Diamond Model - Criticism

Criticism

In his famous book, The Competitive Advantage of Nations, Porter studied eight developed countries and two newly industrialized countries (NICs). The latter two are Korea and Singapore. Porter is quite optimistic about the future of the Korean economy. He argues that Korea may well reach true advanced status in the next decade (p. 383). In contrast, Porter is less optimistic about Singapore. In his view, Singapore will remain a factor-driven economy (p. 566) which reflects an early stage of economic development. Since the publication of Porter's work, however, Singapore has been more successful than Korea. This difference in performance raises important questions regarding the validity of Porter's diamond model of a nation's competitiveness.

Porter has used the diamond model when consulting with the governments of Canada and New Zealand. While the variables of Porter's diamond model are useful terms of reference when analysing a nation's competitiveness, a weakness of Porter's work is his exclusive focus on the 'home base' concept. In the case of Canada, Porter did not adequately consider the nature of multinational activities. In the case of New Zealand, the Porter model could not explain the success of export-dependent and resource-based industries. Therefore, applications of Porter's home-based diamond require careful consideration and appropriate modification.

In Porter's single home-based diamond approach, a firm's capabilities to tap into the location advantages of other nations are viewed as very limited. Rugman has demonstrated that a much more relevant concept prevails in small, open economies, namely the 'double diamond' model. For example, in the case of Canada, an integrated North American diamond (including both Canada and the United States), not just a Canadian one, is more relevant. The double diamond model, developed by Rugman and D'Cruz, suggests that managers build upon both domestic and foreign diamonds to become globally competitive in terms of survival, profitability, and growth. While the Rugman and D'Cruz North American diamond framework fits well for Canada and New Zealand, it does not carry over to all other small nations, including Korea and Singapore.