Frontiers in European Entrepreneurship Research
- Frontiers in European Entrepreneurship series
Edited by Mário Raposo, David Smallbone, Károly Balaton and Lilla Hortoványi
Chapter 9: A Theoretical Model of Competitiveness and its Application in the Hungarian SME Sector
9. A theoretical model of competitiveness and its application in the Hungarian SME sector László Szerb and József Ulbert INTRODUCTION While competitiveness is a popular research topic amongst scholars of economics and business, our knowledge is still limited on the exact meaning, content and factors of competitiveness (Chaudhuri and Ray, 1997; Man et al., 2002). Moving away from the traditional Ricardian idea of comparative advantages, Michael Porter has developed the most widely acknowledged approach (Porter, 1990; 1998). While Porter emphasizes the importance of firms in competitiveness as opposed to countries or regions, he pays less attention to firm-level factors. According to Porter, the government can play an important role by means of effective industry and anti-trust policies, stimulating demand and specialized factor creation. A further development of the original Porter diamond model is the World Economic Forum’s (WEF) index, which defines competitiveness as the mix of institutions, policies and factors that influence the level of productivity of a country (Porter and Schwab, 2008). At the same time, recent Nobel laureate Paul Krugman claims that competitiveness is empirically unfounded, the concept of international competition is wrong, and consequently national economic policy focusing on competitiveness can be harmful (Krugman, 1994). There are similar doubts about the proper interpretation of competitiveness at regional levels. While it is generally agreed that regional competitiveness depends on the combined competitive advantage of firms and the comparative advantage of a regional economy (Budd and Hirmis, 2004), the relative importance of the institutional and firm-level factors...
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