The Microeconomics of Competitiveness: Firms, Clusters and Economic Development

Course Number 1260

Professor Laura Alfaro
Spring; Q3Q4; 3 credits
28 Sessions

Course Description

This course is concerned with the determinants of competitiveness and economic development viewed from a microeconomic perspective. The course challenges students to understand the role of micro and macro policies on the accumulation of factors of production and the potential for competitiveness. The strategies of firms, the vitality of clusters, and quality of the business environment in which competition takes place importantly determine a nation’s or region’s productivity. The globalization process, moreover, has far-reaching consequences for firm productivity growth and countries’ development strategies.

This course covers emerging, developing, and advanced economies and addresses competitiveness at multiple geographic levels: the national level (e.g., Rwanda, Brazil, Poland), the regional and city level within nations (e.g., Lisbon, New York City), and groups of neighboring countries (e.g., the European Union, NAFTA). The course includes both country- and firm-level cases addressing government policy toward the economy as well as the implications and roles of business. In modern international competition, the roles of key stakeholders, including companies, governments, and NGOs, have sifted and expanded, and the traditional separation between them works against successful economic development. Additionally, the ability to mount and sustain a competitiveness strategy for a nation or region is a daunting challenge. The cases pay particular attention to the role of globalization, trade, and capital flows in shaping economic outcomes. The course will explore not only theory and policy, but also the practical implications for all stake holders.

Global Reach - Thiscourse is taught not only at Harvard, but by faculty at approximately 100 universities around the world. These faculty are affiliated through an HBS-managed network to enable the sharing of course materials, research, and ideas globally. As this network expands, there is an even greater advancement of competitiveness theory and practice.

Course Expectations

Course Structure and Pedagogy

The course will be taught using the case method together with readings, lectures, and guests. The case method requires extensive advance preparation for each class and a significant part of the course grade will be based on participation. This method allows students to test their understanding of theoretical tools by applying them to real-life situations. The success of the course relies heavily on the active participation of all students in the preparation of cases, in class discussions, and in their team projects. All students are expected to make their best effort to participate actively in the case discussions and encourage and support the participation of others.

This course is different from most MBA courses in a number of respects. First, it is not a management course but a course focused on economic development. While it does explore implications for companies, companies are only one of the several important constituencies. Second, the course will involve the use of economic theory, though it does not require a mastery of mathematical economics. Third, the course covers emerging, developing and advanced nations, and multiple geographical levels (integration agreements, nations, stages, cities). Fourth, although a portion of almost every session will involve a case, there are additional readings that cover the relevant concepts.

Classroom Discussion

Primarily, MOC is a course about a way of thinking about competitiveness. The “answer” is less important than the thinking process. Analytical rigor is highly valued. Class discussions will consist of a combination of voluntary participation and students called on by instructors. Students may be called on to start the class or at any time during class. In their participation, students will be expected to assimilate and build on the class contributions of other students. Students should be prepared to contribute in a concise and logical manner, marshaling evidence to support their views. The capacity to integrate across facts, issues, and cases is valued. All discussions should be constructive in approach and tone.


Grading is based on class participation and an exam. Class participation will receive a weighting of 60%. The exam date and format are TBA.

Course Content and Structure

The course itself consists of three main sections aimed at exploring different topics. The first part of the course, Analytical Framework, introduces the broad topics of the course and the core framework. The model overviews key concepts: what is prosperity? Cases analyze clusters and cluster development and how firms compete within and across borders. The globalization process has far-reaching consequences for firms and nations. For example, while gaining access to foreign markets increases opportunities for firms, opening a market for imports presents different challenges and opportunities. On the one hand, it exposes firms to competition from imported goods and on the other hand it enhances their opportunities to globally source their inputs for production. Both mechanisms affect firms’ incentives to invest in upgrading their technologies, processes, and products, but potentially in different ways. Cases in the module include: Shaping Productivity: Demographics, Robots, and Globalization; Dutch Flower Cluster.

The next section looks at Strategies for Nations and Geographical Influences of Competitiveness. A first module in this section analyzes the experience of countries which have undergone tremendous transformation and at different stages of development to identify and develop the issues central to the course. Cases in the course include Australia, Rwanda, and Saudi Arabia. We then also explore challenges and economic strategies at different levels, studying the different geographical influences. Cases include Lisbon, New York City, and Puerto Rico.

In this section, we will also analyze different integration initiatives. This section uses the cases of the European Union, Brexit, Poland, and NAFTA to discuss the globalization process. The European Union illustrates how different countries have developed institutions that permit coordination of different decisions. The rising inequality, the weak labor market performance for workers at the lower end of the skill spectrum, and the Global Financial Crisis of 2008-2009 have come together to foster a growing backlash against globalization in certain segments of the population in various countries. Overall gains from globalization, and technology more generally, can have different allocations and distributive effects. The cases in the module study how changes in the economic, social, and political environments can challenge previously institutional structures creating new opportunities and risk.

The last section - Policies and Strategies: Globalization meets National Institutions - discusses different tools used to harness benefits: cluster initiatives, policies to foster entrepreneurship and management of foreign trade, capital and attraction of the foreign investment. Cases include Cambridge Innovation Center; Start up Chile; India: Special Economic Zones; Talent Corp Malaysia; Brazil: Sustaining Long Term Growth.

Core Concepts: Macroeconomic and Microeconomic Competitiveness

    • What is Prosperity?
      • Integrating Economic and Social Development
    • Determinants of Competitiveness:
      • Indicators and Enablers of Competitiveness

National, Regional and Local Economic Strategy

    • Geographic Influences on Competitiveness

Strategies and Policies for Competitiveness

    • The Role of the Private Sector in Economic and Social Development
    • Upgrading the Business Environment and Cluster Development
      • Organizing for Competitiveness