Michael E. Porter

Location, Competition, and Economic Development: Local Clusters in a Global Economy

Economic geography during an era of global competition involves a paradox. It is widely recognized that changes in technology and competition have diminished many of the traditional roles of location. Yet clusters, or geographic concentrations of interconnected companies, are a striking feature of virtually every national, regional, state, and even metropolitan economy, especially in more advanced nations. The prevalence of clusters reveals important insights about the microeconomics of competition and the role of location in competitive advantage. Even as old reasons for clustering have diminished in importance with globalization, new influences of clusters on competition have taken on growing importance in an increasingly complex, knowledge-based, and dynamic economy. Clusters represent a new way of thinking about national, state, and local economies, and they necessitate new roles for companies, government, and other institutions in enhancing competitiveness.

Creating Shared Value

THE CAPITALIST SYSTEM is under siege. In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community.

How Competitive Forces Shape Strategy

The essence of strategy formulation is coping with competition. Yet it is easy to view competition too narrowly and too pessimistically. While one sometimes hears executives complaining to the contrary, intense competition in an industry is neither coincidence nor bad luck.

From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition

I. Interdependence and conjecture in entry, 242.—II. Barriers to mobility, 249.—III. Diversification by established firms and intergroup mobility, 257.—IV. Conclusion, 261.

The Global Competitiveness Report 2003-2004

A guide mechanism for a sliding door for a motor vehicle such as a van. The guiding mechanism is characterized in that it includes a roller carriage along which the door slides. An element of a synthetic material or a plastic holds three sides of a rail which forms a bearing for the axle of a roller. This element acoustically and mechanically insulates the axle from other metal parts of the guide mechanism. This in turn will reduce the noise which is usually generated when the door is opened or closed.

Changing Patterns of International Competition

What does international competition mean for competitive strategy? While there is an ample literature on the problems of becoming a multinational, the specific strategic needs of established multinationals requires closer examination in light of the increasingly competitive international environment. We need to distinguish between multidomestic industries and global industries. If American firms are to catch up with the Japanese, they must strive to achieve global platforms rather than engage in competition on a country-by-country basis. A global strategy requires that a firm rebalance the configuration and coordination of its activities so that comparative as well as competitive advantage is achieved. The increasing globalization of international competition requires strategic responses that overcome country parochialism.

A Strategy for Health Care Reform — Toward a Value-Based System

Michael Porter writes that the only way to truly contain costs in health care is to improve outcomes. He discusses how we can achieve universal coverage in a way that will support, rather than impede, a fundamental reorientation of the delivery system around value for patients.

Clusters and Entrepreneurship

This paper examines the role of regional clusters in regional entrepreneurship. We focus on the distinct influences of convergence and agglomeration on growth in the number of start-up firms as well as in employment in these new firms in a given region-industry. While reversion to the mean and diminishing returns to entrepreneurship at the region-industry level can result in a convergence effect, the presence of complementary economic activity creates externalities that enhance incentives and reduce barriers for new business creation. Clusters are a particularly important way through which location-based complementarities are realized. The empirical analysis uses a novel panel dataset from the Longitudinal Business Database of the Census Bureau and the U.S. Cluster Mapping Project (Porter, 2003). Using this dataset, there is significant evidence of the positive impact of clusters on entrepreneurship. After controlling for convergence in start-up activity at the region-industry level, industries located in regions with strong clusters (i.e. a large presence of other related industries) experience higher growth in new business formation and start-up employment. Strong clusters are also associated with the formation of new establishments of existing firms, thus influencing the location decision of multiestablishment firms. Finally, strong clusters contribute to start-up firm survival.

What Do We Know About Variance in Accounting Profitability

In this paper, we analyze the variance of accounting profitability among a broad cross-section of forms in the American economy from 1981 to 1994. The purpose of the analysis is to identify the importance of year, industry, corporate-parent, and business-specific effects on accounting profitability among operating businesses across sectors. The findings indicate that industry and corporate-parent effects are important and related to one another. As expected, business-specific effects, which arise from competitive positioning and other factors, have a large influence on performance. The analysis reconciles the results of previous studies by exploring differences in method and data. We also identify the broad contributions and limitations of the research, and suggest avenues for further study. New approaches are necessary to generate significant insights about the relationships between industry, corporate-parent, and business influences on firm profitability.

The Role of Location in Competition

(1994). The Role of Location in Competition. International Journal of the Economics of Business: Vol. 1, No. 1, pp. 35-40.