International Journal of Emerging Markets

Strategies and competitiveness for emerging countries: A comparative study

among three South-American countries
Segundo J. Castro-Gonzales Maritza I. Espina Raquel M. Tinoco-Egas
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To cite this document:
Segundo J. Castro-Gonzales Maritza I. Espina Raquel M. Tinoco-Egas , (2017)," Strategies and
competitiveness for emerging countries A comparative study among three South-American countries
", International Journal of Emerging Markets, Vol. 12 Iss 1 pp. 125 - 139
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Competitiveness
Strategies and competitiveness for emerging
for emerging countries countries

A comparative study among three

South-American countries 125
Segundo J. Castro-Gonzales and Maritza I. Espina Received 24 December 2014
IEN Business School, Universidad del Este, Carolina, Puerto Rico, and Revised 8 February 2016
Accepted 17 March 2016
Raquel M. Tinoco-Egas
Facultad de Ciencias Empresariales Machala,
Universidad Tecnica de Machala, Machala, Ecuador
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Abstract
Purpose The purpose of this paper is to assess the strategies for improving the competitiveness of Ecuador
(ECU), Colombia (COL) and Peru (PER). It is one of the first studies using 36 indicators within the context of
three South-American countries. It fulfills the lack of knowledge at the scientific work and its practical
objective by identifying the factors that public policy may take into consideration urgently to improve the
global competitiveness level of the countries for a sustainable development and considerations for a long-term
integration.
Design/methodology/approach It analyzes data of four-year average of international sources such as:
The International Monetary Fund, The World Bank, The United Nations, among others. The factors were
selected after a careful literature review, the final selection and the weight of each determinant was calculated
using partial least squares-structural equation modeling. The calculation of the national and international
competitiveness indexes used the double diamond for competitiveness theoretical frame.
Findings From a national perspective, it was found that COL is the most competitive country followed by
PER in the second place and ECU is in third. Internationally, the authors have found also that COL is the most
competitive economy, PER in second place and ECU is in third.
Research limitations/implications This study has found that in order to improve the level of national
competitiveness, ECU has to concentrate on improving and strengthening formal and non-formal institutions,
which are reflected in: four factors, PER four, and COL three. To reach international competitiveness, ECU
should improve four factors, PER five, and COL five formal and non-formal institutions.
Practical implications This research is the first one on its field, it uses 36 competitiveness indexes and the
PLS-SEM statistic methodology to assign the weight of competitive indicators and the DD theoretical frame to
determine the relevance of its factors and it is oriented to advise decision-makers and provides the appropriate
police guidelines for the national competitiveness strategy and improve their quality of life of its residents from:
ECU-COL-PER. On the other hand, the academic implications of these results appear when calculating the
weight-load competitiveness indexes using inferential multivariate analysis; it provides researchers and
practitioners an analysis tool for comparing competitive factors of emerging countries from the DD approach
without any weaknesses, as a framework to assist in formulating economic policy at the national and regional level.
Social implications Due to the difficulty of competitiveness operationalization, this research uses
PLS-SEM to correlate its factors as the statistical methodology and the DD as the tool for the identification of
theoretical indicators. This work may be taken into consideration for an immediate and sustainable
improvement in order to win competitiveness than its neighbors.
Originality/value This study is unique because the factors were selected after a careful literature review;
the final selection and the weight of each determinant was calculated using PLS-SEM. The calculation of the
national and international competitiveness indexes used the DD for competitiveness theoretical framework
applied for the first time in a research for South America with 36 determinants. The result of this analysis
compares the weak and strong determinants of these three member countries of UNASUR for the
development of their complementarities and therefore the recommendations of public policy.
Keywords Latin America, Emerging economies, Competitiveness, PLS-SEM, International strategy
Paper type Research paper International Journal of Emerging
Markets
Vol. 12 No. 1, 2017
pp. 125-139
This research was sponsored by Prometeo Program of the National Secretary of Higher Education, Emerald Publishing Limited
1746-8809
Science and Technology (SENESCYT) Ecuador. DOI 10.1108/IJoEM-12-2014-0222
 IJOEM 1. Introduction
12,1 Latin America (LATAM) is a region with high growth and development potential in the near
future (Castro-Gonzles et al., 2014; WEForum, 2012). From Mexico to Argentina, there are
huge natural and energy resources, with a population of more than 600 million the great
majority speaking the same language and according to the World Bank, it will jointly
become the third most powerful economic group in the world (Bonari et al., 2009).
126 Castro-Gonzles et al. (2015) argue that there is few scientific research related to the
competitiveness of the countries in LATAM, even less for South-American countries, and
almost no published studies on Ecuador (ECU), Peru (PER) and Colombia (COL). There is
existing data which have been analyzed and their results and indicators commented and
published by the World Economic Forum (WEF) and the International Institute for
Management Development (IMD). The lack of scientific literature on competitiveness for
ECU-PER-COL is one of the main reasons of this research; this paper may capture the
current situation of the countries and the results could be used for comparison studies
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related to public policy changes or considerations for long-term integration.

Since some researchers hold that South-American countries compete only to attract
foreign direct investment (FDI), the first objective of this research is to compare the
determinants of competitiveness of ECU-PER-COL, to study what main strategic factors
each country should consider to achieve improved competitiveness. The second objective is
to value these determinants with partial least squares-structural equation modeling
(PLS-SEM). The last objective is to turn this tool into a helpful one when designing public
policy and when assigning resources to strategic sectors to their governments.
We used the double diamond (DD) model proposed by Moon et al. (1995) since it is
recommended when analyzing competitiveness of small economies with intensive exporting
activity (Cho and Moon, 2000; Moon, 2006; Moon et al., 1998); it solves the deficiencies of the
model proposed by Porter (1990) for competitiveness analysis. The DD model was also
validated by Moon et al. (1998), Pea-Vinces (2010), Castro-Gonzles et al. (2014), among others.
The factors were selected after a careful literature review, the final selection and the weight
of each determinant was calculated using PLS-SEM. The calculation of the national and
international competitiveness indexes used the DD for competitiveness theoretical frame
applied for the first time in a research of South America with 36 determinants. We chose the
comparison among ECU, COL and PER for this emerging countries study, since the three of
them belong to the Andean Community Trade Group with all trade infrastructures (including
maritime port); besides they share similar cultural and historical characteristics. The results
compare weaknesses and strengths of determinants for recommendation of public policies.

2. Literature review
When talking about competitiveness, there is a consensus for increasing the number of
determinants, as the considered indicators for measuring national competitiveness
(Liu and Hsu, 2009). Mihaela et al. (2011) study cultural dimensions as a determinant of
national competitiveness. Berger (2013) includes government policies, management styles,
amounts of natural resources and labor costs and concludes that productivity is the most
important determinant even in the globalization age. Delgado et al. (2013) highlighted
three broad and interrelated drivers of foundational competitiveness for nations: social
infrastructure and political institutions, monetary and fiscal policy and the microeconomic
environment. However, Cho and Moon (2000) proposed that in a globalized world a simple
theory for trade is able to explain the prosperity of nations. Therefore, measuring
competitiveness takes into account important determinants such as capital investment,
infrastructure, education, knowledge management, technological progress, bank service
development, financial ratios, communication, industries, macroeconomic stability,
good governance, efficiency of enterprises and sophistication level, among others
 ( Jin and Moon, 2006; Castro-Gonzles et al., 2014). When talking about national Competitiveness
competitiveness even the indicator of FDI is correlated positively with the economic for emerging
growth within the host countries since the host country relies on human capital, an economic countries
stability and a liberalized market to really benefit from long-term capital flows (Bengoa and
Sanchez-Robles, 2003). However, there are new approaches about the competitiveness of
nations dealing with regional competitiveness, and they are directly related to the strength
of the domestic firms that do internationalize first in the regional phase. On the other hand, 127
Diaz and Vassolo (2012) argue that for some Latin American emerging countries, firm-specific
advantages (FSAs) are rather more important than country-specific advantages (CSAs).
Within a similar context, Das and Kapil (2015) claim that some specific factors influence the
decision of merges and acquisition of technology companies as a growth strategy of Indian
technology companies. Both approaches to the competitiveness of countries are new events
that globalization is experiencing and the relevance of one or the other criteria is measured
according to different levels, depending on the nature of the countries and the strength of their
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firms. The countries studied in this paper have little presence of local multinational (MN)
firms. Domestic enterprises are not strong in FSAs; therefore, ECU-PER-COL do have as an
alternative to compete under CSAs strategy.
Porter (1990) proposed that prosperity of a country is not only related to the endogenous
factors of each country, but depends mostly on the capability of its industries to innovate.
National industries win competitive advantages related to world competitors when they operate
under pressure and face other challenges. These industries are benefited when they have better
production factors, strong domestic rivalry and related industries, good local suppliers with
strategy and structure focused on entrepreneurial aggressiveness and an exigent demand
(Castro-Gonzles et al., 2015). Porter established that competitiveness depended of these four
determinants, creating the diamond model for the competitiveness of nations. The stronger the
four determinants are better the position the country has to compete internationally, through
FDI (Dunning, 1993). For Krugman (1994), competitiveness of countries is based mainly on
getting higher capability to produce goods and services, which compete globally and allow its
population to enjoy life standardization, growth and sustainability (Castro-Gonzles et al., 2015).
However, competitiveness should not be related only to a greater market share of corporations
in developed countries, it must also consider MN companies from emerging countries
addressing their weaknesses into a global competitiveness by developing different strategies for
internationalization. (Luo and Tung, 2007).
The Porter (1990) diamond for the competitiveness of nations is criticized by different
model proposals such as Rugman and DCruz (1991) who objected that its greatest limitation,
small countries with great export activity, could not get modeled appropriately. Moon et al.
(1995) and Rugman and DCruz (1991) pointed to the exclusion of international activities on
Porters diamond since it was only oriented to the country of origin and to the strength of its
local companies. To cover these limitations Moon et al. (1995) proposed the DD model, which
includes the activities of MNs, and the role that national governments play in competitiveness,
using the DD as an inclusive model that provides poor objectivity. On the other hand, some
researchers have objected the WEF-IMD reports, among them the low participation rate on
surveys which is 15-35 percent (Cho and Moon, 2000; Kaplan, 2003). Also questionable is the
arbitrary assignment of weights to factors when calculating the rankings (Squalli et al., 2008).
Lora (2005) and Cho and Moon (2000) hold that these rankings for competitiveness are
oriented to benefit the wealthy and industrialized countries. Castro-Gonzales et al. (2014)
manifest some inconsistencies in the reports of these institutions because there is the need to
give greater participation to quantitative variables instead of surveys.
In our review of the literature, no similar work in Latin America was identified. To define
the indicators of competitiveness, we used the published research related to global
competitiveness, economic growth and development of countries.
 IJOEM 3. Competitiveness indicators of the model
12,1 The DD model considered the same constructs proposed initially by Porter (1990), but with a
local and an international focus. The traditional competitiveness methodology used by
WEF-IMD lacks representativeness (Cho and Moon, 2000; Kaplan, 2003), since it minimizes
the usage of indicators from surveys (Cho and Moon, 2000; Lora, 2005). The DD is used
because of three reasons: it remedies deficiencies from Porter (1990) when considering two
128 scenarios, international and national; it is useful when analyzing competitiveness of small
countries with intensive exports activities; and it operationalizes in a simple way the
competitiveness of these countries, when representing it as an area difference (Cho and
Moon, 2000; Moon et al., 1998).
Therefore, in this study we elaborated two constructs, national and international (DD),
after a careful selection of indicators grouped into four categories of each construct: factor
conditions, demand conditions, related and support industries and structure and rivalry.
The selected specific indicators for each category are shown in Table I. Some of these
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indicators present the characterization (*) to specify the use of inverse values to have a
consistency with economic theory (Castro-Gonzles et al., 2014).
The factor conditions category at the national level consists of the following constructs:
labor participation, (previously measured by the level of population able to work and the
enterprises access to labor). Currently, it is the main source of competitiveness in emerging
countries due to the large amount of technical talent and cheap labor (Contractor, 2013); food
production index, including groceries with a nutritive value, is considered an indication of
food production diversity; and the number of scientific publications and patent applications
in emerging countries, such as China and India, increases, so does the creation of R&D
centers in multinationals and local companies (Yip and Mckern, 2014). Finally, the

Local factors Factor International factors Factor

Factor conditions locals Factor conditions niternationals

Labor force participation (% population) LFP Export of goods and services (% GDP) EGS
Food production index (2004-2006 100) FPI Foreign direct inversion (inflow % GDP) FDII
Journal articles (No.) JAR Industry, value added (% GDP) IVA
Researchers in R&D (c/M people) RRD Time for export (days)* TFE
Corruption perceptions index (points) CPI Agriculture, value added (% of GDP) AVA
Demand factors locals Demand conditions internationals
Expenditure on R&D (% GDP) ERD Fuel exports (% merchandise export) FEX
Public education expenditure total (% GDP) PEET Gini index (%)* GIN
Time to import (days)* TPE Cumulative foreign debt (% GDP)* CFD
Import goods and services (% GDP) IGS Services, value added (% GDP) SVA
Annual growth of population (%) AGP
Related and support industries locals Related and support industries internationals
Subscriptions phones (per 100) SPH Air transport, freight (m-ton-kilometers) ATF
Infrastructure quality ports (1-7) IQP ISO certification firms (No.) ICF
Telephone lines (per 100 people) TLI Patents applied to residents (No.) PAR
Electricity consumption (mKwh p/c) ECO Delivery time import (days)* DTI
Aerian Transport, Flight world (thousands) ATFW
Container loading through ports (m 20') CLD
Structure and rivalry enterprises locals Structure and rivalry enterprises internationals
Table I. Cost to establish business (% of GNI p/c)* CTB Cost of exports (mUS$/container)* COE
Determinants of Time to start a business (days)* TSB Technology index (1 @ 7) TIN
competitiveness Trade in services (% of GDP) TIS Average tariff rate manufactured products (%)* ATR
used in PLS-SEM Manufactured products export (% export) MPE
 corruption perception index and the inflation level to consumer prices of the countries are Competitiveness
important conditions since corruption and bad governance affect the growth of countries for emerging
and its competitiveness (Alcaide, 2004; Laffaye, 2007). The factor conditions category at countries
international level include the following FDI as it is important to obtain enhanced
competitiveness level and sustained economic growth in a country (Contractor, 2013),
exports of goods and services, and time to export, a measure of the capability of industries
to convert commodities in products with higher value (Postelnicu and Ban, 2010). Dgl et al. 129
(2012) proposed to use the value added for industries as an approximation of real
productivity of nations and the value added for agriculture because it contributes to
productivity to its agricultural sectors (see Table I).
The demand conditions category at the national-level constructs are: the expenditure on
R&D, the total expenses in public education are used as proxies (Yip and Mckern, 2014), and
time to import, measures the level of sophistication of the market related to the education
level of national consumers (Liu and Hsu, 2009). It also includes the import of goods and
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services as a percentage of the GDP and the annual growth of population, since it is more
important for competitiveness than the size of the nation itself. It leads the firms to adopt
new technologies rapidly (Moon et al., 1995, 1998). The demand conditions category at
international-level indicators are: fuel exports, since the economies studied are small and
local business strategies should achieve economies of scale by exporting to international
markets and cumulative foreign debt, a higher indebtedness makes countries vulnerable to
exogenous shocks that damage the competitiveness of the nations, and a prudential
management of the fiscal debt is a key factor for stability to the country and a sustainable
growth in the medium term (Ginhoven et al., 2001). Laffaye (2007) considered that if a nation
has better life quality level, it has better competitiveness levels, for this reason we used the
GINI index to measure the inequality of peoples income within a nation, and the value
added for services (see Table I).
The indicators for the related and support industries category at national level are the
usage of the denominated information and communication technology: phone subscriptions
and telephone lines per 100 inhabitants, as they are related to efficiency in commercial
communications as Sardy and Fetscherin (2009) have proposed infrastructure quality ports
are considered since good conditions for transport are relevant for industry growth
(Moon, 2006); and electric consumption is used as an approximation for a countrys
industrialization level (Dogl et al., 2012). The indicators for related and support industries
category at the international level are: aerial and maritime infrastructure to internationalize
efficiently (Pea-Vinces, 2010), and the quantity of aerial and maritime tons commercialized
with other countries. (Castro-Gonzles et al., 2014). Additionally we consider the usage of
aerial transportation expressed in thousands of flights, patent applications (Pea-Vinces,
2010), number of ISO-certified firms and delivery time of imports (see Table I).
The indicators for structure and rivalry enterprise category at the national level are: time
to start a business and the costs to establish a business (Pea-Vinces, 2010) with a direct
effect within costs of companys products. The creation, organization, management
and national competitors conditions are relevant for competitiveness of the country
(Porter, 1990). Chiu and Lin (2012) proposed the use of commerce within services as a factor
in this construct. Since service businesses represent 70 percent of the transactions, we use
the added value of services and the added value within industrialization. The indicators for
structure and rivalry enterprise category at the international level are: The technology index
and exporting activity, since there is evidence of the improvement in competitiveness levels
of the export sector due to the relevant increase of high technology products and added
value industries (Castro, 2011). Also, Sardy and Fetscherin (2009) have proposed that
product prices for exports are influenced by the exports costs and average tariffs for
exports, as an included recommendation (see Table I).
 IJOEM 4. Sampling and methodology
12,1 The countries included in this study were ECU, PER and COL. These countries were
chosen because of their tight historical and economical linkage. They are associated to
Mercosur (regional and economical agreement of great relevance); their combined GDP is
$3.641 billion; and they represent 82.3 percent of the total South-American GDP. The
Mercosur is considered as the fourth most important economic block due to its relevance
130 and volume of businesses, and considered as the fifth world economy (Mercosur, 2013;
Bonari et al., 2009). The indicators used in this research were based on two models: Porter
(1990) and DD model (Moon et al., 1998). For all indicators we utilized the four-year average
of the selected factors (2010-2013), in order to ensure the central trend of the data and to
minimize the effect of an extraordinary data that can happen in any country fortuitously.
The data have been collected from various sources including the WB, IMF, IDB and WEF.

4.1 PLS-SEM procedure

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The PLS-SEM procedure has been gaining interest and use among researchers in
management and economics because of its ability to model latent constructs under
conditions of non-normality and small to medium sample sizes (Chin, 1998). We chose this
particular statistical technique. The use of this technique involves two stages or approaches:
evaluation of the measurement model and and the assessing of the structural model.
Hair et al. (2011) recommend using PLS-SEM when the phenomena studied stems from a
theory examined at a macro level, and the relevant variables are unknown.
As we do not know the weight of the factor items and their relevance in the construct of
competitiveness, we employed the PLS-SEM technique using SmartPLS developed
by Ringle et al. (2014). In order to calculate the competitiveness index, we used first
PLS-SEM for assigning the weight of the indicators used. Initially, 64 factors were used.
In the first stage of PLS-SEM procedure, the constructs were evaluated to assess their
reliability and validity. Validity of construct (VC) measures high-quality measurements or
indicators. VC concerns the degree to which a scale has an appropriate sample of items to
represent the construct of interest that is, whether the domain of content for the
construct is adequately represented by the items (Chin, 1998). Individual item reliability
was assessed by analyzing the standardized loadings (Hair et al., 2011). For the acceptance
of an item in the construct, it must exceed a threshold of 0.40. When the measurement
scales are applied across different contexts, in our case to Latin America then by
PLS-SEM, factors that are not significant were removed. We included 36 factors as
listed in Table I.
Then, a path analysis was calculated using SmartPLS (see Table II). The second
column shows the factorial weight () for each of the factors used. The factorial weight
indicates what the factor contributes to each of the latent variables (determinants of the DD).
The communality of the indicators was also estimated. This evaluation indicates the
quantitative value added to the construct. For example, a communality value of (2) 0.948
squared would give us a value of 0.898. It indicates that 89 percent of the variance of the
indicator is related to its construct (refer to the third column of Table II). On the other hand,
the reliability attributes in a PLS-SEM seek to analyze whether the theoretical concepts
correctly measure the construct via the observable variables (Hair et al., 2011). Following the
analysis, the next step in this second stage is the evaluation of the construct reliability (CR).
Henseler et al. (2009) and Roberts and Thatcher (2009) established that a CR or a value
greater than 0.70 is required in the early stages of research. All constructs for our research
recorded values above the set limit of 0.70 (refer to the fourth column of Table II). All the
competitiveness constructs in our study exceed the threshold limit.
Subsequently, to determine the discriminant validity, we examined the correlations
between the constructs themselves and the other constructs (Henseler et al., 2009).
 National diamond factors International diamond factors
Competitiveness
Weight Communality Reliability Weight Communality Reliability for emerging
Variable () (2) (CR) Variable () (2) (CR) countries
National demand conditions 0.963 International factor conditions 0.918
AGP 0.948 0.898 AVA 0.982 0.964
ERD 0.995 0.990 EGS 0.910 0.828
IGS 0.942 0.949 FDI 0.837 0.700 131
PEET 0.492 0.243 IVA 0.971 0.942
TPE 0.958 0.912 TFE 0.895 0.801
National factor conditions 0.946 International demand conditions 0.683
CPI 0.948 0.899 CFD 0.006 0.000
FPI 0.014 0.001 FEX 0.362 0.131
JAR 0.633 0.401 GIN 0.899 0.808
LFP 0.498 0.248 SVA 0.919 0.800
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RRD 0.881 0.776

National firm strategy: structure and 0.928 International-firm strategy: structure 0.777
rivalry and rivalry
CTB 0.877 0.769 ATR 0.022 0.004
TIS 0.927 0.859 COE 0.645 0.416
TSB 0.898 0.806 MPE 0.995 0.990
TIN 0.869 0.755

National-related and supporting 0.913 International-related and supporting 0.994

industries industries
ECO 0.996 0.992 ATF 0.983 0.966 Table II.
IQP 1.000 1.000 ATFW 0.999 0.998 Results of the factors
SPH 0.996 0.992 CLD 0.997 0.994 of the national
TLI 0.206 0.042 DTI 0.949 0.900 diamond and
ICF 0.971 0.943 international diamond
PAR 0.999 0.998 using SmartPLS

The competitiveness dimensions show discriminant validity (refer to Table III) as the values
of the correlations are lower for each construct than among them.
Simultaneously, the convergent validity (CV) of the construct was evaluated. CV is
usually assessed by the average variance extracted (AVE) (Hair et al., 2011). Table IV
provides the findings related to the reliability and validity analysis for all reflective
constructs of the research model. Using the item loadings, we calculated the internal
composite reliability (ICRs) to evaluate the reliability of our reflective constructs, all of which
exceeded the 0.70 threshold for the ICR. Also, to estimate convergent validity, we evaluated
each constructs AVE. Because each constructs AVE exceeded 0.50, (or very close to it) our

Latent variable (1) (2) (3) (4) Latent variable (1) (2) (3) (4)

National diamond International diamond

(1) Factor conditions 1 (1) Factor conditions 1
(2) Demand conditions 1.00 1 (2) Demand conditions 0.76 1 Table III.
(3) Related and supporting 0.97 0.97 1 (3) Related and supporting 0.98 0.63 1 The correlations
industries industries matrix of the national
(4) Firm strategy, structure and 0.70 0.71 0.84 1 (4) Firm strategy, structure and 0.98 0.86 0.93 1 and international
rivalry rivalry diamond factors
 IJOEM analysis suggests that our measures satisfy the heuristics required to confirm convergent
12,1 validity (Roberts and Thatcher, 2009).
As previously stated, we focused our attention on determining the weight-loadings of the
indicators of a country for competitiveness and the indexs constructs are based on the DD
model (Moon et al., 1998). The weight of the index was assigned using the ratio of the
number of indicators for each construct. This assignment is a limitation within this model.
132 PLS-SEM application in nature is an exploratory analysis uses the commonalities (2) as the
weight loads for each of the indicators of the competitiveness index. This research initially
used 68 indicators, which were reduced to 36 indicators after measuring the structural
strength of the model (refer to Table I). With commonality weight for each factor we
overcome the arbitrariness objections concerning the models of WEF-IMD (Moon et al., 1998;
Castro-Gonzles et al., 2014). Using the DD methodology, the competitiveness index was
standardized for each factor (ICF) of the country j using the formula:


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ICFi ; country j lJAR

 
 average factori ; country j=best average among the countries (1)
The calculation of scientific and technical articles published in journals for each country
(refer to Table I) is as follows:
  
ECU 0:401  68:70=636:70 0:04

  
COL 0:401  636:70=636:70 0:40

  
PER 0:401  160:57=636:70 0:10
Once those values were calculated, we calculated the competitiveness index for each group.
We used the first letters of each group for its identification; for example, the index for
competitiveness under conditions of national factors (country) j is identified as ICCNF and
formula is used to calculate it:
X
n
ICCNFj ICFi (2)
i1

We used formula to calculate the national index for competitiveness:

X X X X X
ICNj ICCNFj ICCNDj ICRINAj ICESNRj (3)

In this case, ICNj National Index for Competitiveness of the country j; ICCNFj Index for
Competitiveness under Conditions of National Factors (country) j; ICCNDj Index
for Competitiveness under Conditions of National Demand (country) j; ICRINAj Index

Latent variable ICR AVE Latent variable ICR AVE

National diamond International diamond

Table IV. (1) Factor conditions 0.7649 0.4661 (1) Factor conditions 0.6832 0.4461
Construct reliabilities (2) Demand conditions 0.9463 0.7869 (2) Demand conditions 0.9181 0.8477
(ICR) and AVES (3) Related and supporting industries 0.9133 0.7571 (3) Related and supporting industries 0.9942 0.9665
for national and (4) Firm strategy, structure and 0.9280 0.8114 (4) Firm strategy, structure and 0.7769 0.5403
international diamond rivalry rivalry
 for Competitiveness of Related Industries and National Support of the country j, and Competitiveness
ICESNRj Index for Competitiveness in Enterprises Structures and National Rivalry of the for emerging
country j. For International Competitiveness Index we did the same procedure by using countries
the values of Table II. Finally we calculated global competitiveness, for which we considered
the average of national and international competitiveness indexes. For its illustration both
goals have the same relevance within competitiveness of nations (Sardy and Fetscherin,
2009) and the calculated value is plotted in scale using AutoCAD 2014 in order to have an 133
objective and real appreciation of countries competitiveness levels.

5. Results and analysis

From the results (see Table V and Figure 1) we can conclude that: within national
competitiveness the most competitive country is COL, nearly followed by PER and ECU.
We achieved the same result within the international competitiveness analysis; however, ECU
had a remarkable difference from the other two countries. Within factor conditions construct
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the least favored country was ECU. We found a significant disadvantage for ECU for the
production of published articles at indexed magazines: the lowest number of publications in
journals (only 10.8 percent from COL) and researchers and R&D (49 percent from PER).
However, ECU is nowadays implementing public policies in order to change its technological
index with public programs such as PROMETEO Project. The corruption index in ECU had an
87 percent higher corruption perception than PER. Under the demand conditions construct,
ECU was the most competitive compared to COL and PER; i.e. the expenses for research and
development was 72.6 percent higher than COL; ECU was the leader of total expenses for
public education with a 64 percent higher than PER; it imported more goods and services
(66.2 percent higher than COL); and because of the annual growth of its population. Therefore,
we emphasize that ECU had a more sophisticated demand than other countries. Under related
industries, ECU was more competitive than COL and PER in number of phones (7.1 percent
more that COL) and electricity consumption (40.5 percent more than COL).
Regarding firms structure and rivalry, COL leads the other two countries because of:
a lower cost to establish business (32.8 percent of ECU) and a lower time for starting a new
business (55.3 percent than PER and ECU). On the other hand, ECU shows advantages
within trade in services (48.3 percent more that COL). Regarding firm structure and
rivalry, COL leads the other two countries because of: a lower cost to establish business
(32.8 percent of ECU) and a lower time for starting a new business (55.3 percent than
PER and ECU). On the other hand, ECU shows advantages within trade in services
(48.3 percent more that COL).
Concerning international competitiveness, Figure 1 and its areas represent the situation
of each country, where COL has an advantage to PER and ECU. COL exhibits the best
values of the three determinants of competitiveness: demand conditions, related and support
industries and enterprises structure. The factor conditions construct shows PER within the
best position: in FDI (inflows) by attracting higher foreign investors than other countries,
(ECU is only 11.5 of PER). However, FDI is not the only indicator that matters when talking
about recommendations for public policy, governments should consider widening the
interest of the emerging countries to promote capital flows out of countries by their
companies (outward FDI OFDI) to ensure the long-term development economies rather
than narrow strategies only to national interests (Rasiah et al., 2010), less time for exports
(less than COL-ECU). ECU explains best situation within agriculture best value added
(52.9 percent more than COL). Within the demand conditions construct, the three countries
have a similar score within its different factors (see Table V).
Within related industries, COL has the most favored factors, such as: most
ISO-certificated firms, most number of applied patents of its residents (177 percent higher
than ECU), and the high number of international flights (142 percent higher). PER has only
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12,1

134

Table V.
IJOEM

local and national

Competitiveness index
Average 2010-2013 Index Average 2010-2013 Index
Factor ECU COL PER 2 ECU COL PER Factor ECU COL PER 2 ECU COL PER

EGS 31.3 18.3 26.2 0.8 0.8 0.5 0.7 LFP 71.0 71.0 78.3 0.2 0.2 0.2 0.2
FDII 0.6 3.8 5.5 0.7 0.1 0.5 0.7 FPI 119.5 108.9 130.0 0.0 0.0 0.0 0.0
IVA 39.3 36.8 38.0 0.9 0.9 0.9 0.9 JAR 68.7 636.7 160.6 0.4 0.0 0.4 0.1
TFE 20.0 14.0 12.0 0.8 0.5 0.7 0.8 RRD 106.1 167.0 216.0 0.8 0.4 0.6 0.8
AVA 10.1 6.6 6.7 1.0 1.0 0.6 0.6 CPI 33.3 36.5 38.0 0.9 0.8 0.9 0.9
Factors conditions internationals 3.3 3.2 3.7 Factor conditions locals 1.4 2.1 2.0
Demand competitiveness index 87.9 84.4 100.0 Factors competitiveness index 68.8 100.0 96.9
FEX 57.0 66.2 13.7 0.1 0.1 0.1 0.0 ERD 0.3 0.2 0.2 1.0 1.0 0.6 0.6
GIN 49.3 55.9 48.1 0.8 0.8 0.7 0.8 PEET 4.4 4.4 2.7 0.2 0.2 0.2 0.1
CFD 21.5 23.1 28.9 0.0 0.0 0.0 0.0 TPE 25.8 13.0 17.0 1.0 0.5 1.0 0.7
SVA 50.5 56.7 54.7 0.8 0.7 0.8 0.8 IGS 33.3 20.0 24.8 0.9 0.9 0.6 0.7
Demand conditions internationals 1.6 1.6 1.6 AGP 1.6 1.4 1.2 0.9 0.9 0.7 0.7
Demand competitiveness index 99.3 100.0 98.8 Demand factors locals 3.6 3.1 2.8
Demand competitiveness index 100.0 87.3 79.7
ATF 121.3 923.5 108.8 1.0 0.1 1.0 0.1 SPH 107.1 100.4 102.3
1.0 1.0 0.9 0.9
ICF 9.7 20.8 14.2 0.9 0.4 0.9 0.6 IQP 3.9 3.4 1.0 3.5 1.0 0.9 0.9
PAR 5.3 148.0 38.3 1.0 0.0 1.0 0.3 TLI 14.5 15.0 0.0 11.6 0.0 0.0 0.0
DTI 3.7 8.0 2.9 0.9 0.7 0.3 0.9 ECO 1.5 1.1 1.0 1.2 1.0 0.7 0.8
ATFW 59.1 242.1 100.1 1.0 0.2 1.0 0.4 Related and support industries locals 3.0 2.5 2.7
CLD 1.2 2.4 1.5 1.0 0.5 1.0 0.6 Industries competitiveness index 100.0 84.3 88.0
Related and support industries internationals 2.0 5.2 2.9
Industries competitiveness index 39.0 100.0 56.4
COE 1.5 2.4 0.9 0.4 0.2 0.2 0.4 CTB 30.4 10.0 12.0 0.8 0.3 0.8 0.6
TIN 2.8 3.3 3.3 0.8 0.6 0.8 0.7 TSB 65.0 36.0 65.0 0.8 0.4 0.8 0.4
ATR 8.1 7.8 4.1 0.0 0.0 0.0 0.0 TIS 6.3 4.2 6.1 0.9 0.9 0.6 0.8
MPE 9.0 19.3 14.3 1.0 0.5 1.0 0.7 Structure and rivalry firms locals 1.6 2.2 1.9
Structure and rivalry firms internationals 1.1 1.7 1.5 Structure competitiveness index 72.3 100.0 89.3
Structure competitiveness index 62.8 100.0 84.7
Notes: Bases consulted: IMF, International Monetary Fund; IDB, Inter-American Development Bank; WB, World Bank; FAO, Food and Agriculture Organization;
WEF, World Economic Forum; ECLAC, Economic Commission for Latin America and the Caribbean. The italic values are the total values of the each country by
construct
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International Competitiveness
National Competitiveness
Ecuador, Colombia and Peru
Ecuador, Colombia and Peru
Structure and Rivalry Structure and Rivalry
Enterprises Enterprises
10
0.

00
00

0.
84

10
.7
1

89
.2
6

3
.3
62
.77

72
10
0.

99
00

9
0
0

79
.9 .30
Conditions Conditions

.8
.8
.4

.7
Demand 87 Demand

96
68
Factors Factors 84 Conditions
Conditions

9
10

00

.2
10 0.0

0.
0. 0 9

87
00 .7

10
98
53
.28
Key
Key
Ecuador
Ecuador 92
.03

9
Colombia

.2
84
Colombia

6
.9
10

Peru

10
0.

87

0.0
00

0
Peru

Related and Support Related and Support

Industries Industries
135
countries

competitiveness of
Competitiveness

international
National and
Figure 1.
for emerging

and Peru
Ecuador, Colombia
 IJOEM one favored factor which is the lowest time for delivering imports. Firms structure and
12,1 rivalry is a domain in COL, with the lowest cost of export, making its firms more competitive
abroad and a higher number of manufacturing exports (111 percent higher than ECU).

6. Conclusions and implications

This research advises decision-makers and provides the appropriate police guidelines for
136 the national competitiveness strategy to improve the quality of life of its residents from:
ECU-COL-PER using the DD model as a theoretical frame and the first in its field using
36 competitiveness indexes and the PLS-SEM statistic methodology to assign the weight of
competitive indicators when calculating the weight-load competitiveness indexes using
inferential multivariate analysis. It provides researchers and practitioners an analysis tool
for comparing competitive factors of emerging countries from the DD approach without
limitations, as a framework to assist in formulating economic policy at the national and
regional level.
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This work may be taken into consideration for an immediate and sustainable
improvement in order to win competitiveness in the region. It has been found that national
competitiveness that is built on three constructs, the countries compete among them:
industries, conditions and structure: COL has the greatest advantage, mostly because of its
production of published scientific articles and its quantity of scientists in R&D. But, in order
to improve the level of national competitiveness, COL has to concentrate on improving and
strengthening formal and non-formal institutions, which are reflected in: ECU, four factors,
PER four and COL three factors.
On the other side, PER has an advantage in two of the factors with greater values than
ECU-COL, i.e. its corruption index. It has been found that in order to improve national
competitiveness, it is required to care about the following factors, for ECU: reducing time for
imports, reducing costs of starting a new business, increasing the number of indexed
publications, and increasing the number of researchers dedicated to R&D. However, ECU
has best values in: R&D expenses, public expenses for education, mobile phones and fixed
lines subscribers and greater trade for services. From these results we assume that in the
medium-term ECU returns on benefits are going to show a difference in its favor. On the
other hand, COL needs to improve its competitiveness level by increasing R&D expenses,
imports of goods and services and decreasing import costs. However, COL has best values
among them: greater production of scientific articles, lowest time for importing, and lowest
time for starting a business (refer to Table III). In order to increase national competitiveness
PER should: increase the number of scientific articles produced (it has similar number of
scientists and researchers but its production is minimum in comparison to COL, it achieves
only 27 percent of COL, increase investments in R&D, increase investment in education, and
reduce time to establish businesses.
In order to increase international competitiveness it has been found that these countries
should care about the following factors. ECU should improve by: increasing its FDI
(inflows), decreasing time to export, increasing added value for services, increasing
aerial transport, and increasing the number of patents applied to its residents. COL should
improve by: increasing exports of goods and services, increasing added value to agriculture,
reducing time for imports, reducing the export costs, and decreasing tariffs. On the
other hand, PER should care about: increasing added value to agriculture, increasing
the number of patents applied to its residents, increasing the fuel export and increasing
the air transportation.

7. Limitations and future works

Since the three countries belong to the Andean Region of South America, they border each
other and even the three countries historically belonged to a single culture: the Incas; their
 similar informal culture values were assumed in this paper. The work mostly measures the Competitiveness
level of formal cultural values. The theoretical contribution of this research may be helpful for emerging
for further discussion applied to other countries, or even analysis at the regional level. countries
This work used as a methodological reference the DD model (Moon et al., 1998) within the
definition of its constructs, we found two main issues that may be considered for future
work: The use of PLS-SEM as a confirmatory study using second-level dependent variables
within the elaboration of new constructs and the assignment of specific weights to the 137
indexes of national and international competitiveness.

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Corresponding author
Segundo J. Castro-Gonzales can be contacted at: scastro50@suagm.edu

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