Competitive Advantage Determinants of Iranian Manufacturing Industries

According to the latest theoretical and empirical literature of international trade, the market structure is among the most important industry-specific determinants of competitive advantages. The present paper examines the competitive advantage determinants of Iranian manufacturing industries using a panel data of industries at the 4-digit aggregation level for the period 2002-2010. We employ the constant market share (CMS) method to measure the competitive advantage and use the conventional variables to estimate the determinants of the competitive advantage. The results indicate that factors including the economies of scale, product differentiation, and government policy have positive and significant effects on the competitive advantage of Iranian manufacturing industries. Based on these results, it seems that monopolistic competition structure based on product differentiation and economies of scale as well as proper government protections, and emphasis on the competitive advantage instead of merely comparative advantage may improve the competitive advantage of Iranian manufacturing industries. In this framework, we suggest that more attention should be paid to intra industry trade in developing foreign trade.