Competitiveness Index


The attention to competitiveness of a region has not decreased for recent decades. The aspects of competitiveness gradually become one of the main parts in regional development strategies. A lot of regions are looking for perspective niches where they should or could increase their competitiveness and develop themselves economically and socially contemporaneous. One of the most important
stages in strategic planning as well as presumption of the improvement of regional competitiveness are the measurement of present competitive position and potential of a region.
Despite the increasing number of scientific works on regional competitiveness issues, the researches about the techniques of measurement of regional competitiveness are still lacking, especially in Indonesia. Though, the composite indices are considered to be one of the methods
to analyse the problem in a complex way, the methodological aspects of the measurement of regional competitiveness by a composite index have been analysed very little in scientific literature. The indices of national competitiveness (Growth and Business Competitiveness Indices of World Economic Forum, World Competitiveness Index of International Institute for Management Development) have been formed and widely applied in the world, but they are generally intended for the measurement of the competitiveness of a country. There is the lack of the researches about theirs’ possibilities of application in the measurement of competitiveness within a country. Hence,
a regional competitiveness index (RCI), which would be grounded methodologically and would enable to measure the competitiveness of regions within a country is still missing. Lack of a means of complex measurement of competitiveness is becoming one of the obstacles which prevents from measuring a competitive potential of a region and forming effective strategies of increase in competitiveness.

The competitiveness of a region can be measured in different ways: analyzing one or several factors of competitiveness, using theoretical models of competitiveness, creating composite indices, etc. The analysis of the main problems of regional competitiveness measurement (Simanaviciene, et al., 2007, Kitson et al., 2004, de Vet, et al. 2004, Huggins, 2003, Lengyel, 2003) showed, that competitiveness cannot be completely defined by one or several economic and social indicators. Thus, complex measurement of competitiveness is a must. The researches proved that the measurement by a composite index helps to solve the problem of complexity. A group of scientists (Giovannini et al., 2005, Saisana et al., 2005, Wignaraja et al., 2004, IMD, 2004, Freudenberg, 2003, Huggins, 2003) defines a composite index as an artificially made-up instrument of quantitative and qualitative measurement of a particular sphere. The index consists of sub-indicators; hence, the objects under examination can be ranked on the ground of it. It is emphasized that multi-criteria conceptions (e.g. competitiveness, industrialization, coherence, the integration of markets, the development of knowledge society, etc.) are measured by the index most accurately as they cannot be measured by a single index only. The critical analysis of the measurement by the index has induced to distinguish its advantages and drawbacks. However, it envisages more advantages than drawbacks of it. It is predicted that indices will continue to be widely applied in the future in the measurement of multi-criteria conceptions because of the benefit which indices provide as a means of conveyance and analysis.

The analysis of scientific literature (Bowen et al., 2005, WEF, 2005, Giovannini et al., 2005, Wignaraja et al., 2004, IMD, 2004, Huggins 2003, Booysen, 2002, Lall, 2001 a, b, Huovari et al., 2000, 2001) let summarize the stages of index calculation: forming the theoretical model of a problem, normalizing, grouping and weighting the indicators, calculating the index and analyzing the uncertainty and sensitivity of the index. 

In scientific literature the formation of a theoretical model of a problem was not attributed to the stages of the formation of the index, hence, a number of scientists do not mark it at all. The authors of the article are of the opinion that a theoretical model is the basis of the formation of the methodology for index calculation as well as for the grounding of its clarity. Thus, it is considered to be a separate stage.
In pursuance of the comparison of data expressed by different units of measure, indicators are normalized. In the calculation of indices different methods of data normalization are applied. The most frequent methods are the following ones: a standard deviation from the mean, a distance from a minimum and a maximum value and a distance from a group leader or an average. The biggest number of discussions among scientists was caused by the stage of the determination of weight coefficients.
Houvari et al. 2001, 2000, and Sachs et al. 2001 have emphasised the fact that it is difficult to form the substantiation of the measurement of weight coefficients or all variables are provided with the same weight coefficients with no reason (IMD, 2004). Meanwhile Saisana et al., 2005, and Freudenberg, 2003, Booysen, 2002 point out that different weight coefficients enable to calculate competitiveness index more precisely as well as provide indicators with weight coefficients of different value (WEF, 2005).

Methodology of regional competitiveness index 

The analysis of the main problems of regional competitiveness measurement (Simanaviciene et al., 2007) has enabled to determine that the method of regional competitiveness measurement has to meet the following requirements:
– The requirement of complexity, i.e. competitiveness has to be analysed in a number of different aspects by the method which is being used. In addition, a group of competitiveness factors as well as indicators defining them has to be also included into the process of measurement.

– The requirement of reliability, i.e. the method which is being used has to be founded both methodologically and statistically. 

– The requirement of comparability, i.e. the comparison of competitiveness among different regions and with regard to time has to be possible. 

– The requirement of simplicity, i.e. results acquired have to be clear and easy for interpretation, i.e. measurement by the index, meets all the requirements mentioned above.

The principle of complexity is assured by the fact that competitiveness is measured not by a single or several economic and social indicators, but by a number of them included in the structure of the index. The principle of reliability is assured by the fact that the stage of the formation of regional competitiveness model is included in the calculation of the index when a model grounded methodologically as well as the stage of a robustness and sensitivity analysis are formed. The principle of comparability is assured by the fact that indices are calculated both for separate regions and for different years. The principle of simplicity is assured by the fact that competitiveness is measured by a single value which reveals a number of different indicators. Hence, it provides an opportunity to rank regions both according to a group of indicators and separate indicators.
The research carried out by the authors of the article has proved that in scientific literature competitiveness is analysed in a number of ways: according to separate macro-economic indicators, indicators of activity of firms or separate sectors, policies carried out by the authorities, conditions which make firms be competitive or combine several aspects under discussion at the same time. Snieška and Šliburytė, (2000) measure the competitiveness of the territory by the competition intensity level in a different market, others (Kvainauskaitė, Snieška (2002), Kvainauskaitė et al., 2003) – by business structure or market demand, still others (Maksvytienė, Urbonas, 2001) – by the course of exchange, norms of interests, balance of foreign trade, technological innovations, while Snieška and Drakštaitė (2007) – by outsourcing of knowledge process. Snieška et al. (2002) proved that the cluster based approach in the implementing policy can increase regional competitiveness and speed up economic development. Startienė and Genytė (2004) were evaluating the competitiveness of milk processing sector by two levels: macro environment (distant, general or social environment) and by factors excluded in Porter‘s model.
Rutkauskas (2008) defined the competitiveness of a region as a three-dimensional indicator, which depends on the fields of activity, dominating in the country, international economic relations and legal, financial, ecological, natural resources and geographical location environment competitiveness. The research carried has proved that the selection of competitiveness factors depends on the methodology chosen previously.

While identifying factors of regional competitiveness, peculiarities of regional competitiveness (Porter (1990), Cho (1994), Cho, Moon (1998)) and competitiveness within the country (Martin et al. (2003), Lengyel (2003), de Vet et al. (2004)) were also considered which could be applied in the measurement of regional competitiveness.

With reference to Rugman et al. (1998) model of “Double Diamond”, they have divided factors of regional competitiveness into four groups: factors of conditions of production, demand conditions, factors increasing competitiveness of regional firms and factors conditioning the development of regional clusters.
With regard to the fact that a region is an open and lively system, factors of competitiveness are also analysed in inner and outer aspects of a region. A reciprocal effect on regional competitiveness made by both external environments (such as political, economic, geographical-natural, socialdemographic, cultural and technological) and general competitiveness within the country and other regions is also distinguished in the model of “Regional Diamond”.
Despite the fact that these aspects are not included in the measurement of regional competitiveness by RCI, their influence is estimated indirectly via factors of regional competitiveness and its capability to use opportunities provided by these factors to strengthen its own competitiveness. Inclusion of external environments, common competitiveness within the country and competitiveness among other regions of the country shows a complex view to the measurement of competitiveness.

The results of the expert evaluation and calculation of RCI according to the factors of Indonesian regions largely coincide and specify each other. It is identified, that the structure of inhabitants’
age and qualification, infrastructure of studies and science, ITT, the desire for knowledge of local consumers, the extent of export markets and prominence of region in international markets make the biggest influence on competitiveness of Indonesian regions. The strengthening of competitive advantages of firms and maximum fulfilment of consumers’ needs and opportunity adaptation
to changeable conditions are the main factors of competitiveness of regional firms. GDP per capita and the number of economic entities in operation per 1000 population have the biggest influence on the results of measurement of factors increasing competitiveness of firms by RCI. Close cooperation of business, science and the authorities, infrastructure which is widely developed and adapted to the activity of a cluster are the main factors conditioning the development of regional clusters in Indonesia.

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~ by ketekbasahminggir on September 9, 2012.

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