Competitive Advantage Rewired

Is competitive advantage still an applicable concept so many years after its introduction? Our research demonstrates that competitive advantage remains relevant, and that it is the primary driver of firm and regional competitiveness. In rediscovering the need to embrace the opportunities offered by a strong localisation strategy, our article aims to offer a fresh, adapted and practical view of opportunities beyond externalities as a source of competitive advantage.

The localisation of industry is not a new concept. For years, companies located in a cluster have benefitted from the intangible benefits associated with clusters. In fact, more than a hundred years ago, Alfred Marshall observed: ‘Localised industry gains a great advantage from the fact that it offers a constant market for a skill … The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously’.1 At about the same time, the 1900 US Census recorded fifteen areas of industry concentration, as Paul Krugman pointed out: ‘Collars and cuffs, localized in Troy, New York; leather gloves, localized in the two neighboring New York towns of Gloversville (sic) and Johnstown; shoes, in several cities in the northeastern part of Massachusetts; silk goods, in Paterson, New Jersey; jewelry, in and around Providence, Rhode Island; and agricultural machinery, in Chicago’.2 In 1990, Michael Porter found that the creation of national competitive advantage in a particular industry does not occur by chance. He observed prominent economic clusters, such as the London Financial Centre and Silicon Valley, dominating particular industries on the world map. Porter defined a cluster as “a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities”. Interestingly, the industrial concentrations he discussed in 1990 remain relevant and highly contemporary today.

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