Champaign, 1206 South Sixth Street, Champaign, Illinois 61820, USA. *Corresponding author.

Transcription

1 Original Article Does one size fit all? A dual double diamond approach to country-specific advantages Received 20 January 2008; revised 22 October 2008; accepted 30 October 2008 Dong-Sung Cho a, Hwy-Chang Moon b and Min-Young Kim c, * a College of Business Administration, Seoul National University, Seoul , Korea. cho@ips.or.kr b The Graduate School of International Studies, Seoul National University, Seoul , Korea. cmoon@snu.ac.kr c Department of Business Administration, College of Business, University of Illinois at Urbana- Champaign, 1206 South Sixth Street, Champaign, Illinois 61820, USA. mkim229@illinois.edu *Corresponding author. Abstract In this era of globalization, an accurate analysis of country-specific advantages (CSAs) is imperative for multinational corporations (MNCs) to thrive in global competition. Integrating previous extensions of Porter s diamond model, this paper introduces the dual double diamond (DDD) model as a new approach to analyze CSAs of countries with various characteristics, and empirically tests the explanatory power of each model. The results show that the generalized double diamond (GDD) and nine-factor (NF) models have better explanatory power than Porter s diamond when assessing CSAs of countries with high international connectivity and high human-factor dependency, respectively, and that the DDD model is more comprehensive than the GDD and NF models in explaining CSAs of countries with heterogeneous attributes. This paper also discusses the implications of the DDD model for MNCs investing, or planning to invest, in Asian countries. Asian Business & Management (2009) 8, doi: /abm Keywords: Porter s single diamond model; dual double diamond model; countryspecific advantages; national competitiveness; multinational corporations Introduction In this era of globalization, countries bear critical importance, especially to multinational corporations (MNCs), in that country-specific advantages (CSAs) (Rugman and Verbeke, 1992) are sources from which MNCs sustain or create their competitive advantages. In this regard, an accurate analysis of CSAs is imperative and, therefore, the location variable is no longer exogenous to MNCs. r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

2 Cho et al A clear understanding of CSAs should be based on a rigorous analysis of national competitiveness, which is a comprehensive representation of various aspects comprising the business environment of each country. In other words, for the successful implementation of global expansion via foreign direct investment (FDI), MNCs should be equipped with a robust tool to measure and analyze national competitiveness, with which MNCs can have an accurate analysis of the CSAs of both home and host countries and, consequently, can make appropriate location choices for FDI, because it is the combination of CSAs of both home and host countries that constitutes the sources of MNCs competitiveness. One important point in assessing national competitiveness is that countries differ from one another in many aspects: countries differ, inter alia, in the size and status of their economic development; countries also differ in their sources and scopes of competitiveness. Therefore, when analyzing the competitiveness of countries with various attributes, one size does not fit all: different countries require different criteria. Those different criteria, however, should be framed in a systematic way so that MNCs can have a comprehensive understanding of the competitiveness of countries around the world and correctly assess the information of their CSAs. For this purpose, this paper introduces the dual double diamond (DDD) model as a new model that measures and analyzes more comprehensively than existing models the national competitiveness of countries with various characteristics, and empirically evaluates existing models on national competitiveness in terms of their explanatory power over different sources and scopes of national competitiveness. The results first show that the generalized double diamond (GDD) model and the nine-factor (NF) model have better explanatory power than Porter s diamond model when assessing the national competitiveness of countries with high international connectivity and high human-factor dependency, respectively, and that the DDD model is more comprehensive than the GDD and NF models in explaining the national competitiveness of countries with heterogeneous attributes. This paper is structured as follows: The first section will discuss the validity of Porter s single diamond model and its extended models, and then introduce the DDD model. The remainder of the paper will be devoted to empirical tests on the explanatory power of the models and the adequacy of the DDD model as a new model of national competitiveness. Previous Literature on National Competitiveness Although capital, labor and natural resources have been regarded as sources of national competitiveness, it is not difficult to find counter-examples to these 84 r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

3 Does one size fit all? A dual double diamond approach to country-specific advantages traditional theories: some countries flourish without blessed factor endowments, whereas others languish with abundant resources. In an effort to explain these contradictions, Porter (1990), on the basis of a 4-year study of 10 countries, introduced the diamond model as a new approach to the analysis of national competitiveness. Porter s diamond model systematically incorporates many important variables into a single model, together with the production factor conditions that most traditional theorists employ to explain national competitiveness. Therefore, this model is comprehensive and its explanatory power was revolutionary (Ryan, 1990; Thain, 1990). Porter s diamond model consists of endogenous and exogenous variables. The endogenous variables are composed of Factor Conditions, Firm Strategy, Structure, and Rivalry, Related and Supporting Industries, and Demand Conditions. Government and Chances comprise the exogenous variables. Although Porter s diamond model contributed to the revolutionary development of explanations on national competitiveness, it has not been free from criticism and has been extended from the perspective of scopes and sources of national competitiveness. For the scopes of national competitiveness, the (generalized) double diamond model extends Porter s diamond from the domestic into the international context by incorporating multinational activities into the original model (Rugman, 1991; Rugman and D Cruz, 1993; Moon et al, 1995, 1998; Dunning, 2003). As criticized in several studies (Cartwright, 1993; Dunning, 1993; Hodgetts, 1993, inter alia), Porter s diamond model, which focuses on the home-base of a country, needs consideration of the international context to fully explain the national competitiveness of small and open countries. For this purpose, Rugman and D Cruz (1993) introduced the double diamond model, linking the domestic diamond of each country to that of a relevant triad, thus incorporating the international context of national competitiveness. In this era of ever-increasing globalization, however, the double diamond model approach faces a structural limitation in that countries participating in the global economy utilize not only triad but also non-triad diamonds. Linking both the triad diamonds and non-triad diamonds to the domestic diamond of each country would resemble a bunch of grapes, making it difficult to appreciate the competitiveness of each country (Kim, 2006). Therefore, we need to generalize the double diamond model in order to effectively analyze and operationalize both the domestic diamond and the international diamond, including triad and non-triad countries interacting in the global economy. For the generalization of the double diamond model, Moon et al (1995, 1998) further extended the model into the GDD model, which is composed of a domestic diamond and an international diamond. The domestic diamond of the GDD model assesses the extent to which a country enhances competitiveness by utilizing its domestic resources, whereas the r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

4 Cho et al international diamond evaluates the extent to which the country enhances its competitiveness by aggregating all of the non-domestic diamonds. Therefore, the GDD model considers the four factors of Porter s single diamond model in both domestic and international contexts. Regarding the sources of national competitiveness, Porter s diamond model has been extended to better explain the dynamic role of the human factors in national competitiveness through the introduction of the NF model (Cho, 1994; Cho and Moon, 2000). As the focus of Porter s diamond model is primarily on physical factors, mixed with some human factors, it cannot appropriately explain the national competitiveness of countries, in particular developing countries, whose major sources for enhancing national competitiveness are human rather than physical factors. In other words, Porter s diamond model is mainly designed to explain the sources of national competitiveness possessed by the economies of advanced nations, but is limited in its applicability when explaining the levels and dynamics of national competitiveness in less developed or developing countries. Moreover, although the title of Porter s book, The Competitive Advantage of Nations (1990), incorporates nation, he actually analyzes national competitiveness at industry level and, consequently, treats government as an exogenous variable. For a more appropriate analysis of CSAs, however, government, one of the most important factors influencing national competitiveness, should be incorporated as an endogenous variable. In order to provide a better explanation of the dynamic role of human factors and government, the NF model divides the sources of national competitiveness into physical (that is, non-human) factors and human factors (The variable firm strategy, structure, and rivalry, included among the four variables, is not precisely physical but rather a non-human variable). For this purpose, in addition to the four physical factors of Porter s single diamond, the NF model incorporates four human factors (Workers, Politicians and Bureaucrats, Entrepreneurs and Professionals) and one exogenous variable, Chance Events. The human factors in the NF model drive the national economy forward by creating, motivating and controlling the four physical factors in Porter s diamond model. The Dual Double Diamond Model Shortcomings in existing models Porter s diamond model largely focuses on the physical factors in the domestic context when explaining national competitiveness. In order to provide a better explanation of the competitiveness of countries with different attributes, 86 r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

5 Does one size fit all? A dual double diamond approach to country-specific advantages Porter s diamond model has been extended into the GDD and NF models, incorporating the international context and human factors, respectively. In order to have a comprehensive understanding of the national competitiveness of countries with various characteristics, however, it is necessary to integrate existing models and to explicitly consider international human factors. Firstly, the extended models need to be integrated into a single model. As both scopes and sources of national competitiveness simultaneously interact, national competitiveness should be analyzed from both of these perspectives. The existing models, however, consider only one of these two criteria. Secondly, none of the existing models explicitly analyze the role of the international human factors. A careful reader would find that neither Porter s diamond nor its extended models take into consideration the role of international human factors. In this era of globalization, as represented in the increasing concerns about phenomena such as the brain drain, the role of international human factors in enhancing national competitiveness is far greater than ever before and must be considered as one of the most important factors in explaining national competitiveness. Therefore, in order to provide a comprehensive analysis of national competitiveness, it is necessary to integrate the existing models into a single model, while explicitly considering the international human factors, a model covering four dimensions of domestic physical factors, domestic human factors, international physical factors and international human factors. The dual double diamond model In order to fully understand the competitiveness of countries with a variety of characteristics, this paper introduces the DDD model as a new model on national competitiveness that integrates the four dimensions of national competitiveness into a single framework. Figure 1 illustrates the studies on Porter s diamond model and its extended models, and the structure of each model. The horizontal axis represents the extension to Porter s diamond model in terms of sources of national competitiveness, whereas the vertical axis shows the extension from the perspective of scopes of national competitiveness. Each of the extended models to Porter s diamond model can double it in its own way. The GDD model (Model 3) doubles Porter s diamond by imposing an international diamond on the existing domestic diamond. On the other hand, the NF model (Model 2) doubles Porter s diamond by introducing a diamond of human factors to the existing diamond of physical factors. Thus, the integration of these two extensions and incorporation of international human factors into a single framework results in a dual double diamond (DDD), which lies at the lower right-hand corner of Figure 1. r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

6 Cho et al Sources of National Competitiveness Physical Factors Human Factors Scopes of National Competitiveness Domestic Context Int l Context Model 1:The Single Diamond (DP) DP Porter (1990) Porter (1998) Porter, Takeuchi, & Sakakibara (2000) Porter (2003a) Model 3: The Double Diamond IP (DP + IP) Rugman (1991) Rugman & D Cruz (1993) Moon, Rugman, & Verbeke (1998) Dunning (2003) Model 2: The Nine Factor (DP + DH) DH Cho (1994) Cho & Moon (2000) Model 4: The Dual Double Diamond IH (DP + DH + IP + IH) Cho, Moon, & Kim (2006;2007;2008) Figure 1: Porter s diamond model and its extension models. *DP: domestic physical factors, DH: domestic human factors, IP: international physical factors, IH: international human factors. The DDD model provides a comprehensive analysis of the competitiveness of countries with heterogeneous attributes, encompassing the four dimensions of national competitiveness: physical and human factors in domestic and international contexts. The DDD model measures the physical factors of national competitiveness with four factors Factor Conditions, Firm Strategy, Structure, and Rivalry, Related and Supporting Industries, and Demand Conditions in domestic and international contexts. For the human factors, the model also analyzes national competitiveness with four factors Workers, Politicians and Bureaucrats, Entrepreneurs, and Professionals in domestic and international contexts. Figure 2 expounds the structure of the DDD model. Modeling For a clear demonstration of the structure and coverage of each model on national competitiveness, we organize the models as follows on the basis 88 r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

7 Does one size fit all? A dual double diamond approach to country-specific advantages DDD Model Firm Strategy, Structure & Rivalry Politicians & Bureaucrats Factor Conditions Physical Factors Demand Conditions Workers Human Factors Professionals of the original intentions of each model, utilizing each of the four parts of national competitiveness illustrated in Figure 1: domestic physical factors, domestic human factors, international physical factors and international human factors. Model 1 (M 1 ): Porter s Diamond Model ¼ DP Model 2 (M 2 ): The NF Model ¼ DP þ DH Model 3 (M 3 ): The GDD Model ¼ DP þ IP Model 4 (M 4 ): The DDD Model ¼ DP þ IP þ DH þ IH where Related & Supporting Industries Domestic diamond Figure 2: The dual double diamond model. Entrepreneurs International diamond DP ¼ domestic physical factors (upper-left corner of Figure 1) DH ¼ domestic human factors (upper-right corner of Figure 1) IP ¼ international physical factors (lower-left corner of Figure 1) IH ¼ international human factors (lower-right corner of Figure 1) For the DP factors, variables including, but not limited to, natural resources, market size, infrastructure and governance structure in the domestic context are selected as proxies. The DH factors include domestic wage, government officials, domestic entrepreneurs and professionals. On the other hand, variables such as foreign direct investment, trade openness, international network and global standard are selected for the IP factors, whereas the openness of the labor market and professional jobs are used for IH factors. r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

8 Cho et al Hypotheses As each of the extended models is developed to complement missing or disregarded parts of the previous models, it is expected that, when statistically compared with previous models, the extended models will have better explanatory power in the criteria they focus on. For the empirical analysis of the validity and explanatory power of the four models on national competitiveness, we test the following four hypotheses: Porter s diamond model versus the generalized double diamond model The GDD model introduces the international context into the analysis of national competitiveness, an important criterion that Porter s diamond model lacks in assessing national competitiveness. Equipped with the international context, the GDD model is expected to provide a more appropriate analysis of the national competitiveness of countries with high international connectivity than Porter s diamond model. Hypothesis 1: The GDD model has better explanatory power than Porter s diamond model in measuring the national competitiveness of countries with high international connectivity. If this hypothesis is accepted, the result would support the assertion that Porter s diamond model is to be reserved for countries with a strong home-base and that the GDD model is more appropriate for explaining the national competitiveness of countries with higher international connectivity. Porter s diamond model versus the nine-factor model The NF model is designed to more accurately assess the national competitiveness of countries where human factors greatly contribute to enhancing national competitiveness. Therefore, the NF model is expected to provide better results when analyzing the national competitiveness of countries with high humanfactor dependency than Porter s diamond model. Hypothesis 2: The NF model has better explanatory power than Porter s diamond model in measuring the national competitiveness of countries with high human-factor dependency. The results of this test will show whether Porter s diamond is essentially a physical-factor-oriented model and whether the NF model is more suitable in explaining the national competitiveness of countries with higher dependency on human factors than on physical factors. 90 r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

9 Does one size fit all? A dual double diamond approach to country-specific advantages The generalized double diamond model versus the dual double diamond model Although the GDD model incorporates an international context into its analysis of national competitiveness, the model can be extended further by distinguishing human factors from physical factors. Considering human factors in addition to the international context, the DDD model is expected to yield a better analysis of the national competitiveness of countries with high human-factor dependency than the GDD model. Hypothesis 3: The DDD model has better explanatory power than the GDD model in explaining the national competitiveness of the countries with high human-factor dependency. The nine-factor model versus the dual double diamond model Like Porter s diamond model, the NF model focuses on the domestic context of national competitiveness. Because the DDD model analyzes physical and human factors in both domestic and international contexts, it would be a better method than the NF model in understanding the national competitiveness of countries with high international connectivity. Hypothesis 4: The DDD model has better explanatory power than the NF model in explaining the national competitiveness of the countries with high international connectivity. Research Design The model In order to test each of the four hypotheses, we suggest a general hypothesis as follows: General Hypothesis : d low o d high where d g ¼ð P n g i¼1 ðm extendedðg i Þ M previous ðg i ÞÞÞ=n g ;M extended (g i )(M previous (g i )) ¼ national competitiveness index of the ith country in each country group g measured with the extended (previous) model; and n g ¼ number of countries in each country group g. More specifically, we first classified the countries into two country groups (g: low or high) according to each country s score in international connectivity and human-factor dependency, respectively, thus resulting in four country groups: high international connectivity, low international connectivity, high human-factor dependency and low human-factor dependency. We then calculate, r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

10 Cho et al Table 1: Variables for each hypothesis Hypotheses Country groups M extended M previous Hypothesis 1 International connectivity (low or high) M 3 : GDD M 1 :SD Hypothesis 2 Human-factor dependency (low or high) M 2 :NF M 1 :SD Hypothesis 3 Human-factor dependency (low or high) M 4 : DDD M 3 : GDD Hypothesis 4 International connectivity (low or high) M 4 : DDD M 2 :NF Abbreviations: SD, Porter s single diamond model; NF, nine-factor model; GDD, generalized double diamond model; DDD, dual double diamond model. in each country group, the difference score of each country between its national competitiveness indices measured with the extended model (M extended (g i )) and its previous model (M previous (g i )). The sum of the difference scores of countries in each country group is then divided by the number of countries in each country group (n g ), thus yielding mean of difference scores (d g ). Finally, each hypothesis statistically compares each group s mean of difference score (d low and d high ). A higher mean of difference score in the high group would represent the underestimated portion of national competitiveness when measured with the previous model, thus supporting the better explanatory power of the extended model. For each hypothesis, we use the variables listed in Table 1. To test the impact of the scopes of national competitiveness, Hypothesis 1 (Hypothesis 4) analyzes the discrepancy between the GDD model and Porter s single diamond model (the DDD and NF models) from the perspective of international connectivity. Likewise, Hypothesis 2 (Hypothesis 3) examines the impact of sources of national competitiveness by calculating the discrepancy between the NF and Porter s single diamond model (the DDD and GDD models) with the criterion of human-factor dependency. Data For the empirical test of the four models on national competitiveness, we reorganize the statistical data in the IPS National Competitiveness Research 2006 Report (IPS, 2006) in compliance with the structures of the four models with full consideration of the original intentions of each model. The report measures and analyzes the national competitiveness of 66 countries with 275 criteria comprised of physical and human factors in both domestic and international contexts. The 275 criteria are composed of the most recent 137 hard data collected through various statistical sources published by international or government organizations, and 138 soft data collected by the Korea Trade-Investment Promotion Agency, which has 100 offices spread over 73 countries. 92 r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

11 Does one size fit all? A dual double diamond approach to country-specific advantages Among the 275 criteria used in the report, four criteria comprising the exogenous factor (Chance Event) and supplementary information (Supplementary Data) are not included in the process of calculating national competitiveness. As 55 criteria in the remaining 271 criteria are used for informative purposes (background information), we select 216 criteria for the calculation of the national competitiveness index of the 66 countries. Each factor is calculated as an average of its sub-factors, and each of the 23 sub-factors is also calculated as an average of its elements or criteria. Table A1 in the Appendix lists the factors, sub-factors and number of criteria employed in the study. (For further information on the criteria, refer to the 2006 IPS report.) Measures and method To test the four hypotheses, the 66 countries studied in the IPS report are classified into four sub-groups by two criteria, international connectivity and human-factor dependency. For international connectivity, FDI openness calculated as (Outward FDI (stock) þ Inward FDI (stock))/(gdp 2) can be a good proxy variable. As the international connectivity of a country implies the relationship between a country and MNCs through which the country can enhance and sustain its sources of competitiveness on a global scale, FDI that transfers intangible assets through MNCs exploration and exploitation activities can effectively achieve the goal of securing sources abroad for enhancing and sustaining competitiveness. Consequently, a high proportion of both inward and outward FDI to GDP would represent a high level of connection to the outside of a country for enhancing national competitiveness. As human factors enhance national competitiveness by creating, motivating and controlling physical factors, high performance per a given factor endowment can be attributed to high efficiency in utilizing human factors. Therefore, GDP per Land Area 1 can be a proxy to categorize countries into a high human-factordependent group and a low human-factor-dependent group. Each sub-group is composed of 33 countries in accordance with each country s score in international connectivity or human-factor dependency. Table A2 in the Appendix shows the names of countries studied in this paper and their positions in the sub-groups. Hong Kong and Singapore, for example, are classified in the high group in both international connectivity and humanfactor dependency, whereas China and India are classified in the low group. As the dependent variable varies across hypotheses, neither analysis of variance nor multivariate analysis of variance techniques would be applicable to the tests. Therefore, before comparing the mean of difference scores of each group with that of the other group in each hypothesis, we employ the independent t-test to statistically test the validity of country grouping. In order r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

12 Cho et al to prevent the inflated Type I error from multiple comparisons, the a-level of each hypothesis is set to Results Table 2 demonstrates the changing rankings of countries when analyzed by the different models of national competitiveness. As expected, countries with high Table 2: Changing rankings of national competitiveness Country SD NF GDD DDD Country SD NF GDD DDD United States Argentina Netherlands Philippines Canada Saudi Arabia Denmark Colombia Sweden Thailand Finland Portugal Norway Brazil Australia India Japan South Africa Israel Hungary Switzerland Czech Republic Austria Pakistan New Zealand Oman Singapore Malaysia Belgium Croatia Germany Romania Hong Kong Dominican Republic France Vietnam Kuwait Cambodia Chile Panama United Kingdom Guatemala Italy Egypt Korea Indonesia Spain Ukraine China Nigeria Taiwan Sri Lanka Greece Peru Russia Morocco Mexico Turkey Jordan Libya UAE Kenya Venezuela Iran Poland Bangladesh Abbreviations: SD, Porter s single diamond model; NF, nine-factor model; GDD, generalized double diamond model; DDD, dual double diamond model. Countries are listed in order of ranking measured by Porter s single diamond model. 94 r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

13 Does one size fit all? A dual double diamond approach to country-specific advantages Table 3: Results of statistical analyses Hypotheses Groups Descriptive statistics t-test * N dg t df Hypotheses 1 High Low Hypotheses 2 High Low Hypotheses 3 High Low Hypotheses 4 High Low *All the t-statistics are significant at the level (two-tailed). international connectivity and/or human-factor dependency boast higher rankings in the DDD model than those measured by Porter s single diamond model. For example, Switzerland, Singapore, Belgium, Hong Kong, United Kingdom and Taiwan countries with both high international connectivity and high human-factor dependency witness increases in their rankings, whereas China, India, Russia, Jordan and Saudi Arabia countries with both low international connectivity and low human-factor dependency experience decreasing rankings. Table 3 summarizes the results of the statistical analyses conducted on the four hypotheses. All the hypotheses are supported at the level: t-statistics with high statistical significance demonstrate the validity of the country groupings and all the high groups have higher means of difference scores (d g ) than lower groups. As each hypothesis is supported at the level, the probability of committing a Type I error in the multiple comparisons is less than 0.05 (because P ¼ 1 (1 0.01) 2 ¼ ) (Glass and Hopkins, 1996). These results statistically support that the GDD and NF models have better explanatory power than Porter s diamond in terms of scopes and sources of national competitiveness, respectively. Furthermore, the results also corroborate that the DDD model is better than the GDD and NF models in explaining the national competitiveness of countries with various characteristics: not only the competitiveness of countries with developed economies and a strong home-base, but also that of countries with high foreign-dependency and/or fewer factor endowments. Discussion The results of the statistical analyses support the rationales provided for each extended model of Porter s diamond. The higher mean of difference scores of r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

14 Cho et al countries with high international connectivity illustrate the underestimated competitiveness of countries with high international connectivity when analyzed with Porter s diamond model, and supports the rationale of introducing the international context into Porter s home-based diamond. In a similar vein, the higher mean of difference scores of countries with high performance per given factor endowments demonstrates the neglected portion of national competitiveness of countries with high human-factor dependency, and supports the necessity of considering human factors to better assess national competitiveness. Compared with the DDD model, however, the GDD and NF models reveal their innate limitations as one-way extended models. Although the GDD model incorporates the international context, it still misses the human factors of national competitiveness. Likewise, the NF model lacks the international context of national competitiveness. Furthermore, neither of the two extended models can explain the impact of IH factors on national competitiveness. Integrating both extensions to Porter s diamond model, that is, scopes and sources, and incorporating IH factors, the DDD model presents an analytical tool to assess the competitiveness of countries with various characteristics more comprehensively than existing models. As MNCs are different bundles of resources and capabilities with strong influences from country effects (Shan and Hamilton, 1991; Makino et al, 2004), each MNC needs different sets of CSAs with which it can enhance its competitiveness. In their strategic consideration of the locations to invest in, MNCs analyze CSAs of candidate countries to determine the best location, with simultaneous considerations of the CSAs of their home countries. Here, it is critical for MNCs to correctly choose an appropriate analytical model, because different models, as shown in the results of the empirical analyses, yield different assessments for the same countries: a wrong choice of the analytical model for CSAs could result in a fatal strategic error. As a matter of fact, Porter (1990) considered a country s diamond as a platform mainly for outbound FDI (OFDI) and this perspective was one of the main criticisms of Porter by other scholars, including Rugman (1991, 1992). There are other works (for example, Reich, 1990) emphasizing the role of inbound FDI (IFDI) in enhancing national competitiveness. Later, Porter himself actually changed his perspective and acknowledged the importance of IFDI, by saying that prosperity in a county is a reflection of what both domestic and foreign firms choose to do in that country (Porter, 2000, p. 16), and that productivity is the goal, regardless of whether firms operating in that country are domestic or foreign owned (Porter, 2003b, p. 31). Accordingly, the criteria of the diamond model can readily be applied not only to the analysis of CSAs in OFDI but also to that in IFDI (Foster and Wang, 2007). The DDD 96 r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

15 Does one size fit all? A dual double diamond approach to country-specific advantages model, incorporating the rationale of the (generalized) double diamond model, acknowledges both IFDI and OFDI as sources for enhancing national competitiveness and therefore allows us to have a more comprehensive model when analyzing CSAs of both home and host countries. If MNCs were to consider only the CSAs of large developed countries like the United States in their analyses for investment, Porter s single diamond model might be sufficient in providing a systematic analysis of the CSAs and the rest of the extended models would be redundant. Location factors of MNCs, however, are composed not only of large developed countries, but also of less developed and developing countries of various sizes and characteristics. The corollary, then, is that Porter s diamond model does not satisfactorily fit. In this era of increasing global competition, MNCs are forced to seek out every corner of the world for favorable CSAs and therefore their location portfolios are full of countries of various sizes and characteristics. In this light, the DDD model can provide a more comprehensive and integrated analysis of MNCs heterogeneous location portfolios. This is especially true for countries in Asia, a dynamic area: consider CHINDIA (China and India) and the Four Asian Tigers (Hong Kong, Singapore, Taiwan and Korea). As shown in Table 2, countries in these two groups show different trends in their changes of rankings. To begin with, there is generally little change in the rankings of CHINDIA, regardless of the models. The rankings of the Four Asian Tigers, however, show drastic changes with the application of different models, although Korea seems to be an exception. Singapore rises from 14th place to 6th, Hong Kong from 17th to 5th, and Taiwan from 26th to 19th. As the Four Asian Tigers have overcome their comparative disadvantages with the strategic utilization of human resources and active openness, their rankings rise when analyzed with the DDD model. In other words, as the Four Asian Tigers have overcome adversity in their DP factors and developed their national competitiveness through the intensive use of global physical factors and human factors in both domestic and international scopes, we can have a better assessment of their CSAs with the DDD model, which comprehensively analyzes the physical and human factors of national competitiveness in both domestic and international scopes. In CHINDIA, however, openness and human factors are not as critical as they are for the Four Asian Tigers and, therefore, different models do not yield large differences in rankings. In sum, as countries with different characteristics need different models to appropriately assess their national competitiveness, it is critical for MNCs to employ a proper model when analyzing the CSAs of countries in which they are planning to invest. In this light, the DDD model provides a better framework than existing models to comprehensively analyze the national competitiveness of countries with heterogeneous attributes. r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

16 Cho et al Conclusion This paper presents the DDD model as a more comprehensive model to measure and analyze the national competitiveness of countries with heterogeneous characteristics, by integrating Porter s diamond and its extended models, and incorporating IH factors into a single framework. Empirical tests on the validity of Porter s diamond, GDD, NF and DDD models show that the DDD model has more comprehensive explanatory power on national competitiveness than existing models. The contributions of this paper can be summarized as follows. Firstly, this paper introduces the DDD model as a new model on national competitiveness. The DDD model can measure and analyze the national competitiveness of countries with a variety of characteristics more comprehensively. As CSAs consist of various aspects of a country and are comprehensively represented in national competitiveness, the DDD model provides a better strategic framework for MNCs to exhaustively analyze the CSAs of countries with various attributes and thus to efficiently implement a global expansion strategy. Secondly, this paper empirically tests the validity of Porter s diamond and each of its extended models. Statistical analyses demonstrate the limits of the existing models and the adequacy of the DDD model. In country sub-groupings, this paper employs international connectivity and human-factor dependency as proxy variables classifying countries. Other proxy variables, based on careful interpretation of the original intentions in each model, can enhance our understanding of each model s contribution, and test the validity of the DDD model in different ways. In addition, a more detailed study on relationships among the models would allow us to have a better insight on national competitiveness. Acknowledgements An early version of this paper was presented at the Academy of International Business 2007 annual meeting in Indianapolis, IN. We thank anonymous AIB and ABM reviewers for their valuable comments. About the Authors Dong-Sung Cho is Professor of Strategy, International Business and Management Design at Seoul National University. He received his doctorate from Harvard Business School. He has been a visiting professor at Harvard Business School, INSEAD, Helsinki School of Economics, University of Tokyo, 98 r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

17 Does one size fit all? A dual double diamond approach to country-specific advantages University of Michigan, Duke, and Peking Universities; and Dean of the College of Business Administration and the Graduate School of International Studies at Seoul National University. He has published numerous journal papers and over 50 books. In the field of International Strategic Management, he has contributed particularly by developing new analytical frameworks, such as the nine-factor and M-management models, which have proved useful in consulting as well as academe. Dr Cho has sat on the Board of Directors of 15 companies and organizations. He is currently an honorary consul general of the Government of Finland in Korea. Hwy-Chang Moon received his PhD from the University of Washington and is currently Professor of International Business and Strategy in the Graduate School of International Studies at Seoul National University. He has also taught at the University of Washington, University of the Pacific, State University of New York at Stony Brook, Helsinki School of Economics and Business, Kyushu University, Keio University and Hitotsubashi University, and has been a visiting professor at Tokyo University. He has published numerous journal papers and books on topics such as international business strategy, foreign direct investment and cross-cultural management; forthcoming is Global Business Strategy: An Asian Perspective (World Scientific, 2009). Currently Editor-in-Chief of the Journal of International Business and Economy, he has consulted for, among others, APEC, World Bank, UNCTAD, and the Korean and Malaysian governments. Min-Young Kim is a doctoral student at the College of Business, University of Illinois at Urbana-Champaign. His current research interests are global expansion of multinational corporations, country-specific advantages and the strategic interaction between multinational corporations and countries. His recent publications include A New Framework for Global Expansion: A Dynamic Diversification-Coordination (DDC) Model (co-authored with Hwy-Chang Moon), Management Decision 46(1): , Notes 1 High correlation coefficients between land area and major natural resources show that land area can be employed as a proxy variable for factor endowments (natural resources): aluminum production: r ¼ 0.81; natural gas production: r ¼ 0.74; round wood production: r ¼ 0.72; oil production: r ¼ 0.53; coal production: r ¼ 0.51; pig iron and crude steel production: r ¼ 0.48; cement production: r ¼ 0.37 (all the correlations are significant at the 0.01 level (two-tailed)). 2 As the probability of committing at least one Type I error in the set of K independent comparisons is calculated as P ¼ 1 (1 a) K (Glass and Hopkins, 1996), in order to employ a significance level of 0.05 for the complete set of multiple comparisons, we adopt a significance level of 0.01 for each comparison. r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,

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20 Cho et al Table A2: Countries studied and their positions in the country sub-groups NO Country International connectivity Humanfactor dependency NO Country International connectivity Humanfactor dependency 1 Argentina H L 34 Libya L L 2 Australia H L 35 Malaysia H H 3 Austria H H 36 Mexico L L 4 Bangladesh L H 37 Morocco H L 5 Belgium H H 38 Netherlands H H 6 Brazil H L 39 New Zealand H H 7 Cambodia H L 40 Nigeria H L 8 Canada H L 41 Norway H H 9 Chile H L 42 Oman L L 10 China L L 43 Pakistan L L 11 Colombia L L 44 Panama H L 12 Croatia H H 45 Peru L L 13 Czech H H 46 Philippines L L Republic 14 Denmark H H 47 Poland L H 15 Dominican L H 48 Portugal H H Republic 16 Egypt L L 49 Romania L L 17 Finland H H 50 Russia L L 18 France H H 51 Saudi L L Arabia 19 Germany H H 52 Singapore H H 20 Greece L H 53 South H L Africa 21 Guatemala L L 54 Spain H H 22 Hong Kong H H 55 Sri Lanka L L 23 Hungary H H 56 Sweden H H 24 India L L 57 Switzerland H H 25 Indonesia L L 58 Taiwan H H 26 Iran L L 59 Thailand L L 27 Israel H H 60 Turkey L H 28 Italy L H 61 UAE L H 29 Japan L H 62 Ukraine L L 30 Jordan L L 63 United H H Kingdom 31 Kenya L L 64 United States L H 32 Korea L H 65 Venezuela H L 33 Kuwait L H 66 Vietnam L L International connectivity=(outward FDI (stock)+inward FDI (stock))/(gdp 2). Human-factor dependency=(gdp/land area). Countries are listed in alphabetical order. Abbreviations: H: high, L: low. 102 r 2009 Palgrave Macmillan Asian Business & Management Vol. 8, 1,