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Comparative Advantage and Competitive Advantage: An Economics Perspective and a Synthesis

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  • Satya Dev Gupta

Abstract

There is a considerable amount of controversy about the model(s) of comparative advantage and its applicability to international business, in particular as a guide to the success of nations and/or firms in international markets. This perception (or understanding) of inapplicability of the model(s) of comparative advantage has lead international business experts to develop new models, or what may be called frameworks, for analyzing the potential for success of firms and/or nations in international markets. These frameworks are popularly known as models of "competitive advantage". In the author's view, the model(s) of comparative advantage are too general to be dismissed altogether in this manner. While they may not be applicable to all circumstances in international business, they are valid models and can still offer meaningful predictions in a variety of circumstances. Furthermore, the models of comparative advantage used together with models of competitive advantage have the potential of offering a much richer analysis of international trade/business, normally not available with either the model(s) of comparative advantage or the model(s) of competitive advantage alone. The major aim of this paper is to establish a link between the principles of comparative and competitive advantage, and outline a synthesis of the two principles as a guiding force for gauging success of nations and/or firms in international trade/business.

Suggested Citation

  • Satya Dev Gupta, 2015. "Comparative Advantage and Competitive Advantage: An Economics Perspective and a Synthesis," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 1(1), pages 9-22, January.
    • Handle: RePEc:ate:journl:ajbev1i1-1
    DOI: =10.30958/ajbe.1-1-1
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    References listed on IDEAS

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    1. J. Peter Neary, 2003. "Competitive versus Comparative Advantage," The World Economy, Wiley Blackwell, vol. 26(4), pages 457-470, April.
    2. Theo S. Eicher & Christian Henn & Chris Papageorgiou, 2012. "Trade creation and diversion revisited: Accounting for model uncertainty and natural trading partner effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(2), pages 296-321, March.
    3. Buller, Paul F. & McEvoy, Glenn M., 1999. "Creating and sustaining ethical capability in the multi-national corporation," Journal of World Business, Elsevier, vol. 34(4), pages 326-343, January.
    4. Luo, Yadong, 2000. "Dynamic capabilities in international expansion," Journal of World Business, Elsevier, vol. 35(4), pages 355-378, January.
    5. Peter G. Warr, 1994. "Comparative and Competitive Advantage," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 8(2), pages 1-14, November.
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    2. Destaw M. Mazengia & Xia Youfu, 2021. "The Moderating Effect of Institutional Environment on Oilseed Export Competitiveness in Sub-Saharan African Countries," International Journal of Science and Business, IJSAB International, vol. 5(4), pages 189-206.
    3. Evgenia Tonkova & Sevdalina Hristova & Dancho Petrov, 2020. "Comparative Advantages in Attracting Investments - Contemporary View," Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, Union of Scientists - Varna, Economic Sciences Section, vol. 9(3), pages 12-18, December.
    4. Banaszyk, Piotr & Deszczyński, Przemysław & Gorynia, Marian & Malaga, Krzysztof, 2021. "Przesłanki modyfikacji wybranych koncepcji ekonomicznych na skutek pandemii COVID-19," Gospodarka Narodowa-The Polish Journal of Economics, Szkoła Główna Handlowa w Warszawie / SGH Warsaw School of Economics, vol. 2021(1), March.

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