Arturo Bris: Rightful institutions foster competitiveness

Posted: March 20, 2014 by jennroig in English, Interviews
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Arturo Bris, Spanish author, researcher and professor at Swiss IMD, was recently appointed as head of the World Competitiveness Center (WCC). This is the original, unedited English version of this interview published by AméricaEconomía on March 3rd, 2014, accessible here.

Arturo Bris, head at WCC

Arturo Bris, head at WCC

As new director of the World Competitiveness Center (WCC), what are the most pressing challenges that will define your work?

The competitiveness of nations is currently on top of politicians’ agendas these days. We are observing anyhow that also corporate executives and industry leaders see country factors as relevant at determining their own competitiveness. Therefore the ability to create wealth and welfare (this is how we define “Competitiveness” of nations) needs to be looked at with a different lens and methodology. We are currently working to extend our approach to measuring competitiveness.

Prof. Pankaj Ghemawat has argued that a comparison between developed and developing economies would show how the availability of management talent and skills can make a difference. You have examined competitiveness in developed and developing economies so you must have a very clear notion of what fosters competitiveness. What’s your point of view over Ghemawat’s argument?

Management skills are certainly a driving force in the competitiveness of nations. The 2013 IMD World Competitiveness report shows that countries that rank the highest in terms of Management Skills (Switzerland, Denmark and Singapore in this order) are also among the most competitive economies. With respect to business schools, their location in a global world is somehow irrelevant, and it does not seem to be the case that developing management education in the home country results is more economic development. Switzerland is one of the most competitiveness nations in our rankings, and also home of several world-class business schools, IMD being at the forefront. But Switzerland is the exception rather than the rule: there are no highly-ranked business schools in countries such as Sweden, Taiwan, Norway, and Germany, however these countries have ranked historically among the top ten in terms of competitiveness.

When it comes to determine which factors make a company competitive, fostering innovation, keeping control over cash flows and excellence in customer service, come at the very top of any list. When it comes to nations, what are the relevant categories?

First, as I mentioned above, variables such as the strength of a country’s financials and the quality of the country brand are also extremely significant at explaining the competitiveness of companies. In any case, competitiveness at the firm level is understood as the ability of the company to excel among its peers. One company becomes more competitive at the expense of another industry rival. Competition at the national level instead requires cooperation among nations—that is, countries can all become more competitive at the same time.

However, our experience has shown that only those economies that manage both their intangible institutions (education, management values) and their infrastructure (regulation, transportation network) stay competitive.

What can companies learn about the management of a national economy, and the other way around?

The lesson for firms is that winning the market in the short term may not be enough—they need to preserve and develop talent, work with society, generate future business at the expense of current profits.

What can countries learn from how companies compete? There is no doubt to me that the world economy would have fared better if world politicians had behaved like business leaders. Talent is the factor that determines which individuals end up in the top positions of our large companies. Excellence is almost always rewarded in the corporate world—however the way to political leadership is a process which in most countries does not guarantee that the most talented become leaders. Why do CEOs and senior executives attend IMD’s business programs, but not Presidents or Prime Ministers?

When you compare competitiveness among nations, what are the key elements to observe? When observing their limitations and potential solutions, what are the factors and frequently hamper a nation’s progress?

There is an interesting academic debate regarding which factors determine the competitive of nations. Researches like Jarred Diamond would agree that access to natural resources has been, or their lack therein, determines the fate of nations. More recently, Acemoglou and Robinson (“Why Nations Fail”) have argued that history shows that competitiveness requires that countries develop the right institutions (“inclusive institutions” as they call them).

At IMD we have shown over the last 25 years that the latter is more important: nations that are rich in natural resources but fail to develop an institutional framework that facilitates business and growth rank very low in competitiveness (e.g. Venezuela). However, natural resources are not a necessary condition for competitiveness: Qatar, the UAE and Hong Kong are worst in “Access to Water” among 60 economies, yet in the top ten of competitiveness.

You have defined Economics as “the science that studies the allocation of scarce resources”. Political science defines politics as the answer to the question of “who gets what”. Both definitions sound similar. From your perspective, is the increasing political polarization in the legislative institutions of modern democracies affecting the economic performance of the countries? How so?

Those definitions correctly point out to the normative aspect of both fields. However economists study primarily the role of markets in the allocation of resources. Markets need to be regulated, and regulation is the subject of Political Science. My opinion is that each political approach to a problem is usually in line with a certain economic way of thinking. And both political and economic opinions are nowadays polarized, as they should be in times around crises. I want to think that discrepancies and debate result in efficient outcomes, as long as we respect each other.

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