User-Producer Interaction, Learning and Comparative Advantage

Michael Porter's book "The Competitive Advantage of Nations" (1990) has led to increasing attention on the favourable impact that "advanced domestic users" may have on competitiveness. This paper presents a critical appraisal of the theoretical and empirical evidence on this relationship. An econometric test of the hypothesis - of a positive impact of advanced domestic users on competitiveness - on data for 16 OECD countries between 1965 and 1987 is presented. In general, the results give strong support to the hypothesis under test. The relationship appears to be stronger in cases where the home-market is exposed to international competition.