UK Competitiveness: Entering a New Stage
Christian H. M. Ketels, PhD
Institute for Strategy and Competitiveness
Harvard Business School
Smith Institute
London, United Kingdom
16 March 2004
This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press,
1990), “The Microeconomic Foundations of Economic Development,” in The Global Competitiveness Report 2003, (World Economic Forum, 2003),
“Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 1998), and our joint
ESRC/DTI report “UK Competitiveness: Entering a New Stage, 2003. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of the author.
Additional information may be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
UK Competitiveness Entering a New Phase
Key Issues
•
The economic performance of the UK in recent years has been positive but past
reforms are now reaching diminishing returns
– Past growth has been driven by increasing labor participation and efficiency,
sources of growth that are inherently limited
•
The past policy approach was based on open markets and macroeconomic
stabilization
– Catch-up by others and increasing European integration have reduced the
UK’s relative advantage in these fields
•
The new policy approach needs to mobilize additional sources of growth: Assets,
skills, and innovation
•
Changes are needed in policy content as well as policy process for the new
approach to be effective
– Invest efficiently
– Define the new positioning of the UK as a place to do business
– Reform the roles of the private and public sector in economic policy
formulation and execution
– Strengthen institutions for collaboration, especially on the regional level
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Prosperity
35,000
US
30,000
GDP per
capita
(PPP
adjusted)
in US-$,
2002
Iceland
Denmark
Switzerland
Japan
25,000
Singapore*
Australia
France UK
Germany
Ireland
Norway
Canada
Finland
Taiwan*
Italy
New Zealand
Spain
20,000
Portugal
South Korea
15,000
0%
1%
2%
3%
4%
5%
6%
7%
8%
Compound annual growth rate of real GDP per capita, 1990-2002
Note: Singapore and Taiwan data from EIU (2004)
Source: World Development Indicators, World Bank (2003)
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Labor Productivity
OECD
80,000
US
Ireland
70,000
Belgium
Norway
Germany
Italy Canada
Australia
France
GDP per
employee
in US-$,
2003
60,000
50,000
Denmark
UK Sweden
Japan
Netherlands
Switzerland
Iceland
Spain
Finland
Singapore*
Taiwan*
New Zealand
40,000
South Korea
Portugal
30,000
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Compound annual growth rate of real GDP per employee, 1993-2003
Note: Singapore and Taiwan data from EIU
Source: Groningen Growth and Development Centre, 2004
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
UK Labor Productivity Gap
Selected Countries
Relative level of real
GDP per Employee,
UK = 100
140%
US
130%
120%
France
110%
Germany
100%
UK
90%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Groningen Growth and Development Centre, 2004
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Labor Productivity Level
UK & Selected Countries, 2003
Relative level of real
GDP per Employee,
UK = 100
140%
130%
120%
GDP per employee
GDP per hour
110%
UK = 100
100%
90%
80%
US
France
Germany
Source: Groningen Growth and Development Centre, 2004
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Labor Productivity Growth
Annual change in real GDP
per Employee
UK & Selected Countries
4.5%
4.0%
3.5%
3.0%
US
Germany
France
UK
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Groningen Growth and Development Centre, 2004
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Decomposing Prosperity: Past Priorities
Prosperity
Prosperity
Labor
Labor Productivity
Productivity
Capital
CapitalIntensity
Intensity
Unemployment
Unemployment
Skills
Skills
Workforce/Population
Workforce/Population
TFP
TFP
Hours/Employee
Hours/Employee
Efficiency
Efficiency
UK Competitiveness Smith Institute 03-16-04 CK
Labor
Labor Participation
Participation
Innovation
Innovation
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Past UK Economic Strategy
•
Past policy reforms in the UK where first targeted on market
opening, the most pressing barriers to competitiveness at that time
– Low flexibility of product and labor markets
– High costs of doing business
– High tax burden
•
More recently, macroeconomic stabilization become a second
cornerstone of economic policy
•
These reforms were successful in making the UK a more flexible
and relatively low cost location for doing business in Europe
– Strong foreign direct investment inflows
– Increase of prosperity, productivity, and wages
•
However, the potential of these policies is inherently limited and
other countries have taken similar steps
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Decomposing Prosperity: New Priorities
Prosperity
Prosperity
Labor
Labor Productivity
Productivity
Capital
CapitalIntensity
Intensity
Unemployment
Unemployment
Skills
Skills
Workforce/Population
Workforce/Population
TFP
TFP
Hours/Employee
Hours/Employee
Efficiency
Efficiency
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Labor
Labor Participation
Participation
Innovation
Innovation
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
UK Economic Strategy: New Priorities
Capital Intensity
• Long debate about the effect of short-termism due to pressure from equity markets
• However, little hard evidence on relative costs and benefits
– New studies suggest that Germany and France with their bank-based systems
might have over-invested in capital because of artificially low interest rates on
loans, driving value-destroying labor substitution
Skills
• UK effective in getting educational quality for investments made; now efforts to
increase spending as well
• However, effects will take time to feed through as low skills are essentially a stock
problem
Innovation
• Clearly an area of UK underperformance
• Skill base at universities is fundamentally good and public spending is ratcheting
up, but so far too little commercialization and private sector R&D
– Existing R&D over-extended on pharmaceuticals and aerospace/defense
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Models of Competitive Strengths
Sweden
Sweden
Germany
Germany
U.S.
U.S.
France
France
Assets Enabling
Innovation and
Productivity
UK
UK
Competition Enforcing
Innovation and Productivity
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
The UK Competitiveness Agenda 2004
Key Priorities
Content
Content
Process
Process
•• Invest
Investininphysical
physicalinfrastructure,
infrastructure,
skill
skillupgrading,
upgrading,and
andscientific
scientificand
and
technological
technologicalcapacity
capacity
•• Define
Defineaanew
newpartnership
partnershipof
of
private
privateand
andpublic
publicsector
sectorininsetting
setting
and
andexecuting
executingeconomic
economicpolicy
policy
--Cluster
Clusterefforts
effortscan
canbe
bean
an
engine
engineto
tomake
makethis
thistransition
transition
•• Continue
Continueto
toupgrade
upgradeproductivityproductivitydriven
drivenregulatory
regulatoryregimes
regimes
•• Strengthen
Strengthenregional
regionalinstitutions
institutions
with
withcredible
credibleauthority
authorityto
tomake
make
policy
policychoices
choices
•• Reach
Reachconsensus
consensuson
onthe
thenew
new
positioning
positioningof
ofthe
theUK
UKas
asaa
location
locationfor
fordoing
doingbusiness
business
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Back-Up: Additional Data
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Comparative Economic Performance
Annual growth rate
of real GDP
Real GDP Growth Rates
15%
Countries sorted by 19902002 annual real GDP
growth rate (CAGR)
Ireland
Singapore
10%
S Korea
Taiwan
Australia
5%
US
Canada
Spain
Germany
0%
UK
Finland
France
Japan
Switzerland
-5%
-10%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: EIU (2003)
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Labor Productivity Gap to the United States
UK & Select Countries
US
100%
95%
90%
85%
France
80%
Germany
75%
UK
70%
65%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Groningen Growth and Development Centre, 2004
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Decomposing the UK Labor Productivity Gap
Market Sector, 1999
% of UK level
150%
140%
130%
Total Factor Productivity
Labor Force Skills
Capital Intensity
UK Level
120%
110%
100%
90%
80%
UK
Germany
France
U.S.
• The UK lags all competitors in capital intensity. It lags France and Germany in
labor force skills, and the US in total factor productivity
Source: Mahoney, de Boer (2002)
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Comparative Capital Intensity and Investment
Selected Countries
Capital Stock per Hour worked,
1996-2000, UK = 100%
180%
Germany
160%
Italy
Netherlands
Belgium
France
Norway
140%
Denmark
Finland
Ireland
Iceland
120%
Sweden
Japan
US
Spain
Canada
UK
100%
80%
-1.5%
Australia
New Zealand
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Growth Rate of Capital Stock per Hour worked, 1996-2000
Source: IMF (2003)
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Total Factor Productivity
UK & Select Countries
Total Factor
Productivity
Level,
US = 100
85
81
80
80
78
78
77
77
76
75
75
77
75
74
73
73
72
72
72
71
70
70
67
67
65
66
1992
1993
67
66
66
66
69
66
69
65
65
60
1990
1991
1994
1995
United Kingdom
Germany
1996
1997
1998
1999
France
Source: OECD
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Productivity Performance
Selected OECD Countries
Total Factor
Productivity
Growth, 1990-98
4.0%
3.5%
Efficiencydriven
Ireland
Finland
3.0%
2.5%
Australia
2.0%
Sweden
1.5%
New Zealand
US
1.0%
UK
Germany
France
Canada
0.0%
0.0%
Spain
Japan
0.5%
0.5%
1.0%
Investmentdriven
1.5%
2.0%
2.5%
3.0%
3.5%
Labor Productivity Growth, 1990-98
Source: IMF, 2001
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Total Factor Productivity Performance
Selected OECD Countries
Total Factor
Productivity
Level, 1995-97,
US = 100
100
US
95
90
85
80
75
70
Spain
Japan
65
Australia
Canada
France
Netherlands
Italy
Ireland
UK
Finland
Germany
60
New Zealand
Denmark
55
Norway
50
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Total Factor Productivity Growth, 1990-98
Source: IMF, 2001
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Unemployment in OECD Countries
Unemployment
Rate, 2002
12%
Spain
Germany
France
Finland
8%
Canada
Australia
US
Japan
UK
Ireland
4%
Taiwan
Singapore
Sweden
South Korea
Netherlands
0%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
Change of Unemployment Rate in Percentage Points,
1995 - 2002
Source: EIU (2003)
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Employees as Share of
Population
Labor Force Participation
60%
55%
50%
45%
40%
35%
30%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Singapore
Japan
Switzerland
Canada
Australia
New Zealand
US
Sweden
Germany
Netherlands
UK
S Korea
Finland
Ireland
Taiwan
France
Spain
Italy
Source: EIU (2003)
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
UK Export Performance
World Export Market Shares
9%
8%
7%
6%
5%
UK Goods
UK Services
UK Total
4%
3%
2%
1%
0%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: WTO (2004)
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
UK’s Export Performance By Broad Sector, 1995-2000
UK’s change in
world average
export share:
+0.7%
World Export Share,
2000
12%
Defense
Personal
10%
Telecommunications
(8.5%, +5.6%)
Health Care
8%
6%
Petroleum/
Chemicals
Transportation
Entertainment
Services
UK’s average
export share:
4.88%
Office
4%
Power
Multiple Business
Food/Beverages
Materials/Metals
Textiles/Apparel
2%
Semiconductors/
Computers
Forest Products
0%
-2%
-1%
0%
+ 1%
+ 2%
+3%
Change in UK’s World Export Share, 1995 - 2000
Source: UNCTAD Trade Data. Author’s analysis.
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+4%
D
D
= $15 billion
export volume
in 2000
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Export Performance
European Countries and Regions
Exports per capita,
in 1,000 ECU, 1998
16
14
14
11.4
12
10.6
10
7.6
8
7.9
6.8
5.7
6
4.6
4
2.3
2.8
3.3
5
4.8
4.7
3.4
2
Fi
nl
an
d
Sw
ed
en
Au
st
ria
D
en
m
ar
k
Ire
la
nd
N
et
he
rla
nd
s
Be
lg
iu
m
y
er
m
an
K
G
U
l
F
Ba
ra
nc
sq
e
ue
Co
un
try
Po
rtu
ga
Ita
ly
Sp
ai
n
G
re
ec
e
0
Source: Basque Statistical Office
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Comparative Inward Foreign Investment
Selected Advanced Economies
Ireland
(68%, 77.5%)
FDI Stocks as % of GDP,
Average 1998-2000
45%
40%
Netherlands
New Zealand
35%
Brazil
30%
Australia
25%
UK
20%
China
15%
France
10%
Sweden
(18%, 89%)
Spain
Germany
Finland
US
Italy
5%
Japan
0%
0%
10%
20%
30%
40%
50%
60%
FDI Inflows as % of Gross Fixed Capital Formation, Average 1998-2000
Note: Germany’s FDI inflows in this period were exceptionally high due to the Vodafone-Mannesmann takeover in 2000
Source: World Investment Report 2002
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Global Competitiveness Report 2003
The Relationship Between Business Competitiveness and GDP Per Capita
Norway
35,000
USA
Iceland
Denmark
Austria
Canada
Switzerland
Ireland
Germany
Finland
Italy
UK
Sweden
Taiwan
Singapore
30,000
2002 GDP per
Capita 25,000
(Purchasing
Power Adjusted)
Spain
20,000
Greece
Malta
15,000
New Zealand
Israel
Czech Rep
Slovenia
S Korea
Portugal
Hungary
Estonia
10,000
Argentina
South Africa
Malaysia
Russia
Brazil Thailand
China
Jordan
Vietnam India
5,000
0
Kenya
Tanzania
Business Competitiveness Index
Source:Global Competitiveness Report 2003
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Current Competitiveness Index
UK Position over Time
Rank
1
1998
1999
2000
2001
2002
2003
5
10
15
BCI Rank
Company Operation &
Strategy Rank
National Business
Environment Rank
Source: Global Competitiveness Report 2003
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Determinants of Productivity and Productivity Growth
Macroeconomic,
Macroeconomic, Political,
Political, Legal,
Legal, and
and Social
Social
Context
Context for
for Development
Development
Microeconomic
Microeconomic Foundations
Foundations of
of Development
Development
Sophistication
Sophistication
of
ofCompany
Company
Operations
Operationsand
and
Strategy
Strategy
UK Competitiveness Smith Institute 03-16-04 CK
Quality
Qualityof
ofthe
the
Microeconomic
Microeconomic
Business
Business
Environment
Environment
30
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Company Operations and Strategy
UK’s Relative Position 2003
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Extent of Incentive Compensation
2
Extent of Regional Sales
22
Reliance on Professional Management
2
Degree of Customer Orientation
14
Extent of Marketing
3
Production Process Sophistication
13
Breadth of International Markets
4
Company Spending on R&D
11
Extent of Branding
5
Extent of Staff Training
11
Nature of Competitive Advantage
7
Willingness to Delegate Authority
9
Control of International Distribution
9
Note: Rank by countries; overall UK ranks 6 (8 on Company Operations and Strategy, 16 on GDP pc 2002)
Source: Global Competitiveness Report 2003
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Determinants of Productivity and Productivity Growth
Macroeconomic,
Macroeconomic, Political,
Political, Legal,
Legal, and
and Social
Social
Context
Context for
for Development
Development
Microeconomic
Microeconomic Foundations
Foundations of
of Development
Development
Sophistication
Sophistication
of
ofCompany
Company
Operations
Operationsand
and
Strategy
Strategy
UK Competitiveness Smith Institute 03-16-04 CK
Quality
Qualityof
ofthe
the
Microeconomic
Microeconomic
Business
Business
Environment
Environment
32
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
National Business Environment Overview
UK’s Relative Strengths and Weaknesses
Rank
BETTER
1
WORSE
5
Overall rank: 6
10
15
20
rc
e
ou
es
s
R
H
um
an
In
f
ys
ica
l
Ph
an
ce
Sc
ie
n
s
ct
ur
e
ra
s
ch
n
Te
d
d
an
es
Ru
l
e
m
in
i
st
ra
tiv
tru
ol
og
y
ur
es
Pr
oc
di
Co
n
d
an
em
D
Ad
Factor Conditions
Context for Firm Strategy and Rivalry
Demand Conditions
Related and Supporting Industries
ed
tio
ns
s
lu
st
er
en
t
M
ar
ke
tI
nc
om
pe
of
C
Vi
ta
lity
C
ive
on
tit
i
et
s
ar
k
M
ta
l
ap
i
C
s
25
Source:Global Competitiveness Report 2003
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Factor
Factor
(Input)
(Input)
Conditions
Conditions
Factor (Input) Conditions
UK’s Relative Position
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Financial Market Sophistication
1
Extent of Bureaucratic Red Tape
Venture Capital Availability
2
Quality of Math and Science Education 42
Ease of Access to Loans
2
Availability of Scientists and Engineers
36
Quality of Scientific Research Institutions
5
Quality of Public Schools
34
Adequacy of Public Sector Legal Recourse 5
Railroad Infrastructure Quality
29
Quality of Management Schools
Overall Infrastructure Quality
25
Quality of Educational System
25
Port Infrastructure Quality
24
Telephone/Fax Infrastructure Quality
21
Local Equity Market Access
18
Internet users per 100 people (2002)
18
Patents per million Population (2002)
17
Police Protection of Businesses
17
Administrative Burden for Start-Ups
15
5
44
Note: Rank by countries; overall UK ranks 6 (6 on National Business Environment, 16 on GDP pc 2002)
Source: Global Competitiveness Report 2003
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Factor
Factor
(Input)
(Input)
Conditions
Conditions
Factor (Input) Conditions Continued
UK’s Relative Position
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Quality of Electricity Supply
14
Judicial Independence
10
Air Transport Infrastructure Quality
10
Cell phones per 100 people (2002)
9
University/Industry Research
Collaboration
8
Note: Rank by countries; overall UK ranks 6 (6 on National Business Environment, 16 on GDP pc 2002)
Source: Global Competitiveness Report 2003
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
International Patenting Output
Annual U.S. patents
per 1 million
population, 2001
400
350
USA
300
250
Japan
Switzerland
200
Taiwan
Sweden
= 10,000
patents
granted in
2001
Germany
150
Israel
Finland
Canada
Netherlands Denmark
100
France
UK
50
Italy
Singapore
South Korea
Norway
Australia
New Zealand
0
0%
10%
20%
30%
40%
Compound annual growth rate of US-registered patents, 1990 - 2001
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Innovation Quantity and Quality
Selected Countries
Annual U.S. patents
per 1 million
population, 2000
400
350
USA
300
Japan
250
Switzerland
200
150
Sweden
Germany
Denmark
100
Austria
South Korea
50
Norway
Canada
Finland
Netherlands
France
Israel
Singapore
UK
Italy
0
6%
8%
10%
12%
14%
16%
18%
20%
Share of country’s patents that are highly cited*
Note: * The share of a country’s patents filed between 1994 and 1998 that were highly cited in 1999.
Source: CHI Patent, National Science Foundation and Council on Competitiveness data. Author’s analysis.
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Factor
Factor
(Input)
(Input)
Conditions
Conditions
U.S. Patenting by UK Institutions
Organization
Patents Issued from 1997 to 2001
1
ZENECA LIMITED
398
2
BRITISH TELECOMMUNICATION, PLC
335
3
INTERNATIONAL BUSINESS MACHINES CORPORATION
280
4
U.S. PHILIPS CORPORATION
257
5
SMITHKLINE BEECHAM PLC
244
6
EASTMAN KODAK COMPANY
206
7
204
9
LUCAS INDUSTRIES PUBLIC LTD. COMPANY
SECRETARY OF STATE FOR DEFENCE IN HER BRITANNIC MAJESTY'S
GOVERNMENT OF THE UNITED KINGDOM
ROLLS-ROYCE PLC
10
MERCK SHARP & DOHME LIMITED
167
11
IMPERIAL CHEMICAL INDUSTRIES PLC
160
12
PROCTER + GAMBLE COMPANY
154
12
NORTHERN TELECOM LIMITED
154
8
183
174
14
NORTEL NETWORKS CORPORATION
135
15
THE BOC GROUP PLC
131
16
SHARP KABUSHIKI KAISHA (SHARP CORPORATION)
117
17
PFIZER INC.
115
18
BRITISH TECHNOLOGY GROUP LIMITED
109
19
HEWLETT-PACKARD COMPANY
103
19
BP CHEMICALS LIMITED
103
21
NOKIA MOBILE PHONES LTD.
92
22
SONY CORPORATION
91
23
NCR CORPORATION
89
24
BRITISH NUCLEAR FUELS PLC
88
25
GLAXO GROUP LIMITED
83
Note: Shading indicates universities, research institutions, and other government agencies
Source: US Patent and Trademark Office (www.uspto.gov). Author’s analysis.
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Innovative Capacity Index
2003 Rankings
Rank
Rank
Scientists &
Engineers Index
Innovation Policy
Index
Cluster Environment Index
Linkages
Index
Operations and
Strategy Index
11
22
33
44
55
66
77
88
99
10
10
11
11
12
12
13
13
14
14
15
15
16
16
17
17
18
18
19
19
20
20
21
21
22
22
23
23
Iceland
Japan
Finland
USA
Sweden
Singapore
Norway
Switzerland
Russian Fed.
Denmark
Australia
Germany
Canada
Belgium
France
Taiwan
United Kingdom
Netherlands
Austria
Korea
New Zealand
Ireland
Slovenia
Singapore
Luxembourg
Taiwan
Finland
USA
Australia
Canada
Israel
France
United Kingdom
Germany
Netherlands
Belgium
Austria
Ireland
Japan
Malaysia
Denmark
Sweden
Tunisia
Spain
Portugal
Iceland
Japan
USA
Finland
Germany
Italy
Taiwan
Denmark
France
Canada
Switzerland
Singapore
United Kingdom
Austria
Hong Kong
Sweden
Korea
Netherlands
Malaysia
Australia
New Zealand
South Africa
Luxembourg
Ireland
USA
Finland
United Kingdom
Israel
Netherlands
Sweden
Canada
Denmark
France
Australia
Germany
Switzerland
Japan
Singapore
Belgium
Ireland
New Zealand
Korea
Italy
Norway
Taiwan
Austria
Iceland
USA
Switzerland
United Kingdom
Denmark
Japan
Singapore
Finland
Germany
Sweden
Hong Kong
France
Israel
Taiwan
Luxembourg
Netherlands
Austria
Belgium
Iceland
Canada
Ireland
Italy
Korea
Australia
Source: Global Competitiveness Report 2003, forthcoming
UK Competitiveness Smith Institute 03-16-04 CK
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Educational Spending and Performance
70,000
US
Switzerland
60,000
Sweden
Spending
per
50,000
student,
2000
Japan
France
Australia
Finland
UK
Germany
40,000
Spain
Ireland
South Korea
30,000
475
500
525
550
Average student test score, 2000
Source: PISA-Study, OECD
UK Competitiveness Smith Institute 03-16-04 CK
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Education in Science & Technology
Selected Countries
Share of Science & Technology
graduates in the age 20 – 29
population, 2000 or latest
25%
20%
15%
EU average: 10.3%
10%
5%
Ir e
la
F r nd
an
F i ce
nl
an
d
Sl U K
ov
en
i
Ja a
p
S w an
ed
en
U
S
Sp
Be ain
lg
Li ium
th
ua
ni
a
Is
D l an
en d
m
G ar
er k
m
a
N ny
or
w
A u ay
st
Es ria
to
Po nia
rtu
ga
P
N ol l
et an
he d
rla
nd
s
Ita
La ly
t
C
ze H u vi a
ch n g
R ary
S w e pu
itz blic
er
la
nd
0%
Source: EU Scoreboard 2002
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Total R&D Spending
Selected Countries
Total R&D Spending as % of
GDP, 2001 (or last available)
4.5%
Sweden
4.0%
3.5%
Finland
Japan
US
Germany
3.0%
2.5%
France
Netherlands
Norway
Australia
2.0%
1.5%
0.5%
UK Canada
Austria
Ireland
New Zealand
1.0%
Slovakia
0.0%
-0.4%
Poland
-0.2%
Iceland
S Korea
Czech Rep.
Italy
Spain
Hungary
Portugal
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
Change of Public R&D Spending as % of GDP,
last three years
Source: OECD
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Context
Contextfor
for
Firm
Strategy
Firm Strategy
and
andRivalry
Rivalry
Context for Firm Strategy and Rivalry
UK’s Relative Position
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Prevalence of mergers and acquisitions
1
Centralization of Economic Policy-making 46
Efficacy of Corporate Boards
1
Cooperation in Labor-Employer Relations 21
Foreign Ownership of Companies
1
Extent of Locally Based Competitors
Intensity of Local Competition
1
Extent of Distortive Government Subsidies 14
Protection of Minority Shareholders
2
12
Effectiveness of Anti-Trust Policy
2
Favoritism in Decisions of Government
Officials
Existence of Bankruptcy Law
2
Tariff Liberalization
12
Regulation of Securities Exchanges
2
Business Costs of Corruption
10
Decentralization of Corporate Activity
3
Hidden Trade Barrier Liberalization
8
Intellectual Property Protection
3
19
Note: Rank by countries; overall UK ranks 6 (6 on National Business Environment, 16 on GDP pc 2002)
Source: Global Competitiveness Report 2003
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Demand
Demand
Conditions
Conditions
Demand Conditions
UK’s Relative Position
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Buyer Sophistication
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
1
Government Procurement of Advanced
Technology Products
37
Stringency of Environmental Regulations
14
Presence of Demanding Regulatory
Standards
11
Laws Relating to Information Technology
8
Consumer Adoption of Latest Products
7
Note: Rank by countries; overall UK ranks 6 (6 on National Business Environment, 16 on GDP pc 2002)
Source: Global Competitiveness Report 2003
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Related
Relatedand
and
Supporting
Supporting
Industries
Industries
Related and Supporting Industries
UK’s Relative Position
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Country Ranking, Arrows
indicate a change of 2 or more
ranks since 2001
Local Availability of Specialized Research 4
and Training Services
Extent of Product and Process
Collaboration
22
Local Supplier Quantity
Local Availability of Process Machinery
15
State of Cluster Development
14
5
Local Availability of Components and Parts 12
Local Supplier Quality
8
Note: Rank by countries; overall UK ranks 6 (6 on National Business Environment, 16 on GDP pc 2002)
Source: Global Competitiveness Report 2003
UK Competitiveness Smith Institute 03-16-04 CK
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Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels