Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market. Although widely used in economics and business management, the usefulness of the concept, particularly in the context of national competitiveness, is vigorously disputed by economists, such as Paul Krugman http://www.foreignaffairs.org/19940301faessay5094/paul-krugman/competitiveness-a-dangerous-obsession.html.

The term may also be applied to markets, where it is used to refer to the extent to which the market structure may be regarded as perfectly competitive. This usage has nothing to do with the extent to which individual firms are "competitive'.

Firm competitiveness

Empirical observation confirms that resources (capital, labor, technology) and talent tend to concentrate geographically (Easterly and Levine 2002). This result reflects the fact that firms are embedded in inter-firm relationships with networks of suppliers, buyers and even competitors that help them to gain competitive advantages in the sale of its products and services. While arms-length market relationships do provide these benefits, at times there are externalities that arise from linkages among firms in a geographic area or in a specific industry (textiles, leather goods, silicon chips) that cannot be captured or fostered by markets alone. The process of “clusterization,” the creation of “value chains,” or “industrial districts” are models that highlight the advantages of networks.

Within capitalist economic systems, the drive of enterprises is to maintain and improve their own competitiveness.this practically pertains to business sectors.

National Competitiveness

In recent years, the concept of competitiveness has emerged as a new paradigm in economic development. Competitiveness captures the awareness of both the limitations and challenges posed by global competition, at a time when effective government action is constrained by budgetary constraints and the private sector faces significant barriers to competing in domestic and international markets.

The term is also used to refer in a broader sense to the economic competitiveness of countries, regions or cities. Recently, countries are increasing looking at their competitiveness on global markets. Ireland (1997), Greece (2003), Croatia (2004), Bahrain (2005), the Philippines (2006), Guyana and the Dominican Republic are just some examples of countries that have advisory bodies or special government agencies that tackle competitiveness issues. Even regions or cities, such as Dubai or the Basque Country, are considering the establishment of such a body.