Drawing on the new trade theory and Porter's theory of national competitive advantage, outline the case for government policies designed to build a national competitive advantage in biotechnology. What kind of policies would you recommend the government adopt? Are these policies at variance with the basic free trade philosophy?

Porter's theory of national competitive advantage argues that the four general attributes of a nation form an environment in which local companies compete, and that these attributes contribute to or hinder the creation of competitive advantage. These attributes are: safety factor, demand conditions, related and support industries, as well as the company's strategy, structure and competence. Porter goes on to argue that companies are likely to succeed in industries where diamond (which is the four attributes) is favorable. Porter adds two factors to the list of attributes described above: randomness and public policy. The New Theory of Trade addresses a separate topic. This theory asserts that due to substantial economies of scale, global demand will only support a few companies in many industries. At the core of this argument is the concept of pioneering benefits, which are the economic and strategic benefits obtained by the first participants in the industry. It can be argued that when the attributes of a nation contribute to the production of a product, and when the manufacturers of this product experienced some "random" events that gave them a pioneering advantage, this nation's government policy should help create an advantage. national competitive in this particular area. This can be accomplished with government research and development grants, policies that favor the industry in capital markets, educational policies, creating a supportive regulatory environment, reducing taxes, and the like. Ask your students if they think this policy goes against the basic philosophy of free trade. It can be argued that this is so because government intervention creates the basis for comparative advantage. Conversely, it can be argued that if a country establishes a comparative advantage in a specific area based on a single set of attributes (such as Swiss watchmaking), global production will have a beneficial effect if this country is allowed to continue its area comparative. advantage.

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