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Porter's Diamond

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The problems discusses important issues related to Porter's Diamond and gives relevant references.

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Porter's Diamond
· General-use factors do not generate sustained competitive advantage. Specialized factors are harder to imitate and therefore more valuable.
What is the distinction being made?
Basic (endowed) versus advanced (created) factors
General (multiple use, mobile geographically) versus specific (dedicated to particular industries, often immobile)
Type I Factor (central focus of classical factor proportions theory): useful in multiple industries, endowed by nature.
Type II Factor (central focus of Porter): useful to a particular industry only, created by human activity. Principal examples include sources of specialized information or capital.
Examples: UC Davis--Napa, Denmark's Hospitals--Insulin producers, Dutch banks--accept bulbs as collateral. Also highly specialized research centers on cultivation, packaging, shipping (refrigerated so it blooms in shop). Venture capital houses that cater to specific industries (biotech, oil, entertainment, software) are increasing their importance relative to "generalists."
Why are specialized factors harder to imitate?
Not clear from Porter. One hypothesis is that scale effects in the provision of such factors lead to a Catch 22 for new entrants. Specialized factors are unavailable locally because ...

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