COMPETITIVENESS IN THE 21ST CENTURY: REFLECTIONS ON THE GROWING DEBATE ABOUT GLOBALIZATION.

INTRODUCTION

The 21st century is here and our prognostications about the future are being realized. Nowhere have our predictions been more optimistic than in our discussions of global competitiveness. Competitiveness is, by definition, inextricably linked to globalization, because it is assessed for nations (as well as for firms) in a global context. While the benchmarks for national competitive advantage would be other nations, firm-level competitiveness is assessed in the context of competitors in a global industry. While these points are better illustrated in Figures 1 & 2, we wish to remind the reader that in our discussions we have used the terms (i.e., competitiveness, globalization) interchangeably, often referring only to one, while implying both.

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Researchers, managers and public policymakers have predicted that tomorrow's global economy will be entrepreneurial based and environmentally sensitive. They also expect our growing global economy to have room for all, ensuring a greater focus on human development and progress. Countries, whether developing or already advanced, are also expected to give the cultivation of knowledge and intellect greater attention than ever. This is, of course, a great idyllic vision of things to come. No one should be left out of tomorrow's global economy; there should be no poverty, disease, human dislocation, homelessness or hopelessness. But in fact, the gap between dreams and reality remains wide. Globalization creates bountiful opportunities for nations and their citizens, but it creates formidable challenges that induce political and cultural tensions. Few have been willing to explore the challenges that globalization poses. And, nobody wants to deliver bad news. However, much is at stake, and an open dialogue is important to guide decision-makers and promote effective policy-making.

There are already several discordant voices that are attempting to draw attention to the downsides of globalization and western-based notions of competitiveness. The violent clashes that occurred in the World Trade Organization (WTO) meetings in Seattle and, more recently, the International Monetary Fund (IMF) and World Bank annual Spring meetings in Washington, D.C., are notable examples. There are of course, other less visible forces and voices that have sought to highlight the need to craft different models of globalization than those widely adopted in the U.S. and elsewhere in the West.

This article addresses the darker side of globalization and the challenges it places on national institutions, firms, and individuals. We believe that awareness of these challenges can be useful in mapping effective strategies that ensure that the predicted gains from tomorrow's economy come to fruition. We are avid proponents of both globalization and competitiveness and recognize their critical importance for the changing global economy. However, our intent is to make sense of the debate and propose effective and sustainable ways of promoting globalization and competitiveness.

Based on existing portrayals, our framework on competitiveness (laid out in Table 1) discusses it at three different levels--namely that of the nation-state, that of the firm, and finally that of the individual. For each of these levels, we discuss the defining concepts, the dimensions associated with competitiveness, the factors that have been predicted to influence competitiveness, and the benefits and the downsides resulting from increasing competitiveness. We then offer two related developmental frameworks (shown in Figures 1 & 2) that portray the sequence of events leading to enhanced firm and national competitiveness. We then lay out a set of guiding principles that advocate the need for balanced, variegated approaches to enhancing competitiveness, while emphasizing the need for institution-building and entrepreneurship. The conclusion section reiterates the gist of our message regarding global competitiveness and its implications.

TABLE 1

Analytical Framework for Examining Competitiveness

Unit of    Defining Concepts          Dimensions of
Analysis                              Competitiveness

Nation     Sovereignty, Culture,      Balance of Trade,
State      Social Values,             GNP/Capita,
           Human Development,         Income/Capita, Foreign
           Living Standards           Exchange Reserves,
                                      Employment (%), Inflation
                                      (%), Savings Rate (%),
                                      Investment Inflows, value-
                                      added Economic Sectors

Firm       Hierarchy.                 Relative market share,
           Structural architecture,   CGS/unit, Stock price,
           Capabilities,              Market capitalization,
           Competencies,              Efficiency, Economic
           Resources,                 value-added,
           Strategy

Indivi-    Living standards,          Income, Net Worth,
dual       Functional well-being,     Productivity, Job
           Personal growth,           opportunities, Education
           Increased human
           capital, Personal
           freedom, Physical
           safety

Unit of    Factors influencing            Benefits
Analysis   Competitiveness

Nation     Size,                          Greater investment
State      Extent of state                inflows,
           intervention,                  Greater employment,
           Pace of change,                Increased reserves,
           Starting state,                Higher economic growth
           Nature of developmental        rates,
           process, Location, Labor       Stronger currency,
           market flexibility (minimal    More value-added
           Exit Barriers), Market         economic activity
           openness (minimal Entry
           Barriers),

Firm       Ownership/type of firm,        Reduced costs, Antipodal
           Size, Economic sector,         commerce, Increased
           Ability to harness             strategic choices,
           intellectual capital, Global   Competitive intelligence
           economies of scale &           from World-wide Web
           process integration,
           Flexibility, Innovativeness

Indivi-    Ability, Skills, Motivation    Instant choice, Greater
dual       Effort                         choice, Increased
                                          mobility, More
                                          entrepreneurial
                                          opportunities, Increased
                                          learning

Unit of    Downsides
Analysis

Nation     Greater economic/political
State      & security concerns,
           Geographic advantages
           neutralized,
           Labor market dislocations
           & unemployment,
           Cultural/social value
           erosion, Cyber crime,
           Political/institutional
           erosion

Firm       Erosion of location
           advantages, Short-term
           unsustainable advantages,
           Increased threat of new
           entrants, Need to
           constantly rejigger
           business models, upgrade
           capabilities; decreased
           reaction times; Piracy,
           Disintermediation

Indivi-    Relentless pressure,
dual       Intrusion into privacy,
           Compressed
           competency/capability
           spans, Disconnect from
           social interactions

COMPETITIVENESS: A BEGUILING CONCEPT?

Competitiveness in the global (and increasingly digital) 21st century economy is a beguiling concept. Business people, politicians, intellectuals and individuals have debated the effects of increased competitiveness. Competitiveness has been prescribed as the antidote to a number of social problems ranging from unemployment and inflation to developmental roadblocks, societal sclerosis and regional tensions. Yet a rousing and contradictory chorus is heard from organized labor, environmentalists, cultural advocates and champions of nationalism. The chaos that prevailed during the WTO meetings in Seattle (Klee, 1999; Magnusson & Bernstein, 1999), and the more recent demonstrations that occurred in Washington at the IMF and World Bank annual meetings (Bernstein, 2000; Cooper & Phillips, 2000; Miller, 2000; Taranto, 2000), is illustrative of the strong feelings that issues related to globalization, open markets and increased competitiveness frequently evoke (Bernstein & Magnusson, 1999). The issues include ending farm subsidies, reducing tariffs on goods and services, protecting e-commerce from taxes and regulations, adding environmental protections to trade agreements, the need for labeling guidelines for bio-engineered foods, ensuring labor rights, enforcing stronger antitrust rules, and the need to reexamine current investment rules. By contrast, developing nations would like to see more relaxation of anti-dumping enforcement, the creation of special rules for developing nations, the opening up of export markets for farm goods, clothing and textiles, and the limiting of intellectual property safeguards. However, beyond the hope and hype raised by protagonists on both sides of the debate on global competitiveness, what is the real zeitgeist?

It is worth pondering whether societies, firms (and ultimately individuals) have desirable end-states other than that of `being competitive.' Evidence suggests that the forces of technological change and the pressures of global competition are inexorable for societies, organizations, and ultimately for individuals. One solution is for societies to be closed off to outside influences, which would shield them from alien cultures and foreign values and the forces of international competition. However, this would be at the expense of systemic progress and social vitality. Closed systems exhibit negative entropy, which gradually leads to deterioration, atrophy, and eventual decay. Prior experiments with closed societies like those in Albania, Burma, China (for a time in the early years of Communism), and Haiti (under Papa Doc Duvalier) have been less than stellar successes in terms of human development and societal progress along basic economic indicators. Over time, each of these societies has been forced to open up. Each did so for different reasons, but common to all of them has been the imperative to improve living standards for their impoverished populaces and catch up with the pace of development in their more-open, contiguous neighboring states. Consequently, it is safe to assume that for societies, organizations and, by extension, for individuals, it is possible to stymie but not altogether close themselves off from the forces of change that accompany the global march towards the competitiveness frontier. Thus, the assumption, which is the cornerstone of this paper, is that the drive for competitiveness is unavoidable, and is in fact useful for all levels of a society.

Along with globalization, technology is also inextricably linked with competitiveness. In the knowledge-based economy, technology is the `enabler' that facilitates the creation of high valued-added products, high valued-added jobs and concomitant higher wages. Globalization is also facilitated through the use of technology (as some of our later discussions will illustrate). Thus competitiveness, globalization and technological progress are inseparable, and constitute the focal troika in our discussions (see Figures 1 & 2). These three constructs are highly interrelated and inseparable, and the advancement of each individual factor will also further the other two.

Competitiveness has been studied at different levels of analysis. Regrettably, discussions of competitiveness do not always take note of the different meanings and corresponding implications of competitiveness when viewed at different levels. To avoid confusion and focus our presentation, we recognize three such levels of the analysis (see Table 1) and examine the benefits and drawback of competitiveness at each level. Table 1 distills the key points we explore in analyzing the following issues:

* The societal units for which competitiveness is traditionally analyzed (i.e., nation-state, firm, and individual).

* The concepts that have been defined in the literature for that societal unit of analysis.

* The dimensions commonly associated with competitiveness (at the appropriate level of analysis).

* The factors that have been predicated to influence competitiveness for that unit.

* The benefits obtained from increased competitiveness (at that level).

* The downside effects from enhanced competitiveness.

National Competitiveness

As Table 1 indicates, the most commonly employed units of analysis for assessing competitiveness are the nation-state, the firm, and finally the individual. The broadest unit is that of the nation-state. The nation-state is a natural choice for analyzing competitiveness since data and statistics on economic and developmental parameters are gathered, stored and distributed both by national governments as well as by multilateral agencies (like the IMF, the United Nations, and the World Bank). For a nation-state, its sovereignty, the societal culture and values (Hofstede's 1980 dimensions are the most commonly used constructs here), the state of human development, and living standards are dominant and defining constructs (shown in row 2, column 2 of Table 1).

Among the many dimensions that are commonly used to characterize competitiveness of a nation are its balance of trade, GNP per capita, per-capita income, the nation's foreign exchange reserves, employment levels, inflation, savings rates, investment inflows and the presence of value-added economic sectors (Johnson, Holmes, & Kirkpatrick, 1998; O'Driscoll, Holmes, & Kirkpatrick, 1999; Richards, 1999). All of these criteria are shown in the 3rd column (row 2) of Table 1.

The extant business literature has also identified some of the variables that influence the competitiveness of a nation. These variables include its size (i.e., total population and resultant purchasing power [see Johnson & Sapsford 1998, King 1998, Kissinger 1997; Zachary 1999]); its location (i.e., whether it is located close to major economic power centers like the Triad or whether it is located at the confluence of major supply routes like Singapore); the extent of state intervention in the economy (i.e., whether the government adopts a more `hands-off' laissez faire approach [see Johnson et. al. 1998; O'Driscoll et. al. 1999]); the pace at which change is introduced (i.e., `gradual' versus `shock therapy' treatments [see Kotler, Jatusripitak & Maesincee, 1997]); the initial starting state at the onset of the march towards competitiveness; the nature of the development process chosen (i.e., import substitution, export-led industrial development, technology substitution, choice of growth versus income distribution [see Kotler et. al., 1997]); labor market flexibility, and market openness (Johnson, Holmes & Kirkpatrick, 1998; O'Driscoll, Holmes & Kirkpatrick, 1999).

While larger size offers major advantages, smaller nations like Iceland, Estonia, Netherlands, Malta and Singapore have often outperformed their larger neighbors on well-established indicators of global competitiveness (Zachary, 1999). Moreover, limited social experiments are more feasible in smaller nations with the possible localization of unintended consequences. Strategic location can also be an important source of comparative advantage, both in terms of back-end sourcing, as well as for downstream distribution and marketing functions. Contemporary work on clusters and the economics associated with them (Porter, 1998) has also emphasized the advantages of being located close to clusters of excellence and innovation.

Governmental intervention in economic decisions can range from setting policy in order to ensure macroeconomic stability and enhance the economy's attractiveness for investment, to more selective interventions like discretionary, directed industrial (sector) promotion, assisted export-led trade policy, and provision of strategic financing (through low interest rates and directed credit). Another area would be enabling the co-existence of alternative forms of ownership such as state-owned, state-cooperatives, private cooperatives, private ownership and foreign private ownership, as is done in China. There is also a verdant literature (Gabrisch & Laski, 1991; Sachs, 1992) on the merits (and downsides) of a `shock-therapy' approach to transition (as was tried in the Czech Republic and Poland) versus a more `gradualist' approach, as was undertaken in China & Hungary. Gradual changes are often absorbed and neutralized by the structure of a centrally planned economy. Consequently, many of the features of a command economy--like intervention in the allocation of inputs, pervasive price controls, dependence on state bodies for decisions, and severe regulations and restrictions on the private sector--remain in place even after reforms are completed. By contrast, shock therapy reallocates resources and raises economic efficiency quickly, thus providing stronger incentives for the emergence of a new economic system. However, it causes trauma in terms of a sharp reduction of real wages, output, employment, and consumption. Massive real-income losses may induce demands for wage increases leading to an inflationary wage-price spiral. Such radical reform might create social tensions leading to adverse consequences. The pre-existence of institutions, the necessary infrastructure, and a market-friendly economy at the onset of transition are also important influences on the rapidity with which the country can become globally competitive.

Also important are the choices regarding the type of developmental model the country chooses to follow. `Export-led' development was spectacularly successful for the pack-of-eight East Asian countries (viz. Japan, S. Korea, Taiwan, Hong Kong, Singapore, Thailand & Malaysia) for a period starting from the 1960s to the 1990s. The common key features contributing to success in export performance for these countries included high savings and investment rates, entrepreneurial dynamism (on the part of the populace), selective public policy interventions and high labor productivity. However, the malaise of Japan (whose economy began unraveling in the early 1990s) and the subsequent travails of Thailand, S. Korea, Hong Kong and Malaysia during the Asian financial meltdown (in 1997-1998) have exposed the limitations of this model of development. Alternatively, `import-substitution' with a more closed economy was chosen by countries like Argentina, Mexico (prior to NAFTA), the Philippines and India, where these countries substituted domestic production for previously imported simple consumer goods and later followed up by also producing more sophisticated manufactured goods indigenously. Policy instruments here included high import tariffs, high non-tariff barriers, guaranteed low interest rates, low direct taxes, high subsidies and generous government procurement. Such policies did not engender supercharged economic growth (in the high single digits as was recorded in the former group of countries). Nevertheless, this approach produced steady (but unspectacular) progress over a sustained period, without the accompanying economic shocks that resulted when targeted export markets went into a slump (as was the case with the former group of countries), or when the global or regional economy plunged into a recession. But there were still aggregate economic costs in terms of inefficiency, higher costs of production, lower consumer welfare, a divergence between domestic and world market prices, overvalued currencies, rationing of scarce inputs, and rent seeking in shortage situations. In addition, excessive regulations gave rise to a slow and arbitrary bureaucracy, corruption, lengthy procedural delays and uncertainty. Freer labor markets attract investments in production capacity, and the absence of trade (as well as tariff) barriers is also conducive to attracting capital inflows. All of the above factors are also listed in Table 1 (row 2, column 4).

A more competitive economy benefits from greater investment inflows, greater employment levels, increasing foreign exchange reserves, higher economic growth rates, a stronger currency (i.e., rising in relation to other major currencies), and the increased relative proportions of value-added economic activity such as high technology and knowledge-based industries (as shown in row 2, column 5 of Table 1). Many of these variables are also dimensions of national competitiveness (see column 3 of Table 1). These variables also fuel growth and create employment opportunities. The combination of growth and employment can raise the standards of living in a country.

However, the greater opening up of the economy needed to enhance competitiveness can also have potential downside consequences (as shown in column 6 of Table 1). The onset of technological changes and globalization of markets and customers may neutralize some of the comparative and competitive advantages stemming from favorable location. Market dislocations, greater unemployment with concomitant social costs, the erosion of traditional values (and their negative consequences), as well as the breakdown of political (and other types of) institutions are some of the negative societal consequences of increased competitiveness. Speculative outflows of capital from five of the more open Asian economies in Indonesia, Malaysia, the Philippines, South Korea and Thailand wiped out over 10% of their GDPs at the height of the Asian financial crisis in 1997 (Bhagawati, 1998). Unfortunately, in today's global currency markets (where trade equals $2-3 trillion a day), most central bankers have very limited control over the forex markets and consequent speculative attacks against their country's currencies (Fairlamb, 2000).

In the quest for enhanced competitiveness, some societies may experiment with trying to leapfrog stages of development by proceeding directly from an agrarian economy to a knowledge-based economy, thereby bypassing the industrial manufacturing phase (Murray, 1999). These compressed development spans can also result in social tensions and fissures. Adaptation and social changes are significantly slower processes than major technological shifts. Furthermore, the path towards the competitiveness frontier often leads through the forest of national trials and tribulations, characterized by a shared national sense of inadequacy, gloom, and shame (witness the example of Japan through much of the 1990s, the widespread hand-wringing in the U.S. during the depths of the 1990-'91 recession, and South Korea's depressed national psyche after the Asian economic crisis of 1997). Such feelings are exacerbated by the acquisition of the nation's industrial `crown jewels' by foreign owners. Examples include the management takeovers of Mazda (a Japanese company) by Ford and, more recently, that of Nissan by Renault, as well as the current efforts to sell Daewoo Motors (of South Korea) to U.S. or other interested foreign auto companies (Lee & Simison, 2000).

Nation-states are also increasingly vulnerable to crime (i.e., cyber-crime, drug trafficking, money laundering) as natural borders become porous because of advances in technology (Shishkin, 2000). Regulation and considerations of extra-territoriality currently hamper cross-border interception of electronic mail, faxes, and phone calls between criminals. This enables sophisticated crime syndicates to exploit the limitations of a national security agency's enforcement capabilities. Increasing competitiveness can also erode the sense of `nationhood' by facilitating greater immigration. Competitive nations often import skilled professionals (as well as other types of labor that are in short supply). The Silicon Valley is a magnet for talented cyber professionals from all over the world, and relies on this inflow of knowledge workers to maintain its preeminence (Porter, 1998). Similarly, migratory patterns in the EU are also on the increase. However, immigration also brings people with different cultural orientations, beliefs, values and customs. Over time, these newcomers diffuse into the mainstream of the national psyche, thereby changing it. Xenophobic politicians often exploit the misplaced fears and prejudices (of native populations) regarding the threats posed by immigrants (e.g., Pat Buchanan in the U.S. is a practiced exponent of this political technique, with Haider in Austria representing a more recent extreme example). The perceived threat is often linked to the existing concept of `nationhood'.

Frequently, economic policies intended to promote national competitiveness can have unintended cultural and social effects. For example, countries that adopt privatization as a way of revitalizing their economies may (in the short term) experience rising unemployment, reductions in social welfare and public services, distrust in national institutions, and a corresponding rise in the popularity of anti-government political parties. These factors combine to complicate these countries' economic and social transitions and foster an atmosphere of distrust in governments and national institutions. The next most common societal unit whose competitiveness is often assessed, is the firm.

FIRM COMPETITIVENESS

It is important to differentiate between the `competitiveness' and `competitive advantage' of a firm. Competitiveness refers to a firm's ability to match the standards of the leaders in its industry (on various benchmarks and critical success factors), while competitive advantage is unique and accrues from the possession of asymmetric resources, capabilities, competencies (or even from location advantages). Competitive advantage enables the firm to garner higher than marginal returns. Thus, competitiveness relates more to the notion of symmetry while competitive advantage results from exploiting unique, firm-specific asymmetries.

Firms operate within the constraints imposed by the societal and economic fabrics within which they exist. If (as argued earlier) societies cannot afford to remain closed, firms have even less leeway to do so. Global technological changes (the widespread use of networked computers, universal access to the Web), facile communications (that enable dissemination of information/knowledge), greater physical mobility (enabled through increased travel and the permeability of national boundaries), and finally the trend towards greater societal openness, democratization and economic freedom (enabled through the WTO agreement and the opening of markets) have all made it imperative for firms to be more open to outside influences if they are to fulfill their primary economic functions and retain competitiveness.

Some of the most successful firms in the New Economy, like Cisco Systems, are characterized by their open architectures and consequent accessibility for their customers, suppliers, employees and collaborators (Byrne, 1998). Cisco networks tirelessly with all its important stakeholders (to enable this, they use the Web more effectively than any other big company), maintains an unrelenting customer focus, teams up with other companies for success, and shares wealth with its employees. In addition, corporate leaders always try and retain hands-on control while maintaining a personal touch in all their dealings. Cisco's awesome merger and acquisition machine, which has been swallowing and digesting other companies at a prodigious rate, can simultaneously acquire and integrate six companies at once (Goldblatt, 1999; Serwer, 2000). Cisco is also a ferocious competitor, whether it is pursuing an acquisition, a customer's account, recruiting talent, or lobbying against unfavorable legislation (Serwer, 2000). It aims to provide one-stop shopping for all customer-networking needs. Cisco also just logged its 40th consecutive quarter of record revenues and profits (ibid.).

The defining concepts for a firm are (as shown in row 3, column 2 in Table 1) its hierarchy (i.e., levels, extent and nature of centralization/decentralization of decision-making); the way it is organized (structure); its capabilities, competencies and resources, and, finally, its strategy. The competitiveness of a firm can be readily assessed in terms of some widely used performance and outcome indicators. These include relative market share, cost of goods sold/unit, stock price, market capitalization, efficiency, and economic value-added (all shown in row 3, column 3 of Table 1). The factors that moderate a firm's ability to become more competitive (shown in column 4) may include its ownership structure (family business, owner-controlled versus manager-controlled), the type of firm it is (state-owned, cooperative, private versus public sector), its size (large versus small/medium enterprise), as well as the economic sector in which it operates (i.e., whether the home country has a comparative/competitive advantage in that sector). The firm's global economies of scale, global process integration, flexibility for quick response to market conditions, innovativeness, and its ability to develop and harvest intellectual capital are also important moderating variables. Individually or combined, these factors can determine a firm's ability to achieve world-class competitiveness and use this capacity to create value.

The benefits accruing from increased firm competitiveness are varied. They may include (see row 3, column 5 of Table 1) a reduced cost structure, the ability to conduct antipodal commerce such as coordinating transactions between geographically dispersed entities or agents (viz. a U.S. company CFO sending number-crunching tasks to accountants located in Bombay at the end of the day, and having the finished figures back in his or her office the next day). Similar antipodal arrangements are now common in a variety of functions such as product design, software development, payroll services, physician dictation and transcription services, and a host of other service areas. Other benefits from improved competitiveness may also include increased strategic choices, and improved competitive intelligence enabled through using the Internet for one-to-one marketing and intelligence gathering (Hof, Green & Himelstein, 1998). Organizing principles in this fiercely competitive environment would be around networks based on interdependencies (e.g., Cisco Systems [see Byrne, 1998; Goldblatt, 1999; Serwer, 2000]). Instead of internal development, the competitive firm often relies on acquisitions and strategic alliances to expeditiously capture intellectual assets and next-generation products that are essential for adding value.

The serious downsides to this increased emphasis on competitiveness are shown in the cell in row 3 and column 6 of Table 1. Enduring competitive advantages requires constant innovation, a process that requires changing the firm's ongoing routines and systems. This may necessitate significant changes in the firm's skill base and, as a result, its labor force. These changes in the labor force bring in new talents and skills but at a heavy human cost. Downsizing often becomes necessary in these cases, leading to human dislocation. Thus innovative strategies enhance competitiveness, but at the same time exhaust the firm's energy.

There are other serious side effects to a firm's pursuit of competitiveness. Such firms may experience an erosion of traditional location advantages as well as the inherent unsustainability of any form of competitive advantage. They also face the increased threat of new entrants, experience decreased reaction times (to these and other environmental threats) and the increased threat of disintermediation (Coy, 1998). A firm's position in the digital/knowledge economy's value chain is constantly in danger of being overrun or displaced by infomediaries (Hof, 1999). Relationships between producers, wholesalers, distributors, retailers and ultimate customers are all up for grabs by opportunistic rivals (op. cit.). In such `frictionless capitalism', hardly anybody makes any money (Hamel & Sampler, 1998). Decreased reaction times are also manifest in the form of build-to-demand models that help to keep inventory to a minimum (op. cit.). While PC manufacturers like Dell & Gateway have been building-to-order for some time, even titans of the old industrial economy like GM and Toyota are now veering to this model (Shirouzu, 2000; Simison, 2000). This will require these auto-manufacturers to completely E-engineer their manufacturing operations to accommodate `modular' manufacturing with `plug-and-play' capabilities (Simison, 2000). Toyota has already developed a way of producing a car within just five days of receiving a customer's order (Simison, 1999). These auto-manufacturers will also need to revamp their supply chains and establish a global standard for purchasing online (Wessel & Shirouzu, 2000). In addition to having to upgrade its capabilities, a firm will also need to constantly rejigger its business model (Byrnes & Judge, 1999; Gomes, 2000; Hamm, Stepanek & Reinhardt, 1999). This is different from (and exponentially more complex than) more traditional competence and resource management. All of the above changes, arising out of the need to remain competitive, impose pressures on the firm and its managers.

The pursuit of world-class competitive standards also places pressures on companies to downsize and restructure their operations. While financially beneficial in the short term, reorganizations and downsizing efforts have eroded the bonds of trust and loyalty that have existed among employers and their employees for decades. This erosion can only undermine the long-term competitive position of companies, preventing them from maximizing their shareholders' wealth.

In a world where standards are constantly being raised, the pursuit of global competitiveness can fatigue organizations, their managers and their employees. Technical changes are hard to introduce in an existing organization but making changes in the firm's culture, structure and systems is even harder. People need time to comprehend and absorb information and make the changes required to adapt. Technological and competitive changes give companies and their employees little time to understand the forces to which they have to respond.

Attaining and maintaining global competitiveness requires companies to ally with each other, and form enduring and beneficial relationships. Companies gain resources (including knowledge) and learn from these alliances, making it possible to pursue new strategic mandates or build new sources of capabilities. In this highly interconnected world, competition takes place between networks--rather than between firms. Firms that are parts of powerful networks are able to survive, succeed and thrive. Over time, however, members of a network are subsumed by stronger firms, a process that can lead to a significant consolidation among industry players. Alliance and network memberships often lead to acquisitions and mergers, a process that can reduce competition over time.

As the above discussion makes clear, competitiveness at the firm level can be a double-edged sword. It can energize the firm to pursue excellence through innovation, while at the same time compelling it to focus on financial gains that overlook the development of human capital. The following section deals with competitiveness at the level of the fundamental building block of all social systems, namely the individual.

INDIVIDUAL COMPETITIVENESS

Ultimately, the cascading effects of increased competitiveness become manifest at the level of the individual. For individuals, living standards, a sense of functional well-being, personal growth opportunities and freedoms, as well as physical safety, are important considerations, and can be argued to be defining concepts (see row 4, column 2 in Table 1). Also, the ability and opportunity to upgrade one's human capital (through learning, development and training) is an important consideration. Dimensions of competitiveness at the individual level include income, net worth, productivity, the availability of job opportunities, and educational level (column 3).

The factors influencing the capacity of an individual to become competitive would include intrinsic abilities, skills, motivation levels, and the amount of effort (shown in row 4, column 4 of Table 1). Competitive individuals benefit from having instant choice, and also having greater (time/place/product) choices in the labor market. The Web fundamentally changes customer expectations about convenience, speed, comparability, price and service (Hamel & Sampler, 1998). Online consumers can more efficiently select out of cyberspace whatever interests them, leaving behind whatever does not. This renders obsolete the old marketing concepts of push and pull. The initiative now rests with the consumer. It increases efficiency in consumer buying decisions by enabling comparisons among products, feature-for-feature, and dollar-for-dollar. Customers can read unbiased product reviews and participate in online discussion groups. For example, Junglee's Web site integrates information from dozens of online merchants and intelligence agents to find the best deals on a particular product. This system allows customers to search for products and bargains all over the Net. The Web also enables customers to buy complementary products in a convenient, economical package, such as being able to select and combine the optimal combinations of airline, hotel, car-rental and sightseeing tours, tailored to their individual needs. Individuals also benefit from increased mobility. Instead of the organization owning individuals and their skills, individuals who are more competitive are now in the enviable situation of being able to rent their capabilities and skills to the organization at a competitive market rate (based on the labor market's demand for such a unique combination of skills). The Web also provides individuals with the current information on their relative worth in the external labor market. These individuals can also be more entrepreneurial and increase their rate of learning (as shown in row 4, column 5 of Table 1).

The downside of competitiveness (for an individual) includes the relentless pressure to perform, compressed competency/capability spans and a sense of disconnectedness from social interactions and cultural bearings. Further, there are potential dangers of invasions of privacy (Mitchener & Wessel, 2000; Moss, 1999; Weber, 2000). Potential privacy intrusions can range from the dissemination of personal demographic information, to the release of financial records, medical records and family information (Baig, Stepanek & Gross, 1999).

Emphasis on global competitiveness has given individuals bountiful options to enjoy a high quality of life, learn and grow. Individuals are able to connect with fellow citizens beyond traditional political and religious institutions. People are also able to communicate with others in distant lands and cultures. Technological changes have made the global village accessible, giving individuals access to information at the speed of the Internet. However, the relentless pace of the change makes it difficult to fully assimilate this knowledge and digest its full implications. Moreover, empowerment for the individual has also threatened traditional institutions by enabling fringe hate and anarchist groups to have a voice and gather support, raising concerns about the stability of democratic institutions. Needless to add, these changes have also made it difficult for corrupt political regimes to silence dissent and suppress individual freedoms. Thus, as with all human experiments, global competitiveness has both enriched and challenged the individual.

A few logical questions now arise. What is the extent to which the effects described at the three levels are interdependent? How do the interaction effects work? Is there a virtuous cycle or a vicious spiral? The-next section discusses these, and other conundrums, posed by this emergent new paradigm.

A BALANCING ACT: INSTITUTIONAL ENTREPRENEURIALISM

A central theme that runs across all these predictions is that globalization will bring about fundamental changes in the knowledge base and capabilities of existing institutions, thereby setting the stage for innovation and risk taking. The cornerstone of future organizational strategies, therefore, lies in greater entrepreneurialism that improves a company's ability to capitalize on opportunities in the changing global landscape. Entrepreneurship means discovery of new products, goods, systems, and creating new industries. It also means creating and founding new types of organizations that thrive under pressure. Firm-level entrepreneurialism is thus viewed as the key to future human development and national competitiveness. Figure 1 captures the chain of events proposed to enhance competitiveness through increased globalization. Futurists highlight two additional forces (besides entrepreneurship) that are likely to determine the future competitiveness of firms and nations. The first is the accumulation of technological resources through the firm's internal development as well as through acquisitions. These firm-level activities are likely to benefit from the existence of systems of innovation (Porter, 1998) as well as from regional location advantages. The second factor is the development of intellectual capital where the firm acquires, develops and harvests the brainpower of its employees. As Figure 2 indicates, intellectual capital can be a key foundation of the firm's global competitiveness. A company can use this capital to penetrate new competitive frontiers, redefine its industry's boundaries, and create radically new industries where new rules of competition apply.

A key point about Figure 2 is that firm-level competitiveness (which we argued in figure 1 to be a fundamental building block of national competitive advantage) is likely to be more attainable and defensible because this competitiveness is grounded in multiple interrelated factors. Intellectual capital is required for successful technological accumulation, and entrepreneurship makes it possible to leverage and exploit the firm's intellectual capital and technological accumulation in innovative ways that create a competitive advantage (viz. refer to the example of Cisco Systems cited earlier). Our discussion also suggests that the concept of competitiveness has to be broader, giving greater attention to institution building as well as to human development and growth. We believe four guiding principles deserve special attention on the part of public policy makers, managers and scholars as they consider the future of global competitiveness.

Balanced Growth is Key

The time has come to recognize that there is a cost for progress and that economic development requires some tradeoffs. In particular, social progress should be considered when other aspects of global competitiveness are evaluated. As we have stated throughout this article, competitiveness is about human progress and we cannot measure this simply by financial or technological criteria alone. Consequently, some societies may have to accept lower growth rates in order to ensure the protection of their resources, environments, and the spiritual well being of their citizens.

Different Growth Models are Viable and Desirable

Accepting that competitiveness has different meanings for different societies suggests that there are various ways of achieving competitiveness. This is an important point to remember as some economists and public policymakers have devoted considerable energy to selling other countries on growth models that are based on the experience of the U.S. These models have produced spectacular results and therefore cannot be ignored. Yet, these models are grounded in cultural and institutional norms that do not translate well in other societies. Institutions should reflect and embody national culture and heritage. Growth and development models should do the same. The wholesale adoption of economic models and theories that have been successful in distant cultures often alienates citizens and fuels public distrust.

Institutional Evolution

Countries, especially those with emerging economies, need to give special attention to building and revitalizing their institutions. Economic development in pursuit of global competitiveness requires significant political and social changes that can tax the individual. Institutions should be evaluated to determine their ability to communicate and further those values that guide a nation's quest for competitiveness.

Building and reforming national institutions has proven to be a formidable challenge. These changes can provoke ideological wars about the concept of a nation, its values and the role of the individual. Difficult as these debates can be, they are an essential part of the transformation a nation has to undergo to achieve global competitiveness. It is important, therefore, to gain strong commitment for a nation's plans for development. This will require revamping the mission and functioning of key political and economic institutions to allow more frequent and freer flow of information, exchange of ideas, and the gathering of feedback data that promotes strategic control.

Institutional Entrepreneurialism

The pursuit of competitiveness requires risk taking and innovation. These are the hallmarks of entrepreneurialism. One of the key roles public policymakers' play is in creating a setting in which individuals and firms are willing to pursue entrepreneurial activities. This can be achieved by changing and enforcing laws governing property rights, through allowing people to reap the benefits of their hard work. Another approach is to invest in developing intellectual capital, allowing individuals to gain the skills they need to build companies. A third area that demands attention is the building of the infrastructure that allows the transfer of information and makes it possible for individuals to recognize emerging market opportunities and capitalize on them. The flow of communication and information makes it possible for firms and individuals to share their discoveries and pursue opportunities through innovation.

One of the most important changes that has occurred in thinking about competitiveness is the recognition of the need to move away from institutional imperialism of the state and instead, promote institutional entrepreneurialism. Institutional imperialism means that planning for competitiveness is shaped by public policymakers and then mandated downward. By contrast, institutional entrepreneurialism is predicated on a belief that some shared appreciation of social and political ideals is important and that both planned and autonomous actions are needed to achieve competitiveness. Institutions and individuals have to experiment with different ways to gain insights into the best ways to attain competitiveness.

CONCLUSION

For years, scholars and public policymakers have touted the virtues of global competitiveness and its potential contributions to the well-being of nations, firms, and individuals. However, little attention has been given to understanding the downside effects of the heightened interest in, and the consequent focus on, global competitiveness. As this article makes clear, competitiveness is a complex and multidimensional variable that can serve as a double-edged sword. It can spur nations, firms and individuals to innovate. Alternatively, it can provoke debates on the concept of a nation, the meaning and role of the firm, and the contributions of individual actions and initiatives. However measured and evaluated, competitiveness is a topical issue that will be fervently debated for the foreseeable future. Nonetheless, the usage of, and measures for, competitiveness should consider its crucial cultural, economic, political, social and technological implications at all of the different societal levels that this article has highlighted.

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Rajaram Veliyath is in the Department of Management in the Coles College of Business at Kennesaw State University, Kennesaw, GA.

Shaker A Zahra is in the Department of Management in the J. Mack Robinson College of Business at Georgia State University, Atlanta, GA.