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National Competitiveness and Economic Growth

The Changing Determinants of Economic Performance in the World Economy

Timo J. Hämäläinen

The current paradigm shift in the world economy is challenging the traditional competitiveness and growth theories with their few explanatory variables. This book offers a more holistic framework to synthesise the key findings of the various branches of competitiveness and growth research. The author illustrates this framework with a new long wave theory of socio-economic development. This theory emphasises the competitiveness and growth benefits of rapid structural adjustment in the rapidly changing techno-economic environment. Based on thorough analysis the author argues that both markets and governments have become less efficient due to the current transformation of the world economy. His empirical data from 22 OECD countries in the 1980s and 1990s illustrates that efficiency and growth-oriented governments have significantly contributed to their countries’ economic success.
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Chapter 7: Productive resources

Timo J. Hämäläinen


The accumulation of productive resources has been the cornerstone of economic growth theories since the days of Adam Smith. Despite fundamental structural changes in the economic systems of industrial countries over the past two centuries, the central role of resource accumulation in economic theories has prevailed (see e.g. Barro and Sala-i-Martin 1995). Although we challenge this simple approach in the following sections, the accumulation of resources will remain an important determinant of economic competitiveness and growth also in our framework. This chapter will examine the competitive value of different types of resources in modern economies. As our review of economic growth and international trade theories revealed, economists have traditionally divided productive resources into relatively broad classes. The classical economists devoted major parts of their works to analyzing the nature, origin and returns of three ‘agents of production’: land, labor and capital. Also the modern economists have tended to use relatively broad categories of resources in their analyses such as physical resources, capital resources, human resources, knowledge resources and infrastructure. Porter has criticized the broad classifications of resources for not being very helpful in explaining the competitive advantage in particular industries. He argues that a nation’s firms gain competitive advantage if they possess the specific resources that are significant to competitive advantage in a particular industry (Porter 1990, pp. 74–75). This leads him to propose a new hierarchy of resources which defines the characteristics that determine their significance to particular industries. Since Dunning has suggested a similar hierarchy of resources,...

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