How Governments influence Competitiveness

Different interpretations of competitiveness are used by government officials around the globe who are aggressively scrambling to adjust to global business. A telling case of governments concern about competitiveness is unfolding in the United States.

It is considered as common wisdom that the United States has been slow to recognize and adapt to the globalization of business. Japan has become the most visible competitor nation. For example, although home video technology was originally developed and patented in the United States not one videocassette recorder has ever been manufactured in this country. Japan now controls the World’s $15 billion market for VCRs. The Japanese have taken over a large portion of the semiconductor market, once an American monopoly and have assumed leadership in the development of new drugs.

The Japanese do not pose the only challenge to US competitiveness. European products such as Airbus jet aircraft are also gaining market shares once firmly held by firms based in the United States, and Korean exports such as Hyundai have made major market inroads. Perhaps the most vivid example of changes in American competitiveness has occurred in the automobile market. Once, virtually all the cars in the United States were from US manufacturers. You need only look at a parking lot in your town to see evidence of the change.

John A Young, chairman of the President’s Commission on Industrial Competitiveness has reported that the ability of the United States to compete in the world economy has declined over the past two decades. The commission concluded that both government and business need to place a higher priority on international competitiveness. Among specific recommendations, the commission suggested that responsibility for formulating international trade policy and encouraging exports (now fragmented among multiple government agencies) should be unified.

Global managers thus operate in a climate marked by more aggressive government efforts to influence how they run their organizations. Those efforts have influenced global competitiveness:

With striking regularity, firms from one or two nations achieve disproportionate worldwide success in particular industries. Some national environments seem more stimulating to advancement and progress than others.

This success traces to a significant degree to the economic climate, institutions, and policies attributable to government actions. With a touch of irony, it can be concluded that in this era of globalization what happens in a company’s ‘home country’ is more important than ever. Sumitomo’s global activities coming at a time of changing banking regulations in Japan, is a case in point. We now turn to consider specific worldwide examples of significant government influence in the global contest of business.

The Blurring of Public and private spheres of Influence:

Because international competition has increased, government has played an increasingly active role in the post-World War II marketplace. In the United States this role crystallized when the federal government bailed out the Chrysler Corporation in 1980 by guaranteeing its loans. Shortly thereafter, the government exempted a number of computer manufacturers from antitrust laws so they could perform joint research and development increasing their ability to compete with the Japanese.

One outcome is SEMATECH, the Semiconductor Manufacturing Technology consortium, which was established in 1987 on the belief that how and where semiconductors are manufactured is important. SEMATECH is a collaborative effort among the nation’s leading companies in partnership with government. The goal of the consortium is to improve US semiconductor manufacturing proficiency to equal or exceed the world’s best both in design and in the manufacturing process itself. It is valuable example of the use of joint development consortia to strengthen competitiveness and has been singled out as the role model for industry government cooperation by the Clinton Administration.–