Porter's Diamond and its Relevance to Irish Trade
Barbara J. O'Toole~Senior Sophister
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Porter's 'Diamond' proposes several basic elements which govern a country's trading competitiveness. The theory propounds demand, factor and inter-firm conditions as the rudiments of a healthy open economy. Barbara O'Toole's analysis finds the theory inapplicable to the 'emerald isle' which has implemented industrial policies more like millstones than gems.
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Introduction
The conventional wisdom of international trade is challenged by Porter's Model. He argues that the factor endowment theories of Heckscher and Ohlin are too simplistic to determine a nation-state's competitive advantage. Comparative advantage can no longer be seen as 'divine inheritance'. Porter states that international success in a particular industry is determined by four broad mutually reinforcing factors which create an environment which enables these firms to compete. The four include factor conditions, demand conditions, related and supporting industries and firm structure, strategy and rivalry. These determinants also being influenced by the nation's government and by chance events. In theory, to apply the model one should look at the Irish export statistics which indicate the industries in which the country has a competitive advantage and then when analysing the competitive environment using the four determinants one should find an environment which fits the industry and is conducive to its success. The export statistics indicate that Ireland has a national competitive advantage (NCA) in both the manufactures of automatic data pr ...