Government's impact on the business environment and strategic management

Should 'government' be a fifth force in Michael Porter's model of the Competitive Advantage of Nations and, if so, what should be the appropriate level of analysis? In the strategic management literature, frameworks explaining the impact of the national environment, and more particularly of government, on firms and industries are still in their infancy. Michael Porter's 'The Competitive Advantage of Nations' proposes a new integrative framework consisting of four determinants (the so-called diamond) and aimed at a comprehensive analysis of the above-mentioned impact. After a short overview of the diamond model and a general critique, this paper will deal with the important question of whether government is adequately integrated into Porter's framework. Stated more precisely: whether government can be considered as a fifth determinant. Porter has already recognized the indirect role of government in creating competitive advantage, but denies a direct role. To demonstrate whether government does have a direct role and, if so, how large its influence is, is both a theoretical and empirical question. Although a definite answer upon this question is beyond the scope of this paper, we will contribute to this challenging question by focusing on two aspects.