What can countries do to improve their competitiveness in global markets?
Two members of the Department of Decision Sciences and Information Systems in the College of Business Administration, Steve Zanakis, professor, and Irma Becerra-Fernandez, associate professor, examined 43 countries listed in the World Competitiveness Yearbook (WCY) and derived some very interesting answers. Their data on 58 variables spanned economic, internationalization, governmental, financial, infrastructural, management, and science and technology variables as well as demographic and cultural characteristics.
In their comprehensive comparisons, Zanakis and Becerra-Fernandez used four techniques from multivariate statistics and data mining—also called knowledge discovery in databases or KDD—to predict a country’s competitiveness and identify the major drivers. And they made an important distinction between productivity and competitiveness—a distinction that people often overlook.
“Productivity has to do with a company’s internal capability,” said Zanakis, who has done extensive research in multi-country comparisons and currently is analyzing the effect of 220 variables from 140 countries on e-commerce, e-government, and growth competitiveness. “Competitiveness relates to the position of one country with respect to others. It also enhances people’s quality of life, not just the prosperity of companies.”
As the researchers mined and analyzed the data, they determined that the primary driver for competitiveness is a lower country risk rating, that is, the ability of a country to meet its financial obligations.
“We also found that the extent to which a country invests in computer infrastructure and computer literacy provides a strong predictor of competitiveness,” Becerra-Fernandez said.
According to the authors, when higher computer use is combined with less male dominance in entrepreneurial societies, the result is a higher competitiveness ranking. Less male dominance means that women play a larger role in the government and in companies than in countries with higher male dominance.
Many of the factors are beyond a country’s capability to alter, but Zanakis and Becerra-Fernandez assert that policy makers and international agencies can tackle a number of them as they try to manage countries’ economic futures. In addition, companies within a country can make business decisions that contribute to their country’s competitiveness.
“It might be very difficult to change a country’s gross national product, for example,” Becerra-Fernandez said. “But the computer infrastructure can be addressed. If countries understand the most important areas that can improve their competitive rankings, they can set priorities, make prudent investments, and propose effective interventions.”
“Leaders can evaluate the possible effects of certain policies that can change a nation’s competitiveness rank in the WYC list,” Zanakis said. “Countries not included on the WYC list can enter their data into the model we developed and predict their rank while expanding their insights about potential changes.”
Among the other significant factors that jointly drive a nation’s competitiveness, according to the study:
- Entrepreneurial, urbanized societies with higher gross domestic investment, savings, and private consumption
- More imports of goods and services than exports
- Increased GDP purchase power parity
- Larger and more productive—but not necessarily less expensive—labor force
- Higher R&D expenditures
The results of this study were published in an article titled “Competitiveness of Nations: A Knowledge Discovery Examination.” It appeared in the October 2005 issue of European Journal of Operational Research, one of the leading journals in the decision sciences and information systems field.
