NOTES ANDVIEWS

A Note on Culture and Competitive Advantage: Response to van den Bosch and van Prooijen MICHAEL PORTER, Puo,fcmr of Busirress Adtrritzistrdio/~, Hnmnrd Busiizess Sclzcwl

C’an den Bosch and van Prooijen rightly raise the impor- tance of cultural factors in setting the context for national competitive advantage. National and even regional culture is an important element in the analysis of competitive advantage. This \\.as one of the reasons \vhy 1x.e studied competitiveness not in one country, but b) examining ten very different countries, and why we devoted a good deal of discussion to the role of national cultural differences, among others, in competition.

Let me summarize here some of our findings about the role of culture. First, cultural factors often lead to sustainable competitive advantages, because firms from competing nations are unable to quickly duplicate them. Cultural changes tend to occur very slowly. Conversely, an inappropriate culture can lead to enduring disadvantages.

Second, the influence of culture on competitive advan- tage is not direct but indirect, always acting through one of the four determinants of national competitive advan- tage - factor conditions; demand conditions; related and supporting industries; and firm strategy, structure and rivalry.

Third, apparent cultural differences can often be traced back to economic circumstances in the diamond. Indeed, culture itself is often the rrsdf of economic circum- stances. For example, the primarv reason behind the Japanese preference for close and long-lasting supplier relationships in the automobile industrv is economics, not culture. .A deeper investigation sholvs that close iwtical relationships are necessitated by just-in-time prC)duction r~~hich, in turn, \vas invented as a result of a factor condition - the severe shortage of factor!’ space in Japan.

Fourth, culture must alnays be vielved in the context of specific industries. ,A culture i\hich fosters competi- tive advantage in one industry can be destructive to competitive advantage in another. Thus, the risk aver-

sion of the Swiss puts the Swiss biotechnology industry at a disadvantage relative to its American rivals. Yet, this same risk aversion represents an advantage for the country’s large insurance industry, because it leads to favora&c home demand conditions.

Fifth, culture is not necessarily exogenous to firms, as van den Bosch and van Prooijen seem to believe. Neither is it static and something to be passively accepted b) industry. It changes over time and can be changed. An example is life-time employment in Japan. This practice has become deeply embedded in Japanese firms, and is often attributed to culture, but is actually the result of negotiations to end the bitter labor disputes after World War 11.

Finally, culture is a national, regional, or even local phenomenon, not a European one. Italians are eager to take risk and found their own firms, while Swedes are more risk-averse and prefer safe employment in a large corporation. Conditions in the French-speaking region of Switzerland favor competitive advantage in consumer goods industries, while the S\\.iss German- speaking region is more favorable to precision machinery industries.

Speaking of Europe and an economic region, as van den Bosch and van Prooijen do, can be misleading. Europe is becoming a critical r?lnrM, but ‘Europe’ is not the locus of competitive advantage. Advantage grw~s out of national and even local circumstances in the diamond, one of ivhich is culture. The importance of cultural factors only reinforces the notion that a firm’s home base remains crucial even in global competition. European firms \vill prosper by dra\ving on and reinforcing their unique national cultures, not by seeking to eliminate them.

Note The author is grateful to Class van der Linde for assistance in preparing this note.

175 EUROPEAN MANAGEXIENT JOURNAL Vol 10 No 2 June 1992