiple
dimensions of
competitiveness

Regional Integration and National
Competitiveness
• Opening trade and investment among neighbors
– Expands the available market for each country
 A nation’s neighbors are its most natural trading and investment
partners
– The natural path of internationalization for local firms is the neighborhood
– Open trade and investment make each country a more attractive location
for investment
• Capturing synergies in policy, infrastructure and other

improvements in the business environment
• Leveraging synergies in clusters that cross borders
• Gaining greater clout in international negotiations
• Regional commitments help to overcome domestic
political and economic barriers to reform
Economic Integration Among Neighbors
Capturing Synergies
Context for Related and
Factor (Input) Demand Macroeconomic
Strategy Supporting
Conditions Conditions Competitiveness
and Rivalry Industries
• Improving the • Eliminating trade • Harmonizing • Facilitating cross- • Coordinating

efficiency of the and investment environmental border cluster macroeconomic
regional barriers within the standards development policies
transportation region
• Harmonizing – e.g., Supplier • Coordinating
network
• Simplifying and product quality, networks programs to
• Creating an harmonizing safety and improve security
– Efficient
efficient regional cross-border technical and public safety
transport and
energy network regulations and standards
logistics
paperwork
• Enhancing • Establishing
– Quality
regional • Coordinating anti- reciprocal
standards
communications monopoly and consumer
and connectivity fair competition protection laws
policies
• Harmonizing • Opening
administrative • Harmonizing IP government
requirements for protection procurement
businesses across within the region
the region
• Linking financial
markets
• Facilitating the
movement of
students for
higher education
Topics

National and Regional Economic Development in Practice
Some Prevailing Approaches
“Build it and
“Open for “Big Game “The Next Big
They Will
Business” Hunting” Thing”
Come”
• Improve the • Compete • Enter new high • Invest in large
general business aggressively for tech/ high growth infrastructure/
environment plants and new industries industrial zone
investments projects
• Attempt to match • Zero Sum • Many competing • Rarely offer a strong

the policies of peers • “Winner’s curse” for the same fields advantage versus
• Long lists of areas – e.g. biotech, other regions
• High cost, low return ‘creative class’
for unless address • Generic
improvement, with underlying • Very few regions infrastructure will not
limited progress weaknesses have the assets to offset lack of skills,
• Table stakes succeed in them absence of related
• Neglects the existing businesses and
base other weaknesses
Clusters as a Tool for Economic Policy
• Leverages the power of linkages across companies to drive rapid
economic development
• Policies and investments strengthen multiple related
firms/institutions simultaneously
• Enhances the effectiveness of traditional economic policy areas,
such as training, R&D, export promotion, FDI attraction, etc.

Organize Public Policy Around Clusters
Business Attraction
Education and
Export Promotion Workforce Training
Science and Technology

Market Information Infrastructure
and Disclosure
Clusters (e.g., centers, university
departments, technology
transfer)
Quality and Environmental

Specialized Physical standards
Infrastructure
Natural Resource Protection
• Clusters provide a framework for organizing the implementation of many

public policies and public investments directed at economic development
Clusters as a Tool for Economic Policy
• Leverages the power of linkages across companies to drive rapid
economic development
• Policies and investments strengthen multiple related
firms/institutions simultaneously
• Enhances the effectiveness of traditional economic policy areas,
such as training, R&D, export promotion, FDI attraction, etc.
• A forum for collaboration between the private sector, trade
associations, government, educational, and research institutions
– A mechanism for constructive business-government dialog
• Brings together firms of all sizes, including SME’s
• Clusters initiatives are a powerful private/public vehicle to identify
and get alignment on problems and action recommendations
• Cluster upgrading fosters greater and more sophisticated
competition rather than distorting the market
• Sound cluster policy addresses all existing and emerging

clusters, and does not pick winners
Pre-Conditions for Cluster Activation and Development
1. A critical mass of locally-based companies or subsidiaries of foreign

companies in the cluster who have met the market test
2. Some meaningful cluster-specific advantages in the diamond or

generalized strengths that are of particular importance to the cluster
− E.g., unique demand, specialized talent, favorable locations, trusted and
appropriate regulatory framework
3. The presence of a world class multinational company in the cluster with an

important investment in the country/region and a commitment to upgrading
4. Strength in a closely related cluster or clusters
• Meeting at least two of these conditions seems to be a basic requirement

for success in cluster development
− Distinguishing emerging clusters from wishful thinking

Topics

Towards a New Economic Development Model
• Focuses on competitiveness, not on jobs per se
• Cluster-based, reflecting the core drivers of jobs and wages in
today’s global economy
• Bottom-up and regionally based, not only top-down
• Driven by an overall strategy rather than a list of actions
• Data driven and fact based, not political or based on wishful
thinking
• Builds on existing and potential regional and local strengths,
not just focused on reducing weakness
• Prioritized and sequenced, not treating all weaknesses equally
• Harnesses collaboration across a wide range of actors and
institutions, including firms, educational institutions, and new types
of economic development organizations, not driven by government
The Need for an Economic Strategy
Policy Economic
Improvement Strategy
• Implementing best practices • An overall agenda for

in each policy area creating a more
competitive and distinctive
position for a country or
region, based on its
particular circumstances
• There are a huge number of
policy areas that matter
• No region or country can (or
should try to) make progress
in all areas simultaneously

Developing an Economic Strategy
National Value Proposition
• What is a distinctive competitive position for the nation given its

location, legacy, existing strengths, and potential strengths?
– What unique advantages as a business location?
– For what types of activities and clusters?
– What roles with the surrounding countries and the broader global economy?
Achieving and Maintaining

Developing Unique Strengths
Parity with Peers
• What elements of the business • What weaknesses must be

environment can be unique strengths addressed to remove key constraints
relative to peers/neighbors? and achieve parity with peer
• What existing and emerging locations?
clusters can be built upon?
• Priorities and sequencing are fundamental to successful economic development

The Role of a National Value Proposition
• Inspire citizens
– Beyond ideology and incremental steps
– A reason for making difficult policy changes
• A guiding vision for policy makers about

what types of improvements are most critical in
order to make the economic success a reality
• A commitment to companies at home and

abroad about what assets, conditions and
programs they can expect

Topics

The Process of Economic Development
Shifting Roles and Responsibilities
Old Model New Model
• Government drives • Economic development is a

economic development collaborative process
through top down policy involving government at
decisions and incentives multiple levels, companies,
educational and research
institutions, and private sector
organizations
• Competitiveness is the result of both top-down and bottom-up

processes in which many companies and institutions take responsibility
• Translating policy into action is decisive in determining success

Government Structure and the Process of
• Competitiveness improvement requires sustained efforts across multiple
years and presidential administrations
– Mechanisms are needed to improve the continuity of policy over time
• Competitiveness is affected by numerous government entities and levels

of government
– Competitiveness is never the sole agenda of a single government agency
– Multiple agencies and departments (e.g. finance, trade, science and
technology, commerce, regional policy, energy, agriculture) have an
influence on competitiveness
– “Economic” agencies and “social” agencies are both involved
– Multiple levels of government (nations, states, cities, etc.) affect the
business environment and macro context
– Intergovernmental relations with neighboring countries affect productivity
• A coordinating structure is needed (e.g. “competitiveness policy council”)

that brings together the ministers and department heads necessary to
formulate and implement an economic strategy
Politics and Competitiveness
• Political definitions of success (e.g., jobs and spending) are different
from competitiveness
• Political cycles do not match competitiveness cycles
• Multiple political jurisdictions always matter to competitiveness
• Political boundaries often do not match relevant economic boundaries
• Political parties are often aligned with ideologies, not pragmatic or

consensus steps to improve competitiveness
– Coalition governments complicate the problem
• Ministry leadership is often divided among parties for political reasons
• Political appointees often represent their parties and constituencies,

not the government as a team
• There is often passive resistance in ministries and government entities

to policies that threaten their constituencies

Organizing for Competitiveness
The South Carolina Council on Competitiveness
 Chaired by a business leader and
South Carolina Council reporting to the governor
on Competitiveness  Convenes working groups, provides
direction and strength, holds working
groups accountable
Executive
Committee
Coordinating
Staff
Cluster Committees Task Forces

Cluster Education /
Automotive Apparel
Activation Workforce
Hydrogen / Research / Start-ups /

Agriculture
Fuel Cells Investment Local Firms
Distressed /
Travel and Measuring
Textiles Disadvan.
Tourism Progress
Areas
Effective economic policy also requires coordination within government

Source: New Carolina, South Carolina’s Council on Competitiveness, U.S. Cluster Mapping Regional Project , Summer 2013
Topics

How Do We Measure Development?
Economic Social
Development Progress
GDP per capita
• The paradigm has been that economic development

measured by GDP will lead to social progress
Economic Social
Development Progress
GDP per capita
• And sometimes social progress influences economic

development
?Social
Progress
• To understand inclusive growth we need to measure

social progress directly
Social Progress Index
Design Principles
Exclusively social and

environmental indicators
Outcomes – not inputs
Relevant to all countries
Actionability

What is Social Progress?
Social progress is the capacity of a society to meet

the basic human needs of its citizens, establish the
building blocks that allow citizens and communities
to enhance and sustain the quality of their lives, and
create the conditions for all individuals to reach
their full potential
A holistic framework is needed

Social Progress Index Framework Indicators
Social Progress Index
Basic Human Needs Foundations of Wellbeing Opportunity

Nutrition and Basic Medical Care Access to Basic Knowledge Personal Rights
 Undernourishment  Adult literacy rate  Political rights
 Depth of food deficit  Primary school enrollment  Freedom of speech
 Maternal mortality rate  Lower secondary school enrollment  Freedom of assembly/association
 Child mortality rate  Upper secondary school enrollment  Freedom of movement
 Deaths from infectious diseases  Gender parity in secondary enrollment  Private property rights
Water and Sanitation Access to Information and Personal Freedom and Choice
 Access to piped water Communications  Freedom over life choices
 Rural access to improved water source  Mobile telephone subscriptions  Freedom of religion
 Access to improved sanitation facilities  Internet users  Early marriage
 Press Freedom Index  Satisfied demand for contraception
Shelter
 Corruption
 Availability of affordable housing Health and Wellness
 Access to electricity  Life expectancy at 60 Tolerance and Inclusion
 Quality of electricity supply  Premature deaths from non-  Tolerance for immigrants
 Household air pollution attributable communicable diseases  Tolerance for homosexuals
deaths  Obesity rate  Discrimination and violence against
 Suicide rate minorities
Personal Safety
 Religious tolerance
 Homicide rate Environmental Quality
 Community safety net
 Level of violent crime  Outdoor air pollution attributable
 Perceived criminality deaths Access to Advanced Education
 Political terror  Wastewater treatment  Years of tertiary schooling
 Traffic deaths  Greenhouse gas emissions  Women’s average years in school
 Biodiversity and habitat  Inequality in the attainment of education
 Globally ranked universities
 Percentage of tertiary students enrolled in
globally ranked universities
11
2016 Social Progress Index Results
Rank Country Score Rank Country Score Rank Country Score Rank Country Score
1 Finland 90.09 35 Hungary 76.88 69 Bosnia and Herzegovina 65.84 103 Lesotho 52.39
2 Canada 89.49 36 Latvia 76.19 70 Dominican Republic 65.65 104 Iraq 52.28
3 Denmark 89.39 37 Israel 75.32 71 Jordan 65.43 105 Rwanda 51.91
4 Australia 89.13 38 Argentina 75.20 72 Bolivia 64.73 106 Swaziland 51.76
5 Switzerland 88.87 39 United Arab Emirates 73.69 72 Moldova 64.73 107 Uganda 50.69
6 Sweden 88.80 40 Mauritius 73.24 74 Lebanon 64.42 108 Benin 50.03
7 Norway 88.70 41 Panama 73.02 75 Russia 64.19 109 Tanzania 49.99
8 Netherlands 88.65 42 Romania 72.23 76 Kazakhstan 63.86 110 Myanmar 49.84
9 United Kingdom 88.58 43 Bulgaria 72.14 77 Azerbaijan 63.75 111 Congo, Republic of 49.74
10 Iceland 88.45 44 Jamaica 71.94 78 Nicaragua 63.03 112 Burkina Faso 49.34
10 New Zealand 88.45 45 Kuwait 71.84 79 Kyrgyzstan 62.91 113 Pakistan 49.13
12 Ireland 87.94 46 Brazil 71.70 80 Mongolia 62.80 114 Zimbabwe 49.11
13 Austria 86.60 47 Serbia 71.55 81 Venezuela 62.60 115 Togo 49.03
14 Japan 86.54 48 Colombia 70.84 82 Indonesia 62.27 116 Côte d'Ivoire 48.97
15 Germany 86.42 49 Peru 70.09 83 Sri Lanka 62.21 117 Mozambique 47.96
16 Belgium 86.19 50 Malaysia 70.08 84 China 62.10 118 Cameroon 47.22
17 Spain 85.88 51 Mexico 70.02 85 Namibia 62.01 119 Nigeria 46.49
18 France 84.79 52 Albania 69.78 86 Morocco 61.92 120 Djibouti 46.30
19 United States 84.62 53 Ecuador 69.56 87 Guatemala 61.68 121 Mali 46.24
20 Slovenia 84.27 54 Georgia 69.17 88 Algeria 61.18 122 Mauritania 46.08
21 Portugal 83.88 55 Montenegro 68.17 89 Egypt 60.74 123 Madagascar 45.91
22 Czech Republic 82.80 56 Tunisia 68.00 90 Honduras 60.64 124 Liberia 45.07
23 Estonia 82.62 57 Macedonia 67.88 91 Uzbekistan 60.49 125 Sierra Leone 44.22
24 Italy 82.49 58 Turkey 67.82 92 Ghana 60.37 126 Ethiopia 43.50
25 Chile 82.12 59 South Africa 67.60 93 Iran 59.45 127 Yemen 41.76
26 Korea, Republic of 80.92 60 Paraguay 67.44 94 Tajikistan 58.78 128 Guinea 41.66
27 Cyprus 80.75 61 Thailand 67.43 95 Nepal 57.40 129 Niger 41.63
28 Costa Rica 80.12 62 Botswana 67.03 96 Senegal 55.64 130 Angola 39.70
29 Uruguay 80.12 63 Ukraine 66.43 97 Cambodia 54.28 131 Chad 36.38
30 Poland 79.76 64 El Salvador 66.36 98 India 53.92 132 Afghanistan 35.89
31 Slovakia 78.96 65 Saudi Arabia 66.30 99 Kenya 53.72 133 Central African Republic 30.03
32 Greece 78.27 66 Belarus 66.18 100 Malawi 53.44
33 Croatia 77.68 67 Armenia 66.05 101 Bangladesh 52.73
34 Lithuania 76.94 68 Philippines 65.92 102 Laos 52.54
Very high social progress High social progress Upper middle Lower middle Low social Very low social progress
20161208—MOC Workshop Framework Overview social progress
77 social progress progress Copyright 2016 © Professor Michael E. Porter
Social Progress Index vs. GDP per Capita, 2016
Correlation = .80

Topics

Course Outline 2016
Module Session Case(s)
Part I: Firms, Industries 1 Competitiveness: The Overall Framework • Costa Rica IT
and Cross-Border
Competition
2 Clusters and Cluster Development • California Wine
Part II: Locations 3 Key Concepts • LECTURE
and Clusters 4 Role of Institutions for Collaboration • Acoplásticos / CSEM
5 Cluster Internationalization • Dutch Flower Cluster
6 Economic Strategy: Advanced Economies • Singapore

7 Economic Strategy: Developing Economies • Vietnam
Part III: Strategy for 8 Economic Strategy: Europe • European Integration
Nations and Regions 9 Economic Strategy: Transition Economies • Latvia/Estonia
10 Economic Strategy: States and Sub-National Regions • Basque Country
11 Economic Strategy: Cities • New York City
12 Economic Strategy: Early Stage Developing Economies • Rwanda
13 Competitiveness Initiatives • New Carolina Initiative

Part IV: The Process of 14 Organizing for Competitiveness: National Level • Colombia
Economic Development 15 Organization for Competitiveness: Export Processing Zones • India
and Foreign Investments
16 Special Session: U.S. Competitiveness
17 Organizing for Competitiveness: Entrepreneurship • Chile
18 Organizing for Competitiveness: Sub-National Level • Naranya
19 Cluster Initiatives • Middledeutschland
20 Creating Shared Value • Yara
21 Team Project Presentations

Part V: Project
22 Team Project Presentations
Presentations 23 Team Project Presentations
24 Wrap-Up/Feedback
Teaching Model
Classroom
• Case study preparation and discussion

• Readings
• Concept lectures
• Guest protagonists or protagonist videos
Group Project
• Cluster/country assessment
• At Harvard, project groups can be mixed,
consisting of both HBS and non-HBS students

MOC Course Group Projects
2016
Country Cluster
• Singapore • Higher Education
• Lima, Peru • Financial Services
• Kenya • Tourism
• Costa Rica • Medial Tourism
• Chicago, U.S. • Biotech
• London • FinTech
• Kenya • ICT (fintech)
• Slovakia • Cartech
• Japan • Automobiles
• Costa Rica • Data Centers
• Saudi Arabia • Petrochemicals
• Australia • Liquefied Natural Gas (LNG)
• Argentina • Soy
• San Diego, U.S. • Beer
• Belgium • Chocolates

ISC Data Resources for Affiliates:
National Competitiveness Profiles
• A rigorously calibrated model of competitiveness supported by a panel of 130 survey
and hard data indicators across 144 countries and 13 years

ISC Data Resources for Affiliates:
International Cluster Competitiveness Profiles
• Detailed statistics on trade in goods and services interpreted through the cluster
model available for all countries

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MOC Alumni Facebook Page

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Microeconomics of Competitiveness

Core Concepts and Course Structure

Professor Michael E. Porter

• Provides a holistic framework, but focuses • Emphasis on macroeconomic

• Develops implications for multiple • A mainstream course on development,

20161205—CSV Workshop Introduction Session 2 Copyright 2016 © Professor Michael E. Porter

$20,000 Portugal Estonia Poland

$45,000 United States

II. Course Structure

20161205—CSV Workshop Introduction Session 6 Copyright 2016 © Professor Michael E. Porter

II. Course Structure

20161205—CSV Workshop Introduction Session 7 Copyright 2016 © Professor Michael E. Porter

• Competitiveness depends on the long-run productivity of a location as a

• Successful economic development requires improving competitiveness

20161205—CSV Workshop Introduction Session 8 Copyright 2016 © Professor Michael E. Porter

20161208—MOC Workshop Framework Overview 9 Copyright 2016 © Professor Michael E. Porter

II. Course Structure

20161205—CSV Workshop Introduction Session 10 Copyright 2016 © Professor Michael E. Porter

Productivity Level and Growth

Domestic Inbound Outbound

Country Competitive Environment

20161208—MOC Workshop Framework Overview 11 Copyright 2016 © Professor Michael E. Porter

200 Germany Canada

II. Course Structure

20161205—CSV Workshop Introduction Session 15 Copyright 2016 © Professor Michael E. Porter

20161208—MOC Workshop Framework Overview 16 Copyright 2016 © Professor Michael E. Porter

20161205—CSV Workshop Introduction Session 17 Copyright 2016 © Professor Michael E. Porter

20161208—MOC Workshop Framework Overview 18 Copyright 2016 © Professor Michael E. Porter

20161208—MOC Workshop Framework Overview 19 Copyright 2016 © Professor Michael E. Porter

20161208—MOC Workshop Framework Overview 21 Copyright 2016 © Professor Michael E. Porter

Human Resource Management

Assimilating and extending Creating a unique competitive

Doing the same things better Doing things differently

20161208—MOC Workshop Framework Overview 24 Copyright 2016 © Professor Michael E. Porter

20161208—MOC Workshop Framework Overview 25 Copyright 2016 © Professor Michael E. Porter

• Local rules and incentives that

• Many things in the business environment matter for competitiveness

+ Openness to foreign investment,

Source: World Bank Report, Doing Business (2015).

20161208—MOC Workshop Framework Overview 29 Copyright 2016 © Professor Michael E. Porter

Plantstock Grading / Packaging

Research Institutions Air Carriers

Horticultural Quality & Standards

Australian Wine Export Council Grape and Wine R&D Corporation

Wine Industry National

Source: Porter/Solvell, The Australian Wine Cluster – Supplement, HBS 2002

• Presence of strong clusters • Job growth

• Breadth of industries within a • Higher wages

First oenology Australian Wine Australian Wine New organizations

1950s 1960s 1970s 1980s 1990s and 2000s

Paper & Apparel Textiles

Tobacco Coal Metal

Paper & Apparel Textiles

Tobacco Coal Metal

20161208—MOC Workshop Framework Overview 36 Copyright 2016 © Professor Michael E. Porter

Public Macroeconomic National Business Company Operations

Related and Context for

Factor-Driven Investment- Innovation-

Low Cost Inputs Productivity Unique Value

• Efficient access to endowments

II. Course Structure

20161205—CSV Workshop Introduction Session 39 Copyright 2016 © Professor Michael E. Porter

• Regions are the most important economic unit for