Journal of Educational and Human Resource Development 6:227-237(2018) Southern State University, Sogod, ,

Determining Competitive Advantage of Communities in a Rural Setting

Constantino G. Medilo Jr.* Frederick C. Aniga College of Teacher Education Southern Leyte State University , Southern Leyte, Philippines

Abstract This study provided a framework for determining the competitive advantage of the communities in the rural areas using principal component analysis. The profiles of the municipalities in the province of Southern Leyte, Philippines were analyzed, and principal components identified. The data included density, total land area, revenue classification, number of literate residents, number of gainful workers, average household size, number of residents with academic degrees, number of hazards present and the rate of population increase. The results identified four indices as factors of competitive advantage, which included the general demographic index, crowding index, family size index, and hazard exposure. This paper concluded that competitive edge in rural areas is a function of general demographic factors, crowding, family size, and exposure to hazard. Demographic and geographical factors are vital to improving the competitive advantage of municipalities in the rural setting. Attaining competitive advantage in the rural environment means municipalities must have robust performance in literacy, population, the productivity of its citizens. Those municipalities should likewise perform well in controlling crowding and at the same time have the ability to mitigate the possible effects of natural hazards. The focus of determining competitive advantage away from economic indicators provides opportunities for looking at how communities in the rural see what they define as success.

Keywords: Geographical economics; Local governance; Philippine studies; Social sciences; Climate studies

Introduction helpful concept in understanding capabilities and in dealing with the country’s prosperity This paper aimed to provide a framework and productivity. In the context of municipality, to determine the competitive advantage of competitive advantage resides in the aptitude communities in a rural setting. Competitive to increase the productive activity and advantage allows organizations and services that generate significant presence on communities to improve the levels of the state, national and international markets, performance to reach targets. For the increasing the educational level, income, and public sector, it must be translated in the health of his inhabitants improving this increased quality in the services and efficient way their quality of life (MR, 2018). use of resources to propitiate the social The competitive advantage of a municipality and economic development (MR, 2018). is measured through different areas. Zhang According to Porter as cited by Silva and (2014) determined competitive advantage Tamayo (2016), competitive advantage is a through infrastructure such as transportation,

Correspondence: [email protected]; ORCID: 0000-0002-0550-6882 ISSN 2545-9759 Medilo and Aniga JEHRD Vol.6, 2018 telecommunications, water, and sanitation; opportunities, high salaries and bonuses as improved public service which included well as low personal taxation (Fo¨bker, Temme, education, health, public security, and & Wiegandt, 2014), and education and quality housing; and reduced cost of doing of local physical infrastructure (Ghani, Kerr, & business through simplifying regulations, O’Connell, 2014). The local government then making it easier to open business, pay must be able to attract business and industry taxes, hire workers, acquire land, and exit to create jobs (Kincheloe, 2018) and meet from businesses. Additionally, Fo¨bker, the needs and expectations of the prospective Temme, and Wiegandt, (2014) based a residents. If these needs are not met, the municipality’s competitive advantage on municipality will experience brain drain (Gibbs, the provision of attractive housing, cultural 2018) that will weaken its advantage. amenities, and a high-quality educational According to Balestrieri (2014), people, environment. Meanwhile, Silva and Tamayo activity, and uses influence the competitive (2016) competitiveness measures among advantage of a municipality. The first the municipalities of Compostela Valley macro-category (population) considers the was obtained by employing the weighted fact that without a critical mass there is no average value of the three indicators such as stimulus to innovation, research, innovative economic efficiency, government efficiency, solutions, autonomous development and infrastructure development. and overcoming dependence, therefore, With all these factors in place, tangible advantage cannot exist without growth in result will redound to the influx of business population. The second macro-category and a vibrant and healthy economy, which can (activity) refers to economic progress, be further triggered by the implementation expressed by a level of employment, of policies or municipal ordinances that a standard parameter for investigating promote economic development that is, to competitive advantage. The third category attract investment, tourists, labour force, (uses) reports on the fact that the spatial and residents (Cleave & Arku, 2015). The organization system can be an essential local government unit must be able to offer stimulus for attractiveness and development. companies the lowest tax rates and the McGranahan, Kasper, and Maestre (2017) best infrastructures (roads, sewers, lax illustrated why people normally live in environmental regulations) to make the significant settlements and that city has municipality attractive to companies and better position than a small town or a village create jobs (Kincheloe, 2018). In effect, local to accommodate essential services, where councils have a significant role as actors that small municipalities usually cannot afford to compete with each other in essential areas build and maintain. to attract and retain residents, businesses, From all articles cited, there has been and skilled workers (Bjθrna,˚ 2014). However, no study conducted that measures the Anderson and Henrekson (2014) pointed out competitive advantage of municipalities in the that for a municipality to have an advantage, it rural areas based on the identified variables. must have the capacity to renew its economic Many of the studies undertaken focused base to maintain its relevance continuously. only on cities and other highly urbanized Meanwhile, the competitive advantage of a communities (McCarthy, 2016). Thus, this municipality is one consideration for someone study attempts to explore the competitive who is contemplating for his or her choice advantage of municipalities in the rural of residence. If a person decides to settle setting (Leigh & Blakely, 2016), and provide down in a particular municipality, the place a framework for measuring the competitive of choice most likely have enough attractive advantage of the communities in the rural job openings, including promising career areas using principal component analysis.

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The profiles of the municipalities were also Lastly, the transient advantage views analyzed, and the principal components the organization’s competitive advantage identified. strategies as transient and eventually will have to be replaced to sustain the leverage. Theoretical and Conceptual The transient advantage view argues for the continual enhancement of the approach to Framework continually attain competitive advantage.

There are theories which identify and According to Schwab and Sala-i-Martin explain the factors of competitive advantage. (2013) as mentioned in Siudek and Zawojska Wang (2014) identified six approaches on (2014, p. 93), ” competitiveness is the set competitive advantage, which include the of institutions, policies, and factors that market-based view, the resource-based determine the level of productivity.” The view, the knowledge-based view, the definition of Siudek and Zawojska (2014) capability-based view, the relational view defines various factors that determine of strategy, and transient advantage view of the competitive advantages of a country competitive advantage. or community. Paul Krugman, American The market-based view of competitive economist and a distinguished Professor advantage is concerned with establishing of Economics at the Graduate Center of and defending a strategic position regarding the City University of New York, added the ability to exploit natural economies that geographical factors could improve the of scale and scope (McGee, 2015). competitive position of a specific place or The resource-based view of competitive community (Sunley & Martin, 2017). advantage identifies the internal resources Determining the competitive advantage of a and capabilities of the organization as the municipality is dependent on several factors main ingredients to achieve competitive related to geography, institutional indicators, advantage (Madhani, 2010). In fact, an and other factors. Thus, this study, identified extension of the resource-based view, factors including density, area, revenue the knowledge-based view emphasized classification, literate residents, gainful the importance of knowledge to the workers, household size, academic degree sustainable competitive advantage of the holders, the rate of population increase, and organization (Curado, 2006). Knowledge is a hazard present (see Figure 1). non-depreciable resource of the organization that it could continually use to its advantage. The capability-based view of the organization’s competitive advantage points to the organization’s capacity to use resources to meet the organization’s desired goal (Amit & Shoemaker, 1993 as mentioned in Wang, 2014). It is an information-based process developed through complex interactions of the organization’s resources (Wang, 2014). Meanwhile, the relational view emphasized the development of linkages to obtain supplies and market access (Wong, 2011). It stressed Figure 1. Schematic diagram of the organizations often have difficulty maintaining conceptual framework of the study a competitive advantage without the support of other organizations.

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Methodology bases in determining the number of Principal Components (PC) to include. The coefficients This study developed a framework for attaining of the identified principal components were competitive advantage in a rural setting. then obtained by multiplying the factor Various characteristics of the municipalities in loadings of the variables under each the province of Southern Leyte, Philippines component by the value of the variable. were used in the analysis. The data The products were either added to the value included density, total land area, revenue of the rest of the variables or subtracted from classification, number of literate residents, the value of the rest of the variables under the number of gainful workers, average household same component depending of the sign of the size, number of residents with academic resulting product. degrees, number of hazards present and the After the identification of the principal rate of population increase. Also, several components, the competitiveness index was government institutions were the sources of computed. The competitiveness index is the data used in the analysis. calculated as pP(PC)2. The resulting The Philippine Statistics Authority (PSA), competitive advantage index was used to rank Southern Leyte provincial office provided the the towns. data on density, total land area, number of literate residents, number of gainful workers, Results and Discussion average household size, number of residents academic degree, and rate of population Data shows (see Table 1) that population increase. The said data from the PSA are is dense in Liloan, , Padre open for public and were easily provided Burgos, , San Francisco, and San by the provincial office through personal Ricardo. Except for Padre Burgos, all these request. The data on revenue classification municipalities are in the islands of Panaon was downloaded from the Department of and Limasawa. With their geographical Finance website (Bureau of Local Government characteristics, which is mountainous, Finance, n.d.), which is also open for public expansion is challenging. The rest of the use. municipalities in the province have more The data on revenue classification was significant areas that can still accommodate a determined by dividing the 2015 revenue of bigger population and development. the municipalities into three levels. Level Meanwhile, municipalities with higher 1 included the towns having P45,000,000.00 revenue classification are , income and below. Level 2, municipalities , and Sogod. These municipalities with revenue of more than P45,000,000.00 have big land area utilized for agriculture but less than P90,000,000.00. Lastly, level and other industry. The municipalities with 3 for municipalities with income more than lowest revenue classification are Limasawa, P95,000,000.00. , Padre Burgos, and Pintuyan. The data on the rate of population increase With regards to literacy, most municipalities was computed as the annual rate of growth have a good number of literates except of the municipalities’ population from 1965 to Limasawa, Anahawan, Pintuyan, San 2015. To attain consistency, the data used in Francisco, , and having all the identified variables were from year 2015 the low number of degree holders. Moreover, and were standardized prior to analysis. Anahawan, Limasawa, Padre Burgos, and The Principal Component Analysis was Pintuyan have the least gainful workers. the main tool to develop the competitive Malitbog also has the most significant advantage index, The scree plot and the household size, the rest of the municipalities Eigen analysis from the PCA were the have similar household sizes that are smaller.

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Table 1. Eigen analysis of the correlation matrix. Eigenvalue 4.785 1.961 0.910 0.703 0.311 0.209 0.110 0.010 0.001 Proportion 0.532 0.218 0.101 0.078 0.035 0.023 0.012 0.001 - Cumulative 0.532 0.750 0.851 0.929 0.963 0.987 0.999 1.000 1.000

Among the municipalities, Hinunangan, index respectively. , St. Bernard, San Juan, Silago have The competitive advantage index derived a significant number of hazards with Sogod as from the identified principal components the highest with seven. These hazards include suggests that competitive advantage, as seen rain-induced landslide, earthquake-induced by the people in the rural areas, is not the same landslide, flooding, earthquakes, liquefaction, with the current worldview of competitiveness. typhoon, and storm surge. It is noteworthy Measures of competitiveness accepted in the that some municipalities like Tomas Oppus, literature are economically related. Segota,ˇ Pintuyan, and San Ricardo have only one Tomljanovic,ˇ and Hudek (2017) defined hazard present in the area. competitiveness as an increase in the level of Relative to the rate of population increase, economic efficiency and quality of products majority of the municipalities are low and only and services which is a vital determinant of few municipalities have higher population the long-term rise in living standards. Also, increase rate like Hinunangan, Libagon, Haque (1995 as mentioned in Arslan & Tathdil, Liloan, Maasin, St. Bernard, Silago, and 2012) explained competitiveness as the ability Sogod. The municipality with the lowest of a country to produce goods and services increase rate of population is Pintuyan. that meet the test of the international markets There are four principal components and simultaneously to maintain and expand identified in the analysis. The first component the real income and also rise the welfare explains 53.2% of the competitive advantage level of its citizens. Whereas, Stanovnik and of the municipalities. The first component is Kovaciˇ cˇ (2000) identified human and natural illustrated by the total area of the municipality, resources, infrastructure, management, the revenue class of the municipality, the capital, government intervention and the number of literate residents, number of gainful technological capability of companies as the workers, and the number of residents with factors, which can increase competitiveness. academic degrees. The said component is However, identified components in the rural the general demographic index. communities point to non-economic factors of The second principal component shows up being competitive. Crowding is one major to 75% of the variability of the competitive factor that rural people consider as vital to their advantage of the municipalities. The second competitive advantage. Helliwell, Shiplett, component is associated with density and and Barrington-Leigh (2018) found an exciting dubbed as the crowding index. result and happiness. In additation, the The third factor indicates up to 85.1% association between population density in of the competitive advantage variability, and the 20 percent most miserable communities the fourth factor explained up to 92.9% of was more than eight times greater than the the variability of the competitive advantage happiest 20 percent of communities (Helliwell, of the municipalities. The third component Shiplett, & Barrington-Leigh, 2018). is associated with family size, while the Related to the issue of crowding is family fourth component is associated with hazard size. The competitiveness index indicates exposure. Hence, the third and fourth factors that people in rural areas are concerned are family size index and hazard exposure with having the ideal family size. The rural

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The resulting framework (see figure 2) showed that the competitive advantage of the municipalities is dependent on general demographics, crowding, family size, and hazard exposure. In addition, the General Demographic Index, Family size index, and crowding index have positive influence on competitive advantage. However, exposure to Figure 2. Scree plot of density, area, revenue hazard index has a negative influence on the classification, number of literate residents, competitive advantage. number of gainful workers, average household The factor loadings showed that when the size, number of academic degree holders, area, number of literate residents, number number of hazards present, and rate of of gainful workers, number of residents with population increase academic degrees, and the revenue class of the municipality increase, the general demographic factor will also increase, thus, communities show that the perfect family increasing the competitive advantage of the size for a competitive rural community is municipality. In the second component, 4.5. The Philippine’s average household size which is the crowding factor, the effect was 4.4 persons in 2015 (Philippine Statistics is also positive if the members of the Authority, 2016) and rural areas generally have population are contributory to the productivity lower family size compared to their urban of the municipality. This means that the counterparts (Stinner, 1977). increase in population for the municipalities Since the Philippines is exposed to almost is an advantage as far as the workforce is all types of natural hazards (Global Facility concerned. for Disaster Reduction and Recovery, 2017), With the third component, the family size, people see life as prosperous if experienced the association is positive since most of away from natural calamities. Typhoons, in the municipalities have not yet experienced particular, have a significant negative impact overpopulation. Generally, the family size on paddy rice production at the provincial is still small which is manageable to raise level; and a significant adverse effect on the and support. Meanwhile, hazard exposure food security of the households in the affected hurts the competitive advantage of the areas (Israel & Briones, 2012). Hence, local municipality. As the municipality’s hazard government must improve and strengthen exposure increases, its competitive advantage infrastructures that protect rice and farmland. decreases. This move will ensure that even with typhoons, the income of farmers is continuous because harvests are still relatively good. Conclusion Lastly, the general demographic index indicates that what rural people see as This paper aims to determine the competitive essential factors to become competitive advantage of communities in a rural setting. include to have a degree and able to land The data used in the analysis were all from the on a job after graduation. Rural people are municipalities of Southern Leyte, Philippines. not so keen on economic achievements but The framework developed provided basis for more interested in nurturing relationships the rest of the municipalities in the Philippines (Capistrano & Weaver, 2017); hence they to assess their competitive advantage and have significantly higher life satisfaction than look for ways to improve the same. city dwellers (SÃÿrensen, 2014). The framework showed that competitive

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Figure 3. Diagram of the competitive advantage framework

Table 2. Characteristics of the municipalities in the province of Southern Leyte, Philippines

advantage in rural areas is a function of rural setting. Attaining competitive advantage general demographic factors, crowding, family in the rural environment means those size, and exposure to hazard. Demographic municipalities must have robust performance and geographical factors are crucial to improve in literacy, population, the productivity of its the competitiveness of municipalities in the citizens. Those municipalities should likewise

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