Working paper Ljubljana, 2002 Summary



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BENCHMARKING COUNTRIES: COMPARING COMPETITIVENESS OF FINLAND, IRELAND AND SLOVENIA


BENCHMARKING DRŽAV: PRIMERJAVA KONKURENČNOSTI IRSKE, FINSKE IN SLOVENIJE

Marko Jaklič

Hugo Zagoršek
Faculty of Economics, University of Ljubljana

Working paper

Ljubljana, 2002



Summary

The paper seeks to identify and compare the competitive strategies of Finland, Ireland and Slovenia. It goes beyond the ordinary benchmarking process of identifying best practices. It acknowledges and explores the specific features of each country and tries to identify the drivers of success for each of them. It aims to find out why these economies, otherwise comparable in size and certain other factors, achieve different rates of economic development. In the paper we explore and compare major elements of the national business systems, such as government, financial environment, human resources R&D policies, and infrastructure. Next we identify four common factors of success for Ireland and Finland, and draw a comparison with Slovenia. At the end some suggestions are provided on how can Slovenia do better.



Povzetek

V študiji analiziramo in primerjamo strategije za doseganje konkurenčnosti, ki so jih ubrale Irska, Finska, in Slovenija. Osnovno vodilo študije je ugotoviti, zakaj te države, drugače medsebojno dokaj podobne po velikosti, številu prebivalstva, in nekaterih drugih dejavnikih, dosegajo različne stopnje gospodarskega razvoja. Analiziramo sedanjo konkurenčnost teh držav ter ugotavljamo globlje družbene, ekonomske in institucionalne dejavnike, ki so bili ključni za njihov uspeh. Države najprej primerjamo po osnovnih elementih nacionalnega poslovnega sistema, kot so država, človeški viri, finančni sistem, raziskave in razvoj ter infrastruktura. Nato izpostavimo ključne skupne in posebne dejavnike uspeha Irske in Finske ter na osnovi tega oblikujemo nekaj predlogov za nadaljnji razvoj Slovenije.


INDEX


1 INTRODUCTION 4

2 DEFINING COMPETITIVENESS 4

2.1 IMDs World Competitiveness Yearbook 5

2.2 The Global Competitiveness Report 7

2.3 Economic Development 12

2.4 Benchmarking competitiveness 14

3 BENCHMARKING COMPETITIVE POSITIONS OF IRELAND, FINLAND AND SLOVENIA 15

3.1 Introduction to Three Economies 15

3.2 Ireland 16

3.3 Finland 18

3.4 Slovenia 20

4 GOVERNMENT & COMPETITIVENESS STRATEGY 22

4.1 GOVERNMENT EFFICIENCY 22

4.2 COMPETITIVENESS POLICY 26

4.3 PROMOTING ENTREPRENEURSHIP 33

4.4 DEVELOPING CLUSTERS 35

5 HUMAN RESOURCES 39

5.1 SOCIETY: CULTURAL NORMS & VALUES 39

5.2 EDUCATION 43

5.3 LABOUR MARKET 47



6 NATIONAL INNOVATION SYSTEMS AND R&D POLICY 48

6.1 Finland 48

6.2 Ireland 51

6.3 Slovenia 52

6.4 Comparison 53

7 FINANCIAL ENVIRONMENT 54

7.1 Finland 55

7.2 Ireland 57

7.3 Slovenia 58

7.4 Comparison 59


8 (ICT) INFRASTRUCTURE 61

8.1 Finland 61

8.2 Ireland 62

8.3 Slovenia 62

8.4 Comparison 63

8.5 Software clusters 64



9 KEY SUCCESS FACTORS OF IRELAND AND FINLAND 66

9.1 Common factors 66

9.2 Specific factors 69

10 WHAT COULD SLOVENIA DO 69

11 REFERENCES 78

1INTRODUCTION

There is no doubt that successful, innovative and competitive enterprises form the foundation of nation’s prosperity. They are the main engine of competitiveness. However, nations shape the environment in which those enterprises operate and thus have profound influence on their competitiveness. A significant part of the competitive advantage of nations stems from existing resources and institutional framework as well as from far-reaching incentive policies emphasizing knowledge creating and entrepreneurship, promoting exports and attracting foreign companies. International success of the country/company depends on its ability to innovate, on size and efficiency of investments in R&D, human capital potentials, which depends on education system, and on technological infrastructure, which is partly historically defined (Jaklič, 1999, 118). The most successful countries recognize strengths and weaknesses of their environments. Just like businesses they develop distinct competitive strategies, tailored to specific conditions of their economy and society in general.

This article tries to identify and compare competitive strategies of Ireland, Finland and Slovenia. It goes beyond ordinary benchmarking process of identifying best practices. It acknowledges and explores specifities of each country and tries to identify drivers of success for each of them. Its aim is to find out why those economies, though comparable in size and some other factors, achieve different rates of economic development. Why is Finland or Ireland such a success? Why does Slovenia lag? And what can Slovenia do to become more competitive?
We believe that Slovenia can learn much from the experience of two “developmental stars.” However, we warn against blindly copying best business practices or specific public policies found in those two countries. Without a thorough grasp of the conditions under which policies succeed, benchmarking exercises may lead to wrong conclusions, since similar policies cannot be expected to render similar results in different environments (UNESCO, 1998). Therefore, this paper aims to provide comprehensive picture of current competitiveness of three nations and various factors that have influenced it over time.

Second chapter addresses the issue of competitiveness of nations in connection with three stages of development. Some thoughts and findings about methodology of competitiveness benchmarking are also presented. Next section introduces three economies. Following chapters compare those countries in terms of government and industrial policy strategy, human resources, national innovation system, infrastructure and financial system. In the final chapters key success factors that emerge as recurrent theme throughout the report, are presented. They may be common to both countries or specific to just one of them. Instead of the conclusion some ideas about possible actions that Slovenia can take to become more competitive are presented.




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