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local firm-level capabilities. Additionally, it might imply creating the conditions to attract
the creation or the relocation of competitive firms within the national territory.
Moreover, as implied by Cantwell, each firm, country or region will possess a different
set of capabilities, providing it with its competitive position vis-à-vis other entities. This
unique set of capabilities is what Porter (1990) refers to as »competitive advantage«,
Nelson (1995) as »comparative advantage«, and Mowery and Nelson (1999) as »industri-
al leadership.« These authors stress that understanding the competitive advantage of a
country cannot be removed from the dynamics at the industry-level. Industrial leadership
in advanced economies does not arise simply from achieving high scores on a generic
set of indicators. Rather, once a certain set of basic capabilities is in place (such as uni-
versal education, basic infrastructures, etc.), further advancement depends on a unique
combination of factors that enable countries to develop or sustain a leadership position
in a particular sector. Porter’s »diamond model« captures how particular combinations
of national demand, relative factor prices, the existence of auxiliary industries and the
level of rivalry between firms shape the development of successful industrial clusters.
He argues that, in advanced economies, these particularities of the national innovation
system vastly exceed the role of price-based factors (such as low input prices or wages
levels, a favourable exchange rate, etc.).
These ideas are consistent with the evolutionary perspectives on innovation and tech-
nological change discussed above. Evolutionary economics places the stochastic pro-
cess of innovation and technological change at the centre of economic development. It
emphasizes the importance of diversity and co-evolutionary dynamics, thus confirming
the importance of a unique and at times random set of factors in determining industrial
leadership (Nelson, 2012). More recently, the importance of unique country characteri-
stics has also gained traction among mainstream development economists. So-called
Schumpeterian models incorporate the concept of »creative destruction« and highlight
the importance of the entry (or threat of entry) of new firms for driving innovation and
economic development. Moreover, they find that the determinants of economic growth
are not universal, but they depend on the particular country context (Aghion and Howitt,
2005).
Combining insights from these Schumpeterian models with findings from the World
Bank’s Growth Report (World Bank, 2008), World Bank chief economist Justin Lin and
Célestin Monga propose the framework of »new structural economics« as an approach
for analysing economic development (Lin and Monga, 2010). At the centre of this appro-
ach is the process of industrial upgrading based on »the given endowment structure of
the economy at that time« as well as the ability to change this structure over time. The
endowment structure in this framework is equated with Porter’s concept of competitive
advantage. In other words, there has been a departure from the neoliberal approach fo-
cused on »getting the prices right« and minimizing government intervention in the eco-
nomy. Rather there is an increasing consensus that building and sustaining competitive
advantage requires constant upgrading and innovation within specific industrial sectors
as well as the creation of new sectors through technological and structural change (see
also the World Economic Forum’s (2010) Global Competitiveness Index). From a policy
perspective, this underlines that there is no such thing as an optimal set of policies to
promote competitiveness and economic growth (Hausmann and Rodrik, 2003; Haus-
mann et al., 2008; Hausmann and Klinger, 2008; Rodrik, 2008; Lin and Chang, 2009;
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