Factor conditions (Porter’s Diamond)
Factor conditions in Porter’s Diamond concern the resources and capabilities available in a location, including skills, knowledge, infrastructure and relevant physical resources. Specialised, developed capabilities can support innovation and productivity; abundant cheap inputs alone do not establish lasting advantage. The factors interact with demand, supporting industries and rivalry.
Worked example
A region develops skilled precision engineers and specialised testing facilities that help instrument makers improve reliability and compete internationally. Cheap land alone would not provide the same capability.
Common mistake
Reducing factor conditions to natural resources or low wages, or assuming a resource disadvantage can never stimulate innovation.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBL | Direct | September 2026–June 2027 |