I was recently discussing the Draghi report on EU competitiveness and stated thinking about the old work of Michael Porter and his work The Competitive Analysis Across Nations which was an extension of his work on competitive analysis of firms. Porter developed the five forces diagram which is followed by most business students when they study strategy analysis.
For his study of nations, Porter developed his four diamond graph which is based on analyzing: factor conditions, the endowment of resources; the firm strategy or domestic conditions; demand conditions for what is needed, and the infrastructure of other industries. Governments can help with the environment, but countries do not have competitive advantage, industries do. Governments cannot make companies be more competitive. It can only create an environment that allow for competition. The private sector is where there is innovation and gains in productivity. If the EU wants to be more productive, then let companies compete gain scale and meet market demand.
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