2.1 Specification of Nations’ Competitiveness
Following WCY (Garelli, 2003), nations’ competitiveness is defined as a measurement of each nation’s ability to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people. WCY divides the nations’
competitiveness into four factors: economic performance, government efficiency, business efficiency, and infrastructure. More than 300 attributes are used together to represent these four factors. All these 300 attributes have the same weight in the overall consolidation of results, which lead to the overall ranking of nations. The WCY provides a competitiveness score for each nation by synthesizing all collected information into a few factors (IMD 2001, 2003, 2005).
2.2 Major Competitiveness Indicators (MCI-WCY)
MCI are selected by the WCY to analyze the performance of each nation independently of the others. They best reflect the changes in quantitative data over time.
Their evolution in time series portrays competitiveness trends and how the nations compete in world market. The contents of these attributes are listed in Table 2.1.
Table 2.1: Major Competitiveness Indicators (MCI) of WCY
Symbol Attributes Abbreviation Description Units
a
1 EXPORT OF GOODS& OF COMMERCIAL SERVICES
Export Exports summation of goods and commercial services (calculated by per million population)
US$
billions
a
2 COMPUTERS PERCAPITA Computer The average computers for any given 1000 people. Number
a
3 GDP PER CAPITA GDP Gross Domestic Product per person US$a
4 LISTED DOMESTICCOMPANIES Company The number of domestically incorporated companies listed on the country's stock exchanges at the end of the year Number
a
5 STOCK MARKETCAPITALIZATION Stock The value of all the stocks traded on a specific stock exchange (calculated by per million population)
US$
billions
a
6 COMPENSATIONLEVELS Salary Total hourly compensation for manufacturing workers (wages plus
supplementary benefits) US$
a
7 OVERALLPRODUCTIVITYS Productivity GDP per person employed US$
a
8 CONSUMER PRICEINFLATION Inflation
Average annual rate; the price increases as measured by the consumer price Indicators (CPI), which reflects the prices of a representative basket of consumer goods and services.
%
a
9 UNEMPLOYMENTRATE Unemployed the ratio of the number of unemployed workers divided by the total
civilian labor force %
a
10 DIRECT INVESTMENTFLOWS INWARD Invest –in Foreign direct investment flows inward (calculated by per million population)
US$
billions
a
11 DIRECT INVESTMENTFLOWS ABROAD Invest-out Direct investment flows toward oversea, calculated by per million population
US$
billions
a
12 REAL GDP GROWTH GDP growth A measure of the annual percent change in the level of production achieved in a given country as measured in constant prices %a
13 CURRENT ACCOUNTBALANCE Balance
The difference between a country's savings and its investment. If positive, the portion of a country's saving invested abroad; if negative, the portion of domestic investment financed by foreigners' savings (calculated by per million population)
US$
Household final consumption expenditure and final consumption expenditure of non-profit institutions serving households, incurred by resident on individual consumption goods and services
US$
2.3 MCI-WCY Data Set
Our research data comes from the data set of Major Competitiveness Indicators (MCI) in WCY for 2001, 2003, and 2005. The MCI-WCY data set covers 14 major competitiveness attributes for 46 nations from 2001 to 2005 (Table B.1, B.2, and B.3 of Appendix B) These data sets are the most continued, consistent, and reliable data chosen from MCI-WCY.
In order to induce rules of competitiveness, we need to convert the data set in Appendix B into discretized codes. Each attribute is divided into four levels: very high, high, medium, and low according to the value domain of that attribute. An equal frequency of nations in each
a
ilevel is adopted to implement the division, described in Appendix C. Following
competitiveness classes in Phase (i) we divide 46 nations into 4 classes. The MCI-WCY data set in Table B.1, B.2, and B.3 of Appendix B are then converted respectively into Table D.1, D.2, and D.3 of Appendix D. Take USA in 2001 (in Table B.1) for instance, the a2 value is 580.5 and the overall score is 100. Since such a a2 value belongs to level 4 (according to the standard in Appendix C), we then denote a2 = 4 at Table D.1.2.4 Consolidated Competitiveness Factors
WCY divides national environment into 4 factors based on analysis of leading scholars and their own research and experience. Each factor has 5 sub-factors which highlight every facet of the areas analyzed. These 20 sub-factors comprise more than 300 criteria. The criteria may be hard data like GDP or soft data like manager ability, which all have same weight to its sub-factor. Finally, these 20 sub-factors are aggregated to make the total consolidation, which leads to the overall ranking of the WCY. The description of factors is listed in Table 2.2. The data set of the factors is listed in Appendix E.
Table 2.2: Consolidated competitiveness factors
Symbol Factors Description
f
1government efficiency
Extent to which government policies are conductive to competitiveness.
f
2economic performance
Macro-economic evaluation of the domestic economy
f
3business efficiency
Extent to which enterprises are performing in an innovative, profitable, and responsible manner.
f
4 infrastructureExtent to which basic, scientific, and human resources meet the needs of business.
2.5 Competitiveness Types for Nations
Examining the change of a nation’s classes for years of 2001, 2003, and 2005, we may classify the 46 nations into 4 types and 18 groups as shown in Table 2.3 in the following ways.
(i) A nation is in group Gijk, if the nation belongs to i, j, and k class in the year 2001, 2003, and 2005 respectively.
(ii) If i = j = k then Gijk
belongs to a sustaining type. There are 27 nations in this type. For
instance, the USA belongs to G444 and INDONESIA belongs to G111.(iii) If i < j = k or i = j < k then Gijk
belongs to an upward type. Only three nations are
included in this type, where TAIWAN is G334, THAILAND is G122 and INDIA is G112. (iv) If i > j = k or i = j > k then Gijk belongs to a downward type. Seven nations areincluded in this type.
(v) If i > j < k or i < j > k then Gijk belongs to a mixed type. For instance, CHILE belongs to the G323 and MALAYSIA belongs to G232.
Table 2.3 Competitiveness types of 46 nations
Types Groups Nations Number G
444CANADA, DENMARK, FINLAND, HONG KONG,
ICELAND, NETHERLANDS, SINGAPORE, SWEDEN, SWITZERLAND, USA, AUSTRALIA, LUXEMBOURG
12
G
333BELGIUM, NEW ZEALAND, NORWAY, UNITED KINGDOM
4
G
222MAINLAND -CHINA, CZECH REPUBLIC, HUNGARY, KOREA
4 Sustaining
type
G
111ARGENTINA, INDONESIA, PHILIPPINES, POLAND, RUSSIA, TURKEY, VENEZUELA
2.6 Review of Literatures of WCY Data Set
WCY data set has been widely used in ranking nations’ competitiveness and in forming nations’ strategy for development. Some studies based on WCY data set with 300 attributes are given below.
(i) Au (2006) used the WCY as a data set for finding plant locations for Hong Kong clothing suppliers. His results showed that China, Pakistan, India, Thailand, and Sri Lanka are the most prosperous locations (Au 2006).
(ii) Zanakis and Becerra-Fernandez (2005), based on WCY data sets, used data mining and multivariate statistical techniques to identify important factors associated with a nation’s competitiveness. In their validation of methods, the stepwise regression had the best average minimum square error (MSE) and the best mean absolute error (MAE); while classification tree and regression (CART) performed the poorest (Zanakis 2005).
(iii) Pistorius (2001) used WCY rating and competitiveness factors to address the fact that SOUTH AFRICA’s weak competitiveness was a threat to its national security.
Following analytical results from the WCY, he proposed ways to improve innovation in raising SOUTH AFRICA’s competitiveness in the future (Pistorius 2001).
(iv) Sheng (1999) used the WCY data set to discover that CHINA had a less certain economy, which was still far from controlling or dominating market and industries. He then proposed that CHINA and the UNITED STATES could cooperate as strategic partners, which might fit the UNITED STATES’ long-term national interests (Sheng 1999).
(v) Oral and Chabchoub (1996) used WCY methodology and data sets to simulate competitiveness score and ranks. However, they could not reproduce results like those in the WCY.