‘Corporate Performance and Competitiveness – the role of skills’

Prof. Ken Mayhew,

Director of SKOPE (Skills, Knowledge & Organisational Performance)

MASSIVE GOVERNMENT CONCERN ABOUT PRODUCTIVITY AND

COMPETITIVENESS

HM TREASURY:• 1,318 references to competitiveness on its

website• 1,197 references to productivity

MACRO PERSPECTIVE

ORGANISATIONAL PERSPECTIVE

POLICY

COMPETITIVENESS

LESTER THUROW (cited by President Clinton):“Advanced nations are in a ‘win-lose’ competition

for world markets”. (1992)

EUROPEAN COMMISSION:White Paper on Growth, Competitiveness and

Unemployment.Competition from newly industrialising economies

was the most important reason for the upward trend in European unemployment rates.

PRODUCTIVITY

• A COMPONENT OF COMPETITIVENESS

• AN INDICATOR Of LIVING STANDARDS

BUT

“Economists, in general, do not use the word ‘competitiveness’. Not one of the textbooks in international economics I have on my shelves contains the word in its index. So why are there so many councils on competitiveness, White Papers on competitiveness and so on? Why have most people who think about international trade come to use ‘competitiveness’ as perhaps the central concept of their world view?”

Paul Krugman, 1996

COMPETITIVENESS FOR THE COUNTRY

SHORT RUN

KEY VARIABLE IS THE REAL EXCHANGE RATE

THIS IS A FUNCTION OF

• NOMINAL EXCHANGE RATE• RELATIVE PRODUCTIVITY• RELATIVE LABOUR COSTS

COMPETITIVENESS FOR THE COUNTRY

LONG RUN

OECD DEFINITION

The degree to which a country can, under free and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the longer term

OLD-FASHIONED DISTINCTION IN INTERNATIONAL TRADE THEORY – STATIC:

• Price competitiveness• Non-price competitiveness

MODERN DISTINCTION – DYNAMIC:• Low unit cost route• High value added route

THE HIGH VALUE ADDED/SKILLS VISION

WHY TAKE THE HIGH VALUE ADDED ROUTE?

• SUSTAINABILITY

• INCOME DISTRIBUTION

• NOT JUST ABOUT TRADEABLES

WHERE DO SKILLS FIT INTO THE PICTURE?

• UK’s alleged deficiencies: the role of international audits

• But skills are a function of purpose

• If the UK follows the low value added route, the demand for skills will be low

• If the UK follows the high value added route, the demand for skills will be higher

WHAT WE KNOW AND WHAT WE DON’T KNOW

LOW SKILLS EQUILIBRIUM?

THE RELATIONSHIP BETWEEN

COMPETITIVENESS ROUTE AND SKILLS

THE RELATIONSHIP BETWEEN SKILLS

AND ORGANISATIONAL PERFORMANCE?

WHAT DOES ALL THIS MEAN FOR INDIVIDUAL ORGANISATIONS?

• CHOICE OF STRATEGY• AGAINST WHOM ARE YOU COMPETING• ENTRY INTO FOREIGN MARKETS• ADJUSTMENT TO IMPORT COMPETITION• FALLING TRADE COSTS ASSOCIATED WITH

A REALLOCATION OF RESOURCES TO THE MORE PRODUCTIVE FIRMS

THE IMPLICATIONS FOR NATIONAL POLICY

• SUPPLY OF SKILLS• ENCOURAGING THE HIGH ROAD• LEVERAGE ON INDIVIDUAL

ORGANISATIONS• MNEs AND SPILLOVERS

HORIZONTALVERTICAL

• THE NEW PROTECTIONISM

IMPLICATIONS FOR POLICY AT THE REGIONAL LEVEL

• HOW MUCH POLICY DISCRETION?• HOW MUCH CORPORATE DISCRETION?• SKILLS SUPPLY• MNEs• KNOWLEDGE-BASED INDUSTRY• HOW TO INFLUENCE COMPANIES• CLUSTERS• THE CLIMATE OF OPINION• COORDINATION AND RESOURCES

THE REAL HORROR STORY!