Add to that “very high unemployment” (as high as 70% unemployment) and one can see the task at hand for USAID. Moreover, on page 2 Dan continues with the litany: Kosovo had an “inadequate banking and financial sector” featuring “poor legal framework conditions for lending, no equity market, [and] an uncertain framework for foreign investment.” In Kosovo at the time of the USAID $20 million investment there were “inadequate and expensive utilities, inadequate and costly transport for exports, a delayed privatization program” and moreover the courts were said to be “ineffective” with generally “uncertain” legal dynamics.
A nation will gain competitive advantage in certain industries where the demand at home gives companies and projects “a clearer or earlier picture of emerging buyer needs” through innovation, Porter explained on page 79. And on page 80 of Porters 1990 scholarly essay the noted business expert states that if the “nations values are spreading” beyond its borders then companies within that nation can expect success.
But wait. In Kosovo at the time of the mid-term evaluation — in the Executive Summary of the report — there was no chance that values could be expanding. Indeed, the Kosovo government was “characterized by indecisiveness and a lack of ability to implement private sector policy in an effective and consistent manner” (Dan, p. 2).
The USAID mission statement asserts that the agencys role is to go into a country that is in transition and “identify the barriers that keep businesses from flourishing”; and yet in Kosovo at the time the $20 million project was put together Kosovo was operating under a division of political responsibilities — with both the United Nations Interim Administration Mission in Kosovo (UNMIK) and the Provisional Institutions of Self-Government (PISG). Looking at Porters diamond in the context of the political and economic chaos in Kosovo, the professors fourth component (“Firm Strategy, Structure, and Rivalry”) there was not much of a chance for Kosovos government to help companies be launched or be innovative.
“When a national environment permits and supports the most rapid accumulation of specialized assets and skillscompanies gain a competitive advantage,” Porter explains (p. 77). The national environment in this case was certainly not in any position to support the assets and skills of workers (especially with 70% of the workforce not employed). By juxtaposing Porters point made in the first sentence of this paragraph with the following passage from the Executive Summary (Dan, p. 6) and an objective researcher can see the crux of the problem: “Two out of three overall indicators measuring business association progress are behind target,” Dan explains. These factors include “external constraints, over which the Project has less control, such as the lack of Government initiative taken in public-private dialog activities,” Dan continues on page 6.
The final relevant points to be made regarding this project — in contrast to what Porter offers in his theories — is that the reason the project isnt going so well, beside the fact that it appears USAID bit off more than it could chew, is that there were “overly optimistic assumptions made during the initial project design regardingprogress toward sustainability” (Dan, 2006, p. 6).
Moreover, the cluster approach is not working well in Kosovo, and Dan (p. 7) admits that: a) this is not intended as a “classic cluster competitiveness project in the full sense of the Michael Porter approach”; b) the Porter approach generally relies on “actively bringing together all the stakeholders” and this was not done in Kosovo; and c) the Kosovo project is more of an extension of a previous project rather than a “Cluster Competitiveness project.”
Dan, Michael B., and Wellons, Richard Lindsey. (2006). Mid-Term Evaluation of the Kosovo
Cluster and Business Support Project. Retrieved Oct. 22, 2010, from http://usaid.gov, 1-52.
Dunning, John H. (1993). Internationalizing Porters Diamond. Management International
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Narula, Rajneesh. (1993). Technology, International Business and Porters “Diamond”:
Synthesizing a Dynamic Competitive Development Model. Management International