Academic journal article Academy of Strategic Management Journal

Double Diamonds, Real Diamonds: Botswana's National Competitiveness

Academic journal article Academy of Strategic Management Journal

Double Diamonds, Real Diamonds: Botswana's National Competitiveness

Article excerpt

Diamonds do not make engines run faster or planes fly further or higher. Unique among major raw materials, the gem diamond has no material use to man

--Nicky Oppenheimer, Chairman, De Beers

INTRODUCTION

Mining, particularly for diamonds, has played a dominant role in the impressive economic development of Botswana since this southern African country became independent four decades ago. In 2004 and 2005, Botswana was the World's leading producer by value of rough diamonds, producing approximately 25% of the World's output (Kimberley Process, 2007). Seventy-five percent of Botswana's current export earnings come from diamond sales (Baxter, 2006). The diamond industry contributes a third of the country's GDP and approximately half of government revenues (EIU, June 20, 2006). It is therefore not surprising that Botswana has had one of the fastest economic growth rates in the World, averaging over 9% per year from 1967 to 1997 (Government of Botswana, 2007; US Dept of State, 2006).

According to Jin and Moon (2006), diversity among nations reflects different environmental conditions which, in turn, affect the strategies, directions and challenges of a specific industry. Therefore, it is essential to understand competitiveness, both domestic and international, for a particular country. In the case of Botswana, the diamond industry is an integral part of the global diamond cartel dominated by De Beers. The De Beers cartel has received extensive attention in the literature (Bergenstock, 2005; Gregory, 1962). This analysis, however, will focus on Debswana, the firm that dominates the Botswana diamond industry and which is jointly owned by the Botswana government and De Beers. The fusion of governmental interest and firm strategy presents an opportunity to understand how Debswana operates both domestically and globally, as part of a cartel, to pursue the national competitiveness of Botswana.

This paper is important for a number of reasons. First, the national competitiveness of Botswana is largely determined by the diamond industry which dominates the country's economy. Second, the "resource curse", i.e. national economies dominated by a single commodity, has plagued many developing countries. However, Botswana has used its resource wealth prudently for socio-economic development while maintaining political-economic stability by adhering to democracy and free market principles. Third, national competitiveness must be viewed in a globalized context where determinants of national competitiveness have increasingly involved cross-border activities and processes.

This article is organized into five parts. It addresses relevant theories, the supporting literature and an application to Botswana's unique situation. Part I discusses definitions and theories of competitiveness. Part II outlines Porter's (1990) Diamond Model of National Competitiveness. Part III introduces the generalized "Double Diamond" framework which emphasizes that national competitiveness is shaped by both domestic and international environments. Part IV analyzes the four determinants of competitiveness as applied to Botswana within the changing dynamics of the global diamond cartel and of domestic political economic issues. Finally, Part V outlines thoughts on the future competitiveness of Botswana.

THEORIES OF NATIONAL COMPETITIVENESS

In management literature, different usages of competitiveness are influenced by the level of analysis. McFetridge (1995) identified competitiveness at three levels: firm, industry and national. One usage is to view competitiveness at the level of the individual firm (Porter, 1990) and of individual sectors within a country (Toyne, Arpan, Barnett, Ricks and Shimp, 1984). According to Kurdrle (1996), "(I)f a firm is holding or expanding its share while maintaining satisfactory profits, the firm can be considered competitive". A second usage is that of industry competitiveness. …

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