National Competitiveness: A Question of Cost Conditions or Institutional Circumstances?

The issue of national competitiveness is a matter of considerable importance to both managers and public policy makers alike. Business scholars reflect this importance by their annual production of international indices of country competitiveness. Nevertheless, the notion of national competitiveness is controversial and has both (i) a narrow, concise conception that relates primarily to cost conditions as determined by exchange rates, and (ii) a broader, more nebulous conception that comprises the institutional and systemic circumstances of an economy, such as legal, governmental, public policy and other factors framing countries' wider business environments. In practical managerial terms, national competitiveness is a combination of both these narrow and broad conceptions. However, exactly how important cost conditions as opposed to institutional circumstances are to national competitiveness from a practical business perspective has never been investigated and is not known. This study uses qualitative and quantitative data gathered from senior firm executives in a specimen economy to find out. Hierarchical regression analyses suggest that institutional circumstances are significantly more important than cost conditions to the competitiveness of an economy from a practical managerial viewpoint.