Building A Competitive Economy:
Implications for Iceland
Professor Michael E. Porter
Institute for Strategy and Competitiveness
Harvard Business School
Reykjavik, Iceland
October 2, 2006
This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press,
1990), “Building the Microeconomic Foundations of Competitiveness,” in The Global Competitiveness Report 2006 (World Economic Forum, 2006),
“Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 1998), and
ongoing research on clusters and competitiveness. 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 Michael E. Porter.
Further information on Professor Porter’s work and the Institute for Strategy and Competitiveness is available at www.isc.hbs.edu
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Iceland’s Long Term Economic Performance
GDP per capita
(PPP adjusted) in US-$
$40,000
$35,000
$30,000
$25,000
$20,000
Iceland:
CAGR: +0.8%
$15,000
Iceland:
CAGR: +3.2%
$10,000
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Source: Groningen Growth and Development Centre and The Conference Board (2006), authors’ calculations
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Copyright 2006 © Professor Michael E. Porter
Iceland’s Economic Legacy
•
Geographic location
•
Natural resources
•
Small population
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Copyright 2006 © Professor Michael E. Porter
What is Competitiveness?
•
Competitiveness is the productivity (value per unit of input) with which a nation,
region, or cluster uses its human, capital, and natural resources. Productivity sets a
nation’s or region’s standard of living (wages, returns on capital, returns on natural
resources)
– Productivity depends both on the value of products and services (e.g. uniqueness,
quality) as well as the efficiency with which they are produced.
– It is not what industries a nation or region competes in that matters for prosperity,
but how firms compete in those industries
– Productivity in a nation or region is a reflection of what both domestic and foreign
firms choose to do in that location. The location of ownership is secondary for
national prosperity.
– The productivity of “local” industries is of fundamental importance to
competitiveness, not just that of traded industries
– Devaluation and revaluation do not make a country more or less “competitive”
•
Nations or regions compete in offering the most productive environment for
business
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Drivers of Sustainable Prosperity
Prosperity
Prosperity
Productivity
Productivity
Competitiveness
Innovative
Innovative Capacity
Capacity
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Determinants of Productivity and Productivity Growth
Macroeconomic,
Macroeconomic, Political,
Political, Legal,
Legal, and
and Social
Social Context
Context
Microeconomic
Microeconomic Capabilities
Capabilities
Sophistication
Sophistication
of
ofCompany
Company
Operations
Operationsand
and
Strategy
Strategy
Quality
Qualityof
ofthe
the
Business
Business
Environment
Environment
• A sound context creates the potential for competitiveness, but is not
sufficient
• Competitiveness ultimately depends on improving the microeconomic
capability of the economy and the sophistication of local companies and
local competition
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Enhancing Competitiveness: Improving the Business Environment
Context
Context for
for
Firm
Firm
Strategy
Strategy
and
and Rivalry
Rivalry
z
Factor
Factor
(Input)
(Input)
Conditions
Conditions
z
Presence of high quality,
specialized inputs available
to firms
–Human resources
–Capital resources
–Physical infrastructure
–Administrative infrastructure
–Information infrastructure
–Scientific and technological
infrastructure
–Natural resources
z
z
z
z
A local context and rules that
encourage investment and
sustained upgrading
–e.g., Intellectual property
Demand
Demand
protection
Conditions
Meritocratic incentive systems
Conditions
across all major institutions
Open and vigorous competition
among locally based rivals z Sophisticated and demanding
local customer(s)
z Local customer needs that
anticipate those elsewhere
Related
and
Related and
z Unusual local demand in
Supporting
Supporting
specialized segments that can be
Industries
served nationally and globally
Industries
Access to capable, locally based suppliers
and firms in related fields
Presence of clusters instead of isolated
industries
• Successful economic development is a process of successive economic upgrading, in which
the business environment in a nation evolves to support and encourage increasingly
sophisticated ways of competing
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Enhancing Competitiveness: Cluster Development
Cairns (Australia), Tourism
Public
Public Relations
Relations &&
Market
Market Research
Research
Services
Services
Travel
Travel agents
agents
Tour
Tour operators
operators
Restaurants
Restaurants
Attractions
Attractions and
and
Activities
Activities
Food
Food
Suppliers
Suppliers
e.g.,
e.g., theme
theme parks,
parks,
casinos,
sports
casinos, sports
Property
Property
Services
Services
Maintenance
Maintenance
Services
Services
Airlines,
Airlines,
Cruise
Cruise Ships
Ships
Hotels
Hotels
Local
Local retail,
retail,
health
health care,
care, and
and
other
other services
services
Local
Local
Transportation
Transportation
Souvenirs,
Souvenirs,
Duty
Duty Free
Free
Banks,
Banks,
Foreign
Foreign
Exchange
Exchange
Government
Government agencies
agencies
Educational
Educational Institutions
Institutions
Industry
Industry Groups
Groups
e.g.
e.g. Australian
Australian Tourism
Tourism Commission,
Commission,
Great
Great Barrier
Barrier Reef
Reef Authority
Authority
e.g.
e.g. James
James Cook
Cook University,
University,
Cairns
Cairns College
College of
of TAFE
TAFE
e.g.
e.g. Queensland
Queensland Tourism
Tourism
Industry
Industry Council
Council
Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden
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Norwegian Maritime Cluster
Fisheries
Fisheries
and
and
Fishing
Fishing
Equipment
Equipment
Ship
Ship owners
owners
Shipyards
Shipyards
Ship
Ship brokers
brokers
and
agents
and agents
Boat
Boat builders
builders
Banking
Banking and
and
Finance
Finance
Maritime
Maritime
Services
Services
Shipping
Shipping
Maritime
Maritime
Equipment
Equipment
Suppliers
Suppliers
Ship
Ship equipment
equipment
Maritime
Maritime lawyers
lawyers
Underwriters
Underwritersand
and
maritime
maritimeinsurance
insurance
Maritime
Maritime
authorities
authorities
Offshore
Offshore
Exploration
Exploration
and
and Oil
Oil
Production
Production
Maritime
Maritime
R&D
R&D
Classification
Classification
societies
societies
Maritime
Maritime
consultants
consultants
Fixed
Fixed platforms
platforms
Pipelines
Pipelines
Processing
Processing
equipment
equipment
Maritime
Maritime
education
education
Norway has 0.1% of the world’s population, represents 1.0% of the world’s economy, yet
accounts for 10% of world seaborne transportation
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Specialization of Regional Economies
Select U.S. Geographic Areas
Seattle-BellevueSeattle-BellevueEverett,
Everett,WA
WA
Aerospace
AerospaceVehicles
Vehicles
and
andDefense
Defense
Fishing
Fishingand
andFishing
Fishing
Products
Products
Analytical
AnalyticalInstruments
Instruments
Denver,
Denver,CO
CO
Leather
Leatherand
andSporting
SportingGoods
Goods
Oil
and
Gas
Oil and Gas
Aerospace
AerospaceVehicles
Vehiclesand
andDefense
Defense
Chicago
Chicago
Communications
CommunicationsEquipment
Equipment
Processed
ProcessedFood
Food
Heavy
HeavyMachinery
Machinery
Wichita,
Wichita,KS
KS
Aerospace
AerospaceVehicles
Vehiclesand
and
Defense
Defense
Heavy
HeavyMachinery
Machinery
Oil
and
Oil andGas
Gas
Pittsburgh,
Pittsburgh,PA
PA
Construction
ConstructionMaterials
Materials
Metal
Manufacturing
Metal Manufacturing
Education
Educationand
andKnowledge
Knowledge
Creation
Creation
San
San FranciscoFranciscoOakland-San
Oakland-San Jose
Jose
Bay
Bay Area
Area
Communications
Communications
Equipment
Equipment
Agricultural
Agricultural
Products
Products
Information
Information
Technology
Technology
Los
Los Angeles
Angeles Area
Area
Apparel
Apparel
Building
Building Fixtures,
Fixtures,
Equipment
Equipment and
and
Services
Services
Entertainment
Entertainment
Boston
Boston
Analytical
AnalyticalInstruments
Instruments
Education
Educationand
andKnowledge
KnowledgeCreation
Creation
Communications
Equipment
Communications Equipment
Raleigh-Durham,
Raleigh-Durham,NC
NC
Communications
CommunicationsEquipment
Equipment
Information
InformationTechnology
Technology
Education
Educationand
and
Knowledge
KnowledgeCreation
Creation
San
SanDiego
Diego
Leather
Leatherand
andSporting
SportingGoods
Goods
Power
PowerGeneration
Generation
Education
Educationand
andKnowledge
Knowledge
Creation
Creation
Houston
Houston
Heavy
HeavyConstruction
ConstructionServices
Services
Oil
and
Oil andGas
Gas
Aerospace
AerospaceVehicles
Vehiclesand
andDefense
Defense
Atlanta,
Atlanta,GA
GA
Construction
ConstructionMaterials
Materials
Transportation
Transportationand
andLogistics
Logistics
Business
Services
Business Services
Note: Clusters listed are the three highest ranking clusters in terms of share of national employment
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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The Composition of Regional Economies
United States, 2004
Traded
Traded
Local
Local
Natural
Natural
Resource
-Driven
Resource-Driven
29.3%
29.3%
0.7%
0.7%
70.0%
70.0%
2.4%
2.4%
0.7%
0.7%
--1.2%
1.2%
$49,367
$49,367
137.2%
137.2%
4.2%
4.2%
$30,416
$30,416
84.5
84.5
3.4%
3.4%
$35,815
$35,815
99.5
99.5
2.1%
2.1%
144.1
144.1
79.3
79.3
140.1
140.1
Patents per 10,000
Employees
23.0
23.0
0.4
0.4
3.3
3.3
Number of SIC Industries
590
590
241
241
48
48
Share of Employment
Employment Growth Rate,
1990 to 2004
Average Wage
Relative Wage
Wage Growth
Relative Productivity
Note: 2004 data, except relative productivity which uses 1997 data.
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Composition of the Traded Economy
Stockholm (Sweden) Cluster Portfolio
Share in National
Cluster Employment,
2003
Change in Stockholm’s overall share of
National Cluster Employment: -0.5%
60%
Financial Services
Biopharmaceuticals
50%
Business Services
Communication Equipment
Publishing & Printing
Tourism
40%
Information Technology
Distribution Services
Transportation & Logistics
30%
Education & Knowledge Creation
20%
Stockholm
Share of
National
Cluster
Employment,
2003: 22.9%
Analytical
Instruments
Heavy Construction Services
10%
0%
-15%
-10%
-5%
0%
5%
Change of Share in National Cluster Employment, 1995-2003
Note: Bubble size is proportional to employment levels
Source: Statistics Sweden (2005), author’s calculations
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Determinants of Regional Prosperity
Cluster Strength and Wage Levels, U.S. Regions
Average Regional
Wage, 2001
$55,000
Bay Area, CA
New York, NY
$45,000
Boston, MA
$35,000
$25,000
y = 96.736x + 16218
R2 = 0.377
$15,000
50
100
150
200
250
300
Share of Traded Employment in Strong Clusters (LQ > .8), Broad Cluster, 2001
Source: County Business Patterns; Michael E. Porter, The Economic Performance of Regions”, Regional Studies, Vol. 37, 2003
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Related Clusters in the U.S. Economy
Schematic Representation
Jewelry &
Precious
Metals
Apparel
Textiles
Footwear
Leather
and
Related
Products
Plastics
Chemical
Products
Financial
Services
Sporting
and Recreation
Goods
Tobacco
Fishing &
Fishing
Products
Heavy
Construction
Services
Transportation
and Logistics
Processed
Food
Communications
Equipment
Furniture
Building
Fixtures,
Equipment
and
Services
Prefabricated
Enclosures
Medical
Devices
Analytical Aerospace
InformationInstruments Vehicles &
Defense
Tech.
Agricultural
Products
Construction
Materials
Oil and
Gas
Pharmaceutical
Publishing Education
and
and Printing
Knowledge
Creation
Forest
Products
Lightning &
Electrical
Equipment
Hospitality
and Tourism
Power
Generation
Aerospace
Engines
Automotive
Metal
Manufacturing
Production
Technology
Heavy
Machinery
Entertainment
Distribution
Services
Business
Services
Motor Driven
Products
Note: Clusters with overlapping borders or identical shading
have at least 20% overlap (by number of industries) in both directions
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Cluster Specialization
Leading Footwear Clusters
Romania
• Production subsidiaries
of Italian companies
• Focus on lower to
medium price range
Portugal
• Production
• Focus on shortproduction runs in the
medium price range
United States
• Design and marketing
• Focus on specific market
segments like sport and
recreational shoes and
boots
• Manufacturing only in
selected lines such as
hand-sewn casual shoes
and boots
Italy
• Design, marketing,
and production of
premium shoes
• Export widely to the
world market
Brazil
• Low to medium quality finished
shoes, inputs, leather tanning
• Shift toward higher quality
products in response to Chinese
price competition
China
• OEM Production
• Focus on low cost
segment mainly for the
US market
Vietnam/Indonesia
• OEM Production
• Focus on the low cost
segment mainly for the
European market
Source: Research by HBS student teams in 2002 – Van Thi Huynh, Evan Lee, Kevin Newman, Nils Ole Oermann
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Copyright 2006 © Professor Michael E. Porter
The Process of Economic Development
Shifting Roles and Responsibilities
Old
Old Model
Model
New
New Model
Model
•• Government
Government drives
drives economic
economic
development
development through
through policy
policy
decisions
decisions and
and incentives
incentives
•• Economic
Economic development
development is
is aa
collaborative
collaborative process
process involving
involving
government
government at
at multiple
multiple levels,
levels,
companies,
companies, teaching
teaching and
and
research
research institutions,
institutions, and
and
institutions
institutions for
for collaboration
collaboration
• Competitiveness must become a bottom-up process in which many individuals,
companies, clusters, and institutions take responsibility
• Every region and cluster can take steps to enhance competitiveness
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Influences on Competitiveness
Multiple Geographic Levels
World Economy
Broad Economic
Areas
Groups of
Neighboring Nations
Nations
States, Provinces
Cluster
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Cross-National Collaboration of Cluster Initiatives
SWEDEN
SWEDEN
Biotech
Biotech Umeå
Umeå
Uppsala
Uppsala BIO
BIO
Biomedical
Biomedical Development,
Development, West
West Sweden
Sweden
Livets
Livets Nya
Nya Verktyg
Verktyg
Healthcare
Healthcare Technology
Technology Alliance
Alliance
BioMedley
BioMedley
FINLAND
FINLAND
Centre
Centre of
of Expertise,
Expertise, Gene
Gene Technology
Technology
and
and Molecular
Molecular Biology
Biology
FIVDIC,
FIVDIC, In
In Vitro
Vitro Diagnostics
Diagnostics Industry
Industry Cluster
Cluster
Culminatum,
Culminatum, Medical
Medical &Welfare
&Welfare Technologies
Technologies
Technology
Technology Centre
Centre Teknia
Teknia Ltd
Ltd
NORWAY
NORWAY
BIOINN
BIOINN
BCNorth
BCNorth
ESTONIA
ESTONIA
Estonian
Estonian Biotechnology
Biotechnology Association
Association
Tartu
Tartu Biotech
Biotech Cluster
Cluster
DENMARK
DENMARK
bioTEAMsouth
bioTEAMsouth
BioMedico
BioMedico Forum
Forum
CROSS-BORDER
CROSS-BORDER EFFORTS
EFFORTS
ScanBalt
ScanBalt
Medicon
Medicon Valley
Valley Academy
Academy
MedCoast
MedCoast Scandinavia
Scandinavia
NORTHERN
NORTHERN GERMANY
GERMANY
Life
Life Sciences
Sciences SH
SH &
& HH
HH
BioCon
BioCon Valley
Valley
medRegio
medRegio Luebeck
Luebeck
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Building A Competitive Economy:
Implications for Iceland
•
Principles of Competitiveness
•
Iceland’s Competitive Position
•
Strategic Issues for Iceland’s Future
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Copyright 2006 © Professor Michael E. Porter
Comparative Economic Performance
Selected Countries
$45,000
$40,000
$35,000
$30,000
GDP per
capita
(PPP $25,000
adjusted)
in US-$,
2005 $20,000
$15,000
$10,000
U.S.
Norway
Ireland
Denmark
ICELAND
Switzerland
Austria
NL
Sweden
France Finland
Japan
Spain
Germany
Italy
New Zealand
Australia,
Greece
Canada,
Slovenia
S Korea
U.K.
Czech Rep.
Portugal
Hungary
Slovakia
Poland
Lithuania
Mexico
Estonia
Latvia
Turkey
China
$5,000
India
$0
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Compound annual growth rate of real GDP per capita, 1998-2005
Source: Groningen Growth and Development Centre and The Conference Board (2006), authors’ calculations
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Copyright 2006 © Professor Michael E. Porter
Decomposing Created Prosperity
Prosperity
Prosperity
Domestic
Domestic
Purchasing
Purchasing
Power
Power
• Consumption taxes
• Level of local market
competition
• Efficiency of local industries
Income
Income
Labor
Labor
Productivity
Productivity
Labor
Labor
Utilization
Utilization
• Skills
• Capital stock
• TFP
Iceland Competitiveness DRAFT 09-14-06 CK
•
•
•
•
21
Working hours
Unemployment
Participation rate
Population age profile
Copyright 2006 © Professor Michael E. Porter
In
d
Ch ia
So R ina
ut u s
h si
Sl
Ko a
ov
a k B rea
Re raz
p u il
b
La lic
tv
C ia
Hu h i
n le
Es gar
y
Li ton
t h ia
ua
M nia
Cz
e
ec P xic
h ol o
Re an
pu d
Ta blic
Sl iwa
ov n
G e nia
r
Po e ec
Ho
rtu e
ng
g
Ko Sp a l
ng ain
SA
Un
R
ite
d Ita
St ly
a
Ne Ca te s
w na
Ze da
Au ala
n
Si stra d
n
Lu g lia
xe ap
m ore
bo
Ire urg
l
Au an d
s
Ne Be tria
th lgiu
er m
G lan
er d s
Un
m
ite F an
d ra y
Ki n
ng ce
d
Fi om
nl
Sw an
d
De ed
e
nm n
Ic ark
el
a
Ja nd
p
Sw No an
itz rwa
er y
la
nd
Domestic Purchasing Power
Purchasing Power
Factor, 2005
Iceland Competitiveness DRAFT 09-14-06 CK
Normalized Purchasing Power Across Countries
6
5
4
3
2
1
0
Source: IMF (2006), authors’ calculations
22
Copyright 2006 © Professor Michael E. Porter
Productivity versus Working Hours
Selected Countries
Real GDP per Hour Worked, PPP adjusted, 2005
70
Norway
60
France
50
40
Ireland
Belgium
United States
Germany
NL Sweden Denmark
Italy
UK
Finland
Canada Australia
Switzerland
Spain
30
Slovenia
Czech Republic
Estonia
Lithuania
Latvia
Portugal
Slovakia
Poland
10
0
500
Japan
New Zealand
Hungary
20
ICELAND
Mexico
600
700
800
900
1000
S Korea
Russia
1100
1200
Hours worked per Capita, 2005
Source: Groningen Growth and Development Centre and The Conference Board (2006), authors’ calculations
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Copyright 2006 © Professor Michael E. Porter
Iceland’s Export Performance
World Export Market Shares
World Export
Share (%)
0.08%
0.07%
0.06%
0.05%
Goods
Services
Total
0.04%
0.03%
0.02%
0.01%
0.00%
2000
2001
2002
2003
2004
2005
Source: WTO (2006)
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Copyright 2006 © Professor Michael E. Porter
Iceland
Cluster Export Portfolio, 1997-2003
2.45%
0.30%
Change In Iceland’s Overall
World Export Share: +0.003%
Fishing and
Fishing Products
Iceland’s world export market share, 2003
2.40%
0.25%
0.20%
Transportation
and Logistics
0.15%
Metal Mining and
Manufacturing
0.10%
Agricultural Products
Sporting, Recreational
and Children's Goods
Footwear
Hospitality and Tourism
0.05%
Iceland’s Average World
Export Share: 0.044%
Communications Services
0.00%
-0.20%
-0.15%
Business Services
Marine Equipment
-0.10%
Leather and
Related Products
-0.05%
Medical Devices
Biopharmaceuticals
Processed Food
Production Technology
0.00%
Change in Iceland’s world export market share, 1997 – 2003
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School;
25
Richard
Bryden, Project
Underlying data drawn from the UN Commodity Trade Statistics Database
and the IMF BOP statistics.
Iceland Competitiveness
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0.05%
0.10%
Exports of
=
$250million
Copyright 2006 © Professor Michael E. Porter
Iceland
Top 50 Goods Export Industries, 2003
World Export
Share
Change in
Share,
1997-2003
Export Value
(in $1,000)
Industry
Cluster
1
Fish, fresh, chilled, or frozen
Fishing and Fishing Products
3.30%
-2.00%
$781,531
2
Aluminum and aluminum alloys, unwrought
Metal Mining and Manufacturing
1.94%
0.67%
$446,594
3
Fish, dried, salted, or smoked
Fishing and Fishing Products
11.23%
1.25%
$303,741
4
Miscellaneous prepared or preserved fish, crustaceans and the like
Fishing and Fishing Products
1.49%
1.06%
$164,554
5
Flours, meals of meat, fish or aquatic invertebrates for animal feeds
Agricultural Products
6.57%
2.43%
$155,568
6
Pig iron, spiegeleisen, sponge iron or steel granules
Metal Mining and Manufacturing
0.74%
0.04%
$78,541
7
Animal oils and fats
Agricultural Products
3.67%
1.81%
$74,261
8
Miscellaneous medicaments
Biopharmaceuticals
0.05%
0.05%
$66,754
9
Artificial aids, disabled
Medical Devices
0.19%
0.12%
$31,083
10
Weighing machinery, weights, and parts
Production Technology
1.60%
1.20%
$30,363
11
Crustaceans, mollusks, and aquatic invertebrates
Fishing and Fishing Products
0.18%
-1.24%
$27,292
12
Ships, boats and other vessels
Marine Equipment
0.05%
0.01%
$20,165
13
Other food-processing machinery and parts
Processed Food
0.26%
0.20%
$17,063
14
Other animal materials
Agricultural Products
0.38%
0.31%
$13,223
15
Twine, cordage, rope and cables
Textiles
0.74%
0.52%
$12,691
16
Electro-medical equipment
Medical Devices
0.12%
0.12%
$11,476
17
Other meat, meat offal
Agricultural Products
0.04%
0.01%
$10,086
18
Activated natural minerals
Chemical Products
2.53%
2.53%
$8,429
19
Fur skins, tanned or dressed
Leather and Related Products
0.80%
-0.61%
$8,258
20
Other plastic containers
Plastics
0.05%
0.01%
$7,758
21
Petroleum bitumen, coke, bituminous mixtures
Oil and Gas Products
0.11%
0.05%
$4,749
22
Fur skins, raw
Leather and Related Products
0.34%
-0.03%
$4,639
23
Other ferrous waste and scrap
Metal Mining and Manufacturing
0.05%
0.05%
$4,530
24
Live animals
Agricultural Products
0.04%
0.01%
$4,310
25
Containers, cartons, bags and cases of paper, paperboard
Processed Food
0.04%
0.02%
$4,200
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School;
26
Richard
Bryden, Project
Underlying data drawn from the UN Commodity Trade Statistics Database
and the IMF BOP statistics.
Iceland Competitiveness
DRAFTDirector.
09-14-06 CK
Copyright 2006 © Professor Michael E. Porter
Iceland
Top 50 Goods Export Industries, 2003 (continued)
World Export
Share
Change in
Share,
1997-2003
Export Value
(in $1,000)
Industry
Cluster
26
Other non-ferrous metal waste
Metal Mining and Manufacturing
0.04%
0.02%
$3,282
27
Miscellaneous articles of iron or steel
Metal Mining and Manufacturing
0.01%
-0.01%
$2,653
28
Other plastics in primary forms
Plastics
0.01%
0.01%
$2,630
29
Prepared additives for cements, mortars or concretes
Chemical Products
0.51%
0.32%
$2,400
30
Miscellaneous tables, kitchen or other household articles
Furniture
0.04%
-0.14%
$2,292
31
Seaweeds and other algae
Fishing and Fishing Products
0.54%
0.54%
$1,924
32
Self-propelled mechanical shovel, excavators and loaders
Heavy Machinery
0.01%
0.01%
$1,809
33
Wool, other animal hair
Textiles
0.04%
0.02%
$1,752
34
Miscellaneous mineral insulating products
Chemical Products
0.10%
-0.02%
$1,739
35
Miscellaneous natural abrasives
Production Technology
0.43%
0.13%
$1,638
36
Printed books, maps, globes
Publishing and Printing
0.01%
0.01%
$1,617
37
Stamps for philately
Jewelry, Precious Metals and Collectibles
0.55%
-0.14%
$1,387
38
Electronic microcircuits
Information Technology
0.00%
0.00%
$1,342
39
Miscellaneous prepared cereal grains
Processed Food
0.04%
0.04%
$1,305
40
Miscellaneous goods vehicles
Automotive
0.00%
0.00%
$1,234
41
Compasses, surveying instruments
Analytical Instruments
0.01%
0.01%
$1,070
42
Other chemical products and preparations
Chemical Products
0.01%
0.01%
$1,064
43
Jerseys, pullovers, cardigans, waistcoats, knitted
Apparel
0.00%
-0.02%
$1,062
44
Yarn of wool or animal hair
Textiles
0.04%
-0.01%
$1,043
45
Miscellaneous non-alcohol beverage
Processed Food
0.01%
-0.11%
$934
46
Other plastic articles
Plastics
0.00%
0.00%
$909
47
Sauce, seasoning, condiment
Processed Food
0.02%
0.02%
$863
48
Miscellaneous crude minerals
Chemical Products
0.05%
-0.45%
$838
49
Petroleum Oils
Oil and Gas Products
0.00%
0.00%
$835
50
Commercial refrigerating equipment and parts
Motor Driven Products
0.01%
0.01%
$833
Top 50 Industries as % of Iceland’s total goods exports: 98.7%%
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School;
27
Richard
Bryden, Project
Underlying data drawn from the UN Commodity Trade Statistics Database
and the IMF BOP statistics.
Iceland Competitiveness
DRAFTDirector.
09-14-06 CK
Copyright 2006 © Professor Michael E. Porter
Inbound Foreign Direct Investment
Stock of Foreign
Direct Investment, in
% of GDP, 2004
Selected Countries
90%
Estonia
80%
70%
Hungary
60%
Malaysia
UK
40%
Thailand
Canada
30%
10%
Kazakhstan
Czech Republic
50%
20%
Chile
Australia
Georgia
Lithuania
South Africa
Poland Brazil
Russia
Colombia
Ukraine
US
China ICELAND
India
Japan
0%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Inflows of Foreign Direct Investment, in % of Domestic Capital Formation, 2002 - 2004
Source: UNCTAD (2006), author’s analysis.
Iceland Competitiveness DRAFT 09-14-06 CK
28
Copyright 2006 © Professor Michael E. Porter
Capital Investment Intensity
Selected Countries
Gross Investment
in % of GDP, 2005
31%
S Korea
29%
ICELAND
Estonia
India
Latvia
Ireland
27%
Australia
25%
23%
21%
New Zealand
Japan
Singapore
Denmark
Taiwan
Brazil
19%
Poland
17%
15%
-4%
Lithuania
Chile
Canada
Russia
Sweden
Germany
-2%
EU-25
Norway Finland
US
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Growth Rate of Real Gross Investment, CAGR, 2000 - 2005
Source: EIU (2006), author’s analysis.
Iceland Competitiveness DRAFT 09-14-06 CK
29
Copyright 2006 © Professor Michael E. Porter
Patenting Intensity: 1996 – 2005
U.S. Patents per
1000 Capita
Selected Countries
350
United States
Japan
Taiwan
Finland
Israel
Switzerland
300
250
Sweden
Germany
S Korea
Canada
Singapore
200
Iceland
Denmark
Norway
Estonia
150
100
Russia
Lithuania
Latvia
Poland
50
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Brazil
India
China
Source: USPTO (2006), author’s analysis.
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Copyright 2006 © Professor Michael E. Porter
U.S. Patents by Iceland-based Institutions
Patentor
Number of patents, 2000-04
CONEXANT SYSTEMS, INC.
OSSUR HF
MAREL H.F.
DECODE GENETICS EHF.
FLAGA HF
STYLE - R.M. MAGNUSSON
ARTLITE LIMITED
PROKARIA LTD.
INTEL CORPORATION
TELEFONAKTIEBOLAGET LM ERICSSON
TEXAS INSTRUMENTS, INCORPORATED
3COM CORPORATION
PHARMACIA & UPJOHN COMPANY
PC-TEL, INC.
NORSK HYDRO ASA
Twelve additional institutions with 1 patent
22
7
6
5
2
2
2
2
1
1
1
1
1
1
1
Source: USPTO (2006), author’s analysis.
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Iceland’s Competitive Position
Overview
Economic performance
•
Strong prosperity growth has turned Iceland into one of the world’s most
prosperous economies
•
High labor participation in the economy together with solid productivity
performance has driven prosperity
•
High local prices reduce the effective standard of living
Trade, Investment, and Innovation
•
Stable export position
•
Foreign direct investment has been moderate, but the ALCOA
investment will push up the numbers
•
Domestic investment is very high for the country’s stage of development
•
Patenting rates, measured by U.S. patents, are rising, against the global
trend
Iceland Competitiveness DRAFT 09-14-06 CK
32
Copyright 2006 © Professor Michael E. Porter
Business Competitiveness Index, 2006
Note: Constant sample
of countries
Iceland Competitiveness DRAFT 09-14-06 CK
Top
Top 25
25
Country
Change
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
24
24
25
25
United States
Germany
Finland
Switzerland
Denmark
Netherlands
Sweden
United Kingdom
Japan
Hong Kong SAR
Singapore
Austria
ICELAND
Norway
Canada
France
Belgium
Australia
Israel
Malaysia
Taiwan
Ireland
New Zealand
Estonia
Korea, Rep. 33
0
0
0
+4
-1
+1
+4
-3
0
+7
-5
0
+3
+5
-1
-6
+1
-5
+3
+3
-6
-1
-3
+3
-1
Copyright 2006 © Professor Michael E. Porter
Business Competitiveness Index, 2006
2005 GDP per Capita
(Purchasing Power Adjusted)
45,000
Relationship with GDP Per Capita
Norway
United States
40,000
ICELAND
35,000
Ireland
Qatar
30,000
UAE
Spain
Italy
25,000
Australia
Taiwan
New Zealand
Greece
Cyprus
Bahrain
20,000
15,000
Canada
Israel
S Korea
South Africa
Chile
Turkey Thailand
China
5,000
Switzerland
Finland
Germany
Sweden
Singapore
Estonia
Trinidad & Tobago
Argentina
10,000
Slovenia
Denmark
Jordan
Malaysia
Brazil
Indonesia
Jamaica
India
0
Low
Business Competitiveness Index
High
Source: Global Competitiveness Report 2006
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Competitiveness and Wages
Hourly Wage in
Manufacturing, 2004
$40
$35
Netherlands
Finland
line
n
Switzerland
o
Austria
ssi
e
r
Sweden
g
Re
ICELAND
France UK
$30
$25
Australia
Ireland
Italy
Japan
United States
Canada
$20
Spain
$15
Greece
Cyprus
$10
$5
Denmark
Germany
Belgium
Norway
Korea
Israel
Slovenia
Portugal
Hungary
Slovakia
Czech Republic
Estonia
Mexico
Lithuania
Latvia Brazil
Romania
New Zealand
Malta
Poland
Bulgaria
$0
Low
Sri Lanka
Singapore
Taiwan
Hong Kong
Business Competitiveness Index 2004
High
Source: Global Competitiveness Report 2006, Eurostat, and Bureau of Labor Statistics
Iceland Competitiveness DRAFT 09-14-06 CK
35
Copyright 2006 © Professor Michael E. Porter
Factor
Factor
(Input)
(Input)
Conditions
Conditions
Factor (Input) Conditions
Iceland’s Relative Position 2006
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 5 or more
ranks since 2001
Country Ranking, Arrows
indicate a change of 5 or more
ranks since 2001
Telephone/fax infrastructure quality
1
Quality of math and science education
32
Quality of electricity supply
1
Quality of scientific research institutions
31
Efficiency of legal framework
2
University/industry research collaboration
19
Quality of public schools
5
Air transport infrastructure quality
16
Reliability of police services
8
Local equity market access
15
Ease of access to loans
8
Availability of scientists and engineers
15
Financial market sophistication
14
Judicial independence
10
Port infrastructure quality
13
Quality of management schools
11
Venture capital availability
10
Overall infrastructure quality
10
Note: Rank versus 121 countries; overall, Iceland ranks 3rd in 2005 PPP adjusted GDP per capita and 13th in Business Competitiveness
Source: Global Competitiveness Report 2006-2007.
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Doing Business 2006 Ranking
Iceland
Category
Rank
Registering Property
Enforcing Contracts
OVERALL
Closing a Business
Getting Credit
Paying Taxes
Starting a Business
Trading Across Borders
Dealing with Licenses
Employing Workers
Protecting Investors
8
8
12
13
13
13
16
18
30
42
83
Note: Iceland’s overall Doing Business rank is 12 out of 175 countries.
Source: World Bank – Doing Business (2007), author’s analysis.
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Effectiveness of Public Spending
Selected Countries
Positive
In
di
a
La
tv
ia
C
hi
na
Ja
pa
n
Li
th
ua
ni
a
Po
la
nd
R
us
si
a
Br
az
il
Ic
el
an
d
Fi
nl
an
d
D
en
m
ar
k
N
or
wa
y
G
er
m
an
y
C
U
hi
ni
le
te
d
St
at
es
Es
to
ni
Sw a
ed
en
Negative
Note: Number refers to rank among 124 countries
Source: Global Competitiveness Report (2006), author’s analysis.
Iceland Competitiveness DRAFT 09-14-06 CK
38
Copyright 2006 © Professor Michael E. Porter
Index of Economic Freedom
1996 - 2005
Free
Hong Kong
Singapore
Ireland
Iceland
UK
Estonia
Denmark
United States
Canada
Finland
Chile
Switzerland
Germany
Sweden
Lithuania
Japan
Norway
Spain
Slovakia
Taiwan
Slovenia
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Latvia
Poland
Source: Index of Economic Freedom (2006), author’s analysis.
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Context
Contextfor
for
Firm
Strategy
Firm Strategy
and
andRivalry
Rivalry
Context for Strategy and Rivalry
Iceland’s Relative Position 2006
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 5 or more
ranks since 2001
Country Ranking, Arrows
indicate a change of 5 or more
ranks since 2001
Low costs of corruption
1
Prevalence of trade barriers
54
Efficacy of corporate boards
5
Decentralization of corporate activity
49
Cooperation in labor-employer relations
6
Intensity of local competition
18
Decentralization of economic policymaking 6
Effectiveness of antitrust policy
13
Intellectual property protection
Favoritism in decisions of government
officials
10
9
Note: Rank versus 121 countries; overall, Iceland ranks 3rd in 2005 PPP adjusted GDP per capita and 13th in Business Competitiveness
Source: Global Competitiveness Report 2006-2007.
Iceland Competitiveness DRAFT 09-14-06 CK
40
Copyright 2006 © Professor Michael E. Porter
Incentive Effect of Taxation
Selected Countries
Positive
H
on
g
Ko
Ic ng
Si el a
ng nd
ap
o
Ire re
la
U Es nd
ni
te ton
d
St ia
at
es
In
U
d
ni
te Ta ia
d
i
Ki wa
ng n
do
m
C
hi
l
La e
t
N via
o
G rwa
er y
m
a
C ny
an
a
M da
e
Li xico
Ko thu
r e an
a, i a
R
e
Po p.
la
Fi nd
nl
a
R nd
us
Sw sia
e
D de
en n
m
ar
k
Br
az
il
Negative
Source: Global Competitiveness Report (2006), author’s analysis.
Iceland Competitiveness DRAFT 09-14-06 CK
41
Copyright 2006 © Professor Michael E. Porter
Related
Relatedand
and
Supporting
Supporting
Industries
Industries
Related and Supporting Industries
Iceland’s Relative Position 2006
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 5 or more
ranks since 2001
Local availability of process machinery
44
Local supplier quantity
31
Local supplier quality
23
Local availability of specialized research
and training services
20
Note: Rank versus 121 countries; overall, Iceland ranks 3rd in 2005 PPP adjusted GDP per capita and 13th in Business Competitiveness
Source: Global Competitiveness Report 2006-2007.
Iceland Competitiveness DRAFT 09-14-06 CK
42
Copyright 2006 © Professor Michael E. Porter
Demand
Demand
Conditions
Conditions
Demand Conditions
Iceland’s Relative Position 2006
Competitive Advantages
Relative to GDP per Capita
Competitive Disadvantages
Relative to GDP per Capita
Country Ranking, Arrows
indicate a change of 5 or more
ranks since 2001
Presence of demanding regulatory
standards
Country Ranking, Arrows
indicate a change of 5 or more
ranks since 2001
9
Government procurement advanced
technology products
58
Buyer sophistication
27
Laws relating to ICT
16
Stringency of environmental regulations
15
Note: Rank versus 121 countries; overall, Iceland ranks 3rd in 2005 PPP adjusted GDP per capita and 13th in Business Competitiveness
Source: Global Competitiveness Report 2006-2007.
Iceland Competitiveness DRAFT 09-14-06 CK
43
Copyright 2006 © Professor Michael E. Porter
Outbound Foreign Direct Investments
Selected Countries
120%
Stock of Foreign Direct
Investment Abroad, in % of
Domestic GDP
100%
Switzerland
Singapore
Netherlands
80%
Belgium
UK
Sweden
Finland
60%
Denmark
European Union
ICELAND
Norway
40%
World
20%
0%
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Source: UNCTAD (2006), author’s analysis.
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Outbound Foreign Direct Investments
•
A number of Icelandic groups have recently made major acquisitions in
the UK and the Nordic countries, concentrating on finance, retail, and
food products enabled by the availability of investment capital after
the opening of the Icelandic economy
•
If Icelandic companies can leverage experiences made on the
competitive domestic markets, they are in a strong position to succeed
abroad
•
The positions on foreign markets can be a platform to further upgrade
domestic operations, through the adoption of new practices and the
use of new linkages with foreign clusters and markets
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Drivers of Iceland’s Competitiveness
Overview
•
Overall strong context conditions provide opportunities
•
Wages are relatively high after recent growth ahead of competitiveness
improvements, a sign of the overheating economy
•
Iceland’s prosperity is ahead of its competitiveness, supported by a strong
context and clear cluster-focus
•
Improving microeconomic fundamentals
– Key strengths in infrastructure, basic skills, administrative capacity, and openness to
competition
– Key weaknesses in the innovation environment, depth of clusters, and demand
conditions
•
Iceland has developed a focused portfolio of traded clusters
Established
•
•
•
Emerging
Fishing products
Energy-intensive metal production
•
•
•
•
Financial services
Life Sciences
Specialty food
Specialty apparel
Icelandic companies are internationalizing
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Strategic Issues for Iceland
•
Continue to upgrade the business environment
•
Strengthen the capacity for innovation
•
Deepen clusters and foster related cluster development
•
Address macroeconomic volatility
•
Coalesce a national economic strategy
Iceland Competitiveness DRAFT 09-14-06 CK
47
Copyright 2006 © Professor Michael E. Porter
National Innovative Capacity Framework
Common
Common Innovation
Innovation
Infrastructure
Infrastructure
Cluster-Specific
Cluster-Specific
Conditions
Conditions
e.g.,
e.g., funding
funding for
for science
science and
and
technology,
protection
technology, protection of
of
intellectual
intellectual property,
property, quality
quality of
of
research
research universities
universities
e.g.,
e.g., presence
presence of
of specialized
specialized
research
research facilities
facilities
Quality
Quality of
of Linkages
Linkages
e.g.,
e.g., university-company
university-company
collaboration
collaboration
Company
Company Innovation
Innovation Orientation
Orientation
e.g.,
e.g., company
company strategies
strategies based
based on
on innovation
innovation
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Iceland’s Innovative Capacity
•
A clear science, technology, and innovation agenda is essential to
overcome the challenges of the country’s small size
•
Leverage unique national conditions (homogeneity of population’s genepool, geothermal energy, climate)
•
Focus innovative investments around clusters
•
Create linkages into innovation networks in neighboring regions (US,
Baltic Sea Region)
Iceland Competitiveness DRAFT 09-14-06 CK
49
Copyright 2006 © Professor Michael E. Porter
Strategic Issues for Iceland
•
Continue to upgrade the business environment
•
Strengthen the capacity for innovation
•
Deepen clusters and foster related cluster development
•
Address macroeconomic volatility
•
Coalesce a national economic strategy
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Cluster Development in Massachusetts
Tertiary
Hospital
Services
Health
Health
Networking
Medical
Information
Processing
Information
Information
Technology
Technology
Telecommunications
Medical Devices
Medical
Software
High Capacity
Computers
Biopharmaceuticals
Medical Outcomes
Measurement
Software
Universities
Medical Research
Consulting
Research
Organization
Think Tanks
Knowledge
Knowledge
Creation
Creation
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Copyright 2006 © Professor Michael E. Porter
The Evolution of Regional Economies
San Diego
Hospitality and Tourism
Climate
Climate
and
and
Geography
Geography
Sporting and
Leather Goods
Transportation
and Logistics
Power Generation
Communications
Equipment
Aerospace Vehicles
and Defense
U.S.
U.S.
Military
Military
Information Technology
Analytical Instruments
Education and
Knowledge Creation
Medical Devices
Bioscience
Bioscience
Research
Research
Centers
Centers
1910
Iceland Competitiveness DRAFT 09-14-06 CK
1930
1950
Biotech / Pharmaceuticals
1970
52
1990
Copyright 2006 © Professor Michael E. Porter
Cluster-Based Economic Policies
Three Key Dimensions
Develop Clusters
•
Guide Existing
Economic Policies
• Aims to increase the
positive economic
effects of clusters
• Aims to increase the
efficiency of existing
economic policies
• Based on the
hypothesis that cluster
development can be
supported
• Based on the
hypothesis that impact
of policies can be
strengthened if clusters
are available as
multipliers
Organize Public-Private
Policy Dialogue
• Aims to improve the
efficiency of publicprivate co-operation in
economic policy design
and implementation
• Based on the
hypothesis, that
discussions on the
cluster-level can be
more issue-driven and
less politically loaded
While the three dimensions often overlap in practice, it is important for clusterbased policies to be based on a clear understanding of their specific aims
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Structuring Cluster Initiatives
•
Activities need to be based on a consistent conceptual framework of the
drivers of the cluster’s performance, shared across the cluster
•
A cluster strategy needs to build on the unique circumstances of Iceland’s
clusters rather than copying successful clusters based elsewhere
•
Cluster development requires an enduring organizational framework with
sufficient resources for at least 3-5 years
– Eventually institutionalized in the private sector
•
Data creation and analysis needs to be a central focus in developing the
cluster action agenda and measuring progress
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Copyright 2006 © Professor Michael E. Porter
Cluster Development in Iceland
•
Iceland has launched a number of regional competitiveness efforts
around the mobilization of clusters
•
For these efforts to reach full effect, it is critical to:
– Consider their nature as local or traded clusters
– Get clarity on whether network building, economic growth, or higher
efficiency of policy is the overriding objective
– Develop an understanding of each cluster’s strategic positioning
– Institutionalize impact control
•
An overarching cluster portfolio strategy should leverage linkages
between clusters in the traded sector
– Increase resilience of cluster portfolio to external shocks
– Leverage existing strengths
Iceland Competitiveness DRAFT 09-14-06 CK
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Copyright 2006 © Professor Michael E. Porter
Strategic Issues for Iceland
•
Continue to upgrade the business environment
•
Strengthen the capacity for innovation
•
Deepen clusters and foster related cluster development
•
Address macroeconomic volatility
•
Coalesce a national economic strategy
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Copyright 2006 © Professor Michael E. Porter
Macroeconomic Context and Competitiveness
Stability and confidence support
investment and upgrading
Macro reform
alone can
Create opportunity
Required to achieve
lead to short
for productivity
productivity
term capital
Micro reform
inflows
is needed
Microeconomic
Macroeconomic
and
to raise
Macroeconomic
Microeconomic
growth
the level of
reform
reform
reform
reform
spurts
sustainable
that
prosperity
ultimately
are not
Productivity growth allows economic
sustainable
growth without inflation, making
macroeconomic stability easier to
achieve
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Copyright 2006 © Professor Michael E. Porter
Icelandic Macroeconomic Context
•
Recent exchange rate fluctuations are not a sign of weakening
competitiveness
•
The overheating of the economy is a concern, but not a competitiveness
problem
HOWEVER
•
Volatility drives investors to demand a risk premium, leading to higher
financing costs for Iceland companies and consumers
•
Volatility distorts company decision making, especially on longer-term
investments
•
Efforts to manage the volatility of the economy are important
•
The arguments for tying the Icelandic currency to an external anchor
are gaining weight
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Copyright 2006 © Professor Michael E. Porter
Strategic Issues for Iceland
•
Continue to upgrade the business environment
•
Strengthen the capacity for innovation
•
Deepen clusters and foster related cluster development
•
Address macroeconomic volatility
•
Coalesce a national economic strategy
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Copyright 2006 © Professor Michael E. Porter
A Changing Global Competitive Environment
Driver
Market
reaction
Implications
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Fewer barriers to trade and investment
•
Rapidly increasing stock and diffusion of knowledge
•
Competitiveness upgrading in many countries
•
Globalization of markets
•
Globalization of value chains
•
Internationalization of capital, especially portfolio investment
•
Increasing knowledge and skill intensity of competition
•
Value increasingly in the service component of activities
•
Productivity increasingly determines success
•
Competition among nations need not be zero-sum
•
Economic success depends on providing unique value, not
just meeting best practice benchmarks
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Copyright 2006 © Professor Michael E. Porter
National Economic Strategy
National Economic Strategy
•
What is a unique competitive position for the country?
– What roles has it in the world and the regional
economy?
– What is the country’s unique value proposition as a
business location?
– For what range or types of businesses can the country
be competitive?
Achieving and Maintaining Parity
with Peer Countries
Developing Unique Strengths
• What macroeconomic, political, legal and
social improvements are necessary to
maintain parity with peer countries?
• What areas of the general business
environment must improve to maintain
parity with peer countries?
• What elements of the business
environment are essential to the national
value proposition?
• What existing and emerging clusters must
be mobilized?
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National Economic Strategy
Issues for Iceland
•
Market niches tied to Iceland’s unique geography, skills, culture, and
values
•
Reinforcing positions in related clusters as a growth vehicle
– Ecology as an overriding theme
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