Industry-Level Loss of Competitiveness: Causal Structure and Process

Abstract

Prior research has framed industry level loss of competitiveness as a process with a narrative structure: causes and consequences are clear; processes are pre- determined, starting in prosperity and ending in collapse; and managers and government officials accelerate decline by making poor choices. However, the definition of and theoretical explanations for loss of competitiveness are not clear in the literature. We analyze books and articles – both historical and empirical – that focus on such processes. We identify four meta-theoretical categories, all of which operate on a narrow set of arguments. Politics and market dynamics are seen as exogenous factors with deterministic features while technology and management capabilities are framed as firm-internal failures with no explanations of how firm-level characteristics may explain industry-level loss of competitiveness. We propose that understanding the limitations of distinct meta-theoretical arguments is important for an enhanced theoretical and practical understanding of what loss of competitiveness is, how it happens, and why. Thus, this study contributes to research about how and why industries lose competitiveness by re-structuring and clarifying latent theoretical themes in research. Moreover, we discuss policy implications of the causal paths leading to loss of competitiveness.