Abstract
This paper explores the dairy industry cluster in Rwanda and its competitive advantage basing on the Porter’s diamond model. Additionally, this study identifies other factors critical to the competitiveness of the dairy industry cluster in Rwanda and includes them to the diamond model to create a multiple diamond model. This study argues that the direction taken to increase milk supply in Rwanda by increasing the number of cattle farmers through the government program known as “One cow per poor family” is not suitable in that it exerts more pressure on already scarce resources such as land. In fact, this study suggests that given the challenges facing the dairy industry, more emphasis should be put on improving efficiency and increasing productivity in the value chain. This study proposes the multiple-diamond model which extends Porter’s Diamond model to include other factors central to the competitiveness of the dairy industry cluster in Rwanda. To test the effect of the proposed multiple-diamond determinants, ARDL test was run. The findings confirmed the effect of trade openness on the dairy cluster industry competitiveness. Development assistance and milk cattle were found to have a negative and significant effect on the dairy cluster industry competitiveness while FDI inflow and market sophistication were found to have non-significant effect. The study concludes by providing recommendations for future studies in this field.
Highlights
Porter [14], Porter [15] developed a model known as Porter’s Diamond Theory of National Advantage designed to help understand the competitive advantage enjoyed by nations in certain industries groups due to specific attributes and aspects of their domestic diamond; the model explain the intervention of the government in stimulating global competitiveness within an economy
Our study has identified a number of competitive advantages in the dairy cluster which took place in response to challenges facing the dairy industry in Rwanda
This study argues that some factors have been wrongly identified as competitive advantage of the dairy industry, this includes the large number of farmers involved in cattle rearing due to cattle farming association coupled with government programs such as “One cow per poor family” program
Summary
Porter [14], Porter [15] developed a model known as Porter’s Diamond Theory of National Advantage designed to help understand the competitive advantage enjoyed by nations in certain industries groups due to specific attributes and aspects of their domestic diamond; the model explain the intervention of the government in stimulating global competitiveness within an economy. Porter [15] argued that the old theories of Adam Smith and David Ricardo which are based on factor endowment are not sufficient to explain competitiveness between technology advantages in the nations of today. He argued that rather than originating from natural endowments, labor pool or interest rates, the national prosperity is created [15]. According to Porter the competitive advantage of an industry originates from four different determinants of competitive advantage which are created within the home base of the nation state; this is illustrated in the Diamond model with four main determinants: 1) factor conditions, 2) demand conditions, 3) related and supporting industries, 4) firm strategy, structure and rivalry. The points of the diamond are self-reinforcing; in the process of clustering, a competitive
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