Comparative versus Collaborative Approach
The nomenclature ‘Comparative Advantage’ has been used predominantly in international trade to signify an advantage to a nation over others with respect to manufacturing products and services easily and cheaply. The same concept is applied in the case of businesses or individuals that can achieve benefits out of the same.
However, when the concept is used by a nation to restrict free trade, under its umbrella by specifying another country taking advantage by introducing technology to hamper or cause damage to the importers as they use the products or services, it tends to digress from the more collaborative approach which is needed especially in current times globally. The country is said to have a more protectionist policy towards its inherent industry players thus boosting domestic manufacturing.
Failing to gain a competitive edge in the international markets over those who enjoy a comparative one is another reason which is attributed to nations adopting a more uncooperative perspective.
Michael Porter in his Harvard Business Review article “Clusters and the New Economics of Competition” (Porter, 1998), stresses upon companies putting their input cost disadvantages to rest through global sourcing. For economic development, being a part of clusters makes more sense than refraining from one. Here he points towards location by providing it, an entirely new paradigm. Geographical locations internationally can be advantageous for the firms and for countries that participate in the conglomeration.
Sourcing inputs from those nations who have by those who haven’t can be an added advantage to all the players that form a part of the value chain and ultimately can provide the value proposition thereby to the customers in terms of cost and quality.
References: Porter, 1998. https://hbr.org/1998/11/clusters-and-the-new-economics-of-competition