CORPORATE PERFORMANCE AND COMPETITIVENESS

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Corporate Performance and Competitiveness the
role of skills Prof. Ken Mayhew, Director of
SKOPE (Skills, Knowledge Organisational
Performance)
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MASSIVE GOVERNMENT CONCERN ABOUT PRODUCTIVITY AND
COMPETITIVENESS

• HM TREASURY
• 1,318 references to competitiveness on its
  website
• 1,197 references to productivity
• MACRO PERSPECTIVE
• ORGANISATIONAL PERSPECTIVE
• POLICY

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COMPETITIVENESS

• LESTER THUROW (cited by President Clinton)
• Advanced nations are in a win-lose competition
  for world markets. (1992)
• EUROPEAN COMMISSION
• White Paper on Growth, Competitiveness and
  Unemployment.
• Competition from newly industrialising economies
  was the most important reason for the upward
  trend in European unemployment rates.

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PRODUCTIVITY

• A COMPONENT OF COMPETITIVENESS
• AN INDICATOR Of LIVING STANDARDS

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BUT

• Economists, in general, do not use the word
  competitiveness. Not one of the textbooks in
  international economics I have on my shelves
  contains the word in its index. So why are there
  so many councils on competitiveness, White
  Papers on competitiveness and so on? Why have
  most people who think about international trade
  come to use competitiveness as perhaps the
  central concept of their world view?
• Paul Krugman, 1996

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COMPETITIVENESS FOR THE COUNTRY

• SHORT RUN
• KEY VARIABLE IS THE REAL EXCHANGE RATE
• THIS IS A FUNCTION OF
• NOMINAL EXCHANGE RATE
• RELATIVE PRODUCTIVITY
• RELATIVE LABOUR COSTS

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COMPETITIVENESS FOR THE COUNTRY

• LONG RUN
• OECD DEFINITION
• The degree to which a country can, under free
  and fair market conditions, produce goods and
  services which meet the test of international
  markets, while simultaneously maintaining and
  expanding the real incomes of its people over the
  longer term

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OLD-FASHIONED DISTINCTION IN INTERNATIONAL TRADE
THEORY STATIC

• Price competitiveness
• Non-price competitiveness
• MODERN DISTINCTION DYNAMIC
• Low unit cost route
• High value added route
• THE HIGH VALUE ADDED/SKILLS VISION

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WHY TAKE THE HIGH VALUE ADDED ROUTE?

• SUSTAINABILITY
• INCOME DISTRIBUTION
• NOT JUST ABOUT TRADEABLES

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WHERE DO SKILLS FIT INTO THE PICTURE?

• UKs alleged deficiencies the role of
  international audits
• But skills are a function of purpose
• If the UK follows the low value added route, the
  demand for skills will be low
• If the UK follows the high value added route, the
  demand for skills will be higher

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WHAT WE KNOW AND WHAT WE DONT KNOW

• LOW SKILLS EQUILIBRIUM?
• THE RELATIONSHIP BETWEEN
• COMPETITIVENESS ROUTE AND SKILLS
• THE RELATIONSHIP BETWEEN SKILLS
• AND ORGANISATIONAL PERFORMANCE?

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WHAT DOES ALL THIS MEAN FOR INDIVIDUAL
ORGANISATIONS?

• CHOICE OF STRATEGY
• AGAINST WHOM ARE YOU COMPETING
• ENTRY INTO FOREIGN MARKETS
• ADJUSTMENT TO IMPORT COMPETITION
• FALLING TRADE COSTS ASSOCIATED WITH A
  REALLOCATION OF RESOURCES TO THE MORE PRODUCTIVE
  FIRMS

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THE IMPLICATIONS FOR NATIONAL POLICY

• SUPPLY OF SKILLS
• ENCOURAGING THE HIGH ROAD
• LEVERAGE ON INDIVIDUAL ORGANISATIONS
• MNEs AND SPILLOVERS
• HORIZONTAL
• VERTICAL
• THE NEW PROTECTIONISM

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IMPLICATIONS FOR POLICY AT THE REGIONAL LEVEL

• HOW MUCH POLICY DISCRETION?
• HOW MUCH CORPORATE DISCRETION?
• SKILLS SUPPLY
• MNEs
• KNOWLEDGE-BASED INDUSTRY
• HOW TO INFLUENCE COMPANIES
• CLUSTERS
• THE CLIMATE OF OPINION
• COORDINATION AND RESOURCES

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THE REAL HORROR STORY!