Handbook on Small Nations in the Global Economy
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Handbook on Small Nations in the Global Economy

The Contribution of Multinational Enterprises to National Economic Success

Edited by Daniel Van Den Bulcke, Alain Verbeke and Wenlong Yuan

This unique, extensive Handbook illustrates that multinational enterprises can contribute substantially to the competitive advantage of small countries. It advances the notion that small nations increasingly need to rely on both home-grown and foreign multinational enterprises to achieve domestic economic success in industries characterized by international competition.
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Chapter 4: Porter’s Diamond and Small Nations in the Global Economy: Ireland as a Case Study

John Cassidy, Frank Barry and Chris van Egeraat


John Cassidy, Frank Barry and Chris van Egeraat The Irish economy has boomed in recent years and become a model economy, particularly for EU accession countries. This chapter sets out to provide a deeper understanding of Ireland’s success in the context of Porter’s ‘diamond’ model of national competitiveness. A number of analyses have been done in Ireland on the relevance of Porter’s diamond theory to national competitiveness. O’Connell et al. adopted a Porter diamond analysis in examining clusters in the Irish dairy industry (1997); O’Gorman et al. (1997) examined national competitive advantage through clusters in the Irish software sector; and Clancy et al. (2001) similarly examined industry clusters in Ireland in relation to the software industry, the dairy industry and the popular music industry. These aforementioned papers summarize the determinants of national competitive advantage and provide critiques of Porter’s diamond theory in the context of Ireland, notably in regard to the important role of FDI (foreign direct investment) in the Irish economy. Criticisms of Porter’s model point to its lack of precision, its determinacy, its strong predictive ability and its irrefutability (Beije and Nuys, 1995; Davies et al., 1995; Grant, 1991; Rugman and D’Cruz, 1993). What unifies these analyses is the perception that Porter’s model does not explain the success of small open economies such as Canada, Finland, New Zealand and Ireland, where favourable domestic demand conditions are unlikely to prevail simultaneously and rivalry between domestic companies may not be significant (Bellak and Weiss, 1993; O’Donnell, 1997; O’Donnellan, 1994; Rugman...

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