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ABSTRACT Michael Porter's Theory of the Competitive Advantage of Nations is commonly referred to as Porter's Diamond, as it comprises 4 key elements that lead to national competitiveness. This paper empirically tests Porter's theory. 50 automotive companies in the automotive industry headquartered in 8 different nations comprise the sample. The results illustrate that the global automotive industry does in fact support Porter's model that defines national competitive advantage. Relationships that exhibit statistical significance are in the expected directions. Applicability of the model and extensions of this research are discussed. INTRODUCTION With the globalization of most industries in the latter half of the twentieth century, the topics of international businesses and competitive advantage have received much attention from business executives, public policy makers and scholars in recent years. This, in conjunction with the rise of global competitors from all parts of the world, has led to the acknowledgement of and search for firms that are both nationally and globally competitive. Practitioners and academics alike have tried to qualify and quantify those characteristics that are present in highly competitive international businesses, with the hope of replicating them in organizations with lower profiles. The research has resulted in numerous rankings, where industries and firms are compared on a global scale to see which are the most competitive. Thus the topics of national competitiveness and global competitiveness have become new additions to the business lexicon. In recent years, U.S., European and Japanese dominance in many industries has been challenged. This trend has many causal factors, including the rapid rate of technology innovation and dissemination, rising standards of living across the globe, decreasing barriers to trade and the rise of enterprises from big, emerging markets that were formerly considered non-players on the global stage. Nowhere has this been more evident than in the automotive market. Because it is such a universal product and one that has significant national brand recognition and image status connotations, countries and businesses seem to attach special meaning to their ranking within this industry. Because it is so dominant in the minds of businesspeople, economists, government officials and consumers, much data and information exist about the auto industry. This paper will bring together the ideas of worldwide rivalry, global competitiveness and automotive manufacturing in the form of research hypotheses. In so doing, it will evaluate the applicability of one of the seminal models in the area of national competitiveness. Specifically, Michael Porter's (1990) Model of National Competitiveness will be empirically tested using the global automotive market. LITERATURE REVIEW One could argue that the topic of global competitiveness occurs at the cross roads between international economics and strategic management. It incorporates many facets of both disciplines, including international trade, global supply and demand, industry structures, levels of competition within industries and strategies utilized by competitors. 1973 Economics Nobel prize winner Wassily Leontief (1953) was one of the first scholars to add an empirical element to the theoretical realm of international trade with his popular paradox of the Heckscher-Ohlin (1919) theory. Later, management scholars adopted the concept of competing globally in their research (Buckley and Casson, 1998; Tsang, 1999). Notably, Hamel and Prahalad (1994) reinforced the concepts of core competencies, industry level analysis and competing for the future. After much research most would agree that we can say that global competitiveness in the aggregate for a nation is not equivalent to global competitiveness at the individual firm level. Yet still today, no universally accepted definition of global competitiveness exists in the literature. …
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