Porter (1990)

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Interdependent

The four mentioned attributes interdependent. For example, a company will not make improvements if there is not enough rivalry or if the culture does not encourage sustained investment. Geographic concentration magnifies the interaction of the four separate influences.

Competitive industries are physically clustered together, linked to one another “through vertical (buyer-seller), or horizontal (common customers, technology, channels) relationships”. Industries cause others to form and they all become a self-sustaining, mutually supportive system.

Too much government intervention and dependency is not encouraged, while too little means less legal support. The government is a “catalyst”, pushing companies to succeed. It should not directly intervene, but have policies which encourage companies to achieve competitive advantage, such as rewarding prizes. However, politics goes at a faster pace than industry, meaning that governments often make policies which yield short-term, cost-related results and stunt innovation, such as cutting back on R&D.

Governments

Companies