Monday, February 10, 2014

Economies Fly High with the Kite Model

International competitiveness doesn’t exist in a vacuum. There are many components such as the internal clusters, national methodology, and the cultural grouping of countries to consider. A paper by Yu-Jen and Hsiao-Fong helps to develop higher levels of understanding of how these factors work together to raise the development properties of a nation (2012). Their work focuses on combining the Flying Geese Theory and The Diamond Model to develop a more holistic framework.

Flying Geese Theory:  The theory was developed by Japanese economist Akamatsu Kaname to categorize countries into leading nations, middle countries, and follower countries (1962). Less advanced countries will attempt to move up in the V pattern but may fall backwards based upon their abilities. The pattern is not set. Countries that adapt new technologies, higher skilled labor, better structures, and greater education will lead the flock.

The Diamond Model:  The Diamond model was developed by Michael Porter (1990) to explain how countries become more competitive. He looked at clusters and history of development. His analysis took into account Factor Conditions, Demand Conditions, Related/Supporting Industries, Firm Development, Government and Chance. The factors work together to create a type of diamond pattern. 

Both theories have their limitations and therefore do not do well in isolation describing concepts of a country in an international market. The Diamond Model can be seen as inner clustered workings of a country while the Flying Geese Theory can be seen as a country working within an international environment. Clusters help create the competitive nature of the country and like geese they jockey with related countries for position. 

The Kite Model seeks to integrate the Diamond and Flying Geese approaches into a more comprehensive framework. A country that develops must compete with others within their group for more influence and access to resources. The Kite Model has the following components:

Body: The integration of all the elements of the kite. 

Frame: Support the kite through infrastructure and human capital. 

Wings: The balance of forces that include international ties and domestic endowments. 

Tail: The fundamental aspects of an economy that allow the economy to rise. This includes government efficiency, law, regulation, political stability, capital formation, investment, ideology, policies etc. 

String: The guiding force of government that encourages movement in a particular direction. 

The largest benefit of the Kite Model is that it doesn’t leave a large gap in the analysis. Clusters, internal/external factors, and the cultural groupings of countries do have an impact on overall success of countries. These do not stand along and influence each other in varying ways. The model is not meant to be a “save all” but does help decision-makers to formalize the various economic components that lead to growth. 

Kaname, A. (1962). Historical pattern of economic growth in developing countries. The Developing Economies, 1 (1). 

Porter, E. (1990). The Competitive Advantage of Nations. Free Press: NY

Yu-Jen, C. & Hsiao-Fong, C. (2012). Kite model for national development strategy. The Journal of Contemporary Management Research, 6 (2).

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