The Competitiveness of Countries and Their Multinational Firms

Analyses of international competitiveness and comparative advantage focus on the characteristics and behaviour of countries. They generally assign the responsibility for changes in countries’ competitiveness to macroeconomic developments and for changes in comparative advantage to changes in factor abundance and factor prices, to industry productivity developments, or to economies of scale in production. There is also another strand of literature that attributes changes in competitiveness to more ‘structural’ developments, in the sense that they are more deeply imbedded and long term, and not subject to manipulation by macroeconomic policy. These include changes in the aggregate productivity of the country, its workers, and its firms relative to those of its competitors. Recent discussions of US trade problems have emphasised factors of the second type, in particular worker skills or motivation, or the innovativeness, inventiveness, management abilities, and technological capabilities of US firms, all or some of which have supposedly declined.