Determining Competitive Advantage of Communities in a Rural Setting

Journal of Educational and Human Resource Development 6:227-237(2018) Southern Leyte State University, Sogod, Southern Leyte, Philippines Determining Competitive Advantage of Communities in a Rural Setting Constantino G. Medilo Jr.* Frederick C. Aniga College of T e acher Education Southern Leyte State University T o mas Oppus, 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 helpful concept in understanding capabilities Introduction and in dealing with the country’s prosperity and productivity. In the context of municipality, This paper aimed to provide a framework competitive advantage resides in the aptitude to determine the competitive advantage of to increase the productive activity and communities in a rural setting. Competitive services that generate significant presence on <ul style="display: flex;"><li style="flex:1">advantage </li><li style="flex:1">allows </li><li style="flex:1">organizations </li><li style="flex:1">and </li></ul>the state, national and international markets, increasing the educational level, income, and the health of his inhabitants improving this way their quality of life (MR, 2018). communities to improve the levels of <ul style="display: flex;"><li style="flex:1">performance to reach targets. </li><li style="flex:1">For the </li></ul>public sector, it must be translated in increased quality in the services and efficient 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 <ul style="display: flex;"><li style="flex:1">Medilo and Aniga </li><li style="flex:1">JEHRD Vol.6, 2018 </li></ul>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 <ul style="display: flex;"><li style="flex:1">housing; </li><li style="flex:1">and reduced cost of doing of local physical infrastructure (Ghani, Kerr, & </li></ul>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 <ul style="display: flex;"><li style="flex:1">from businesses. </li><li style="flex:1">Additionally, Fo¨bker, the needs and expectations of the prospective </li></ul>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. <ul style="display: flex;"><li style="flex:1">amenities, and a high-quality educational </li><li style="flex:1">According to Balestrieri (2014), people, </li></ul>environment. Meanwhile, Silva and Tamayo activity, and uses influence the competitive <ul style="display: flex;"><li style="flex:1">(2016) competitiveness measures among advantage of a municipality. </li><li style="flex:1">The first </li></ul>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, and infrastructure development. 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 level of employment, <ul style="display: flex;"><li style="flex:1">autonomous </li><li style="flex:1">development </li></ul>and overcoming dependence, therefore, aof 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. <ul style="display: flex;"><li style="flex:1">to attract and retain residents, businesses, </li><li style="flex:1">From all articles cited, there has been </li></ul>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 <ul style="display: flex;"><li style="flex:1">base to maintain its relevance continuously. </li><li style="flex:1">only on cities and other highly urbanized </li></ul>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. 228 <ul style="display: flex;"><li style="flex:1">Medilo and Aniga </li><li style="flex:1">JEHRD Vol.6, 2018 </li></ul><ul style="display: flex;"><li style="flex:1">The profiles of the municipalities were also </li><li style="flex:1">Lastly, the transient advantage views </li></ul>analyzed, and the principal components the organization’s competitive advantage <ul style="display: flex;"><li style="flex:1">identified. </li><li style="flex:1">strategies as transient and eventually will </li></ul>have to be replaced to sustain the leverage. The transient advantage view argues for the continual enhancement of the approach to continually attain competitive advantage. Theoretical and Conceptual Framework According to Schwab and Sala-i-Martin (2013) as mentioned in Siudek and Zawojska (2014, p. 93), ” competitiveness is the set of institutions, policies, and factors that determine the level of productivity.” The definition of Siudek and Zawojska (2014) defines various factors that determine the competitive advantages of a country There are theories which identify and explain the factors of competitive advantage. Wang (2014) identified six approaches on competitive advantage, which include the market-based view, the resource-based view, the knowledge-based view, the capability-based view, the relational view of strategy, and transient advantage view of competitive advantage. <ul style="display: flex;"><li style="flex:1">or community. </li><li style="flex:1">Paul Krugman, American </li></ul>economist and a distinguished Professor of Economics at the Graduate Center of the City University of New York, added that geographical factors could improve the competitive position of a specific place or community (Sunley & Martin, 2017). The market-based view of competitive advantage is concerned with establishing and defending a strategic position regarding the ability to exploit natural economies of scale and scope (McGee, 2015). The resource-based view of competitive advantage identifies the internal resources and capabilities of the organization as the main ingredients to achieve competitive Determining the competitive advantage of a municipality is dependent on several factors related to geography, institutional indicators, and other factors. Thus, this study, identified factors including density, area, revenue classification, literate residents, gainful workers, household size, academic degree holders, the rate of population increase, and hazard present (see Figure 1). <ul style="display: flex;"><li style="flex:1">advantage (Madhani, 2010). </li><li style="flex:1">In fact, an </li></ul>extension of the resource-based view, the knowledge-based view emphasized the importance of knowledge to the sustainable competitive advantage of the organization (Curado, 2006). Knowledge is a non-depreciable resource of the organization that it could continually use to its advantage. <ul style="display: flex;"><li style="flex:1">The </li><li style="flex:1">capability-based </li><li style="flex:1">view </li><li style="flex:1">of </li><li style="flex:1">the </li></ul>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 organizations often have difficulty maintaining a competitive advantage without the support of other organizations. Figure 1. Schematic diagram of the conceptual framework of the study 229 <ul style="display: flex;"><li style="flex:1">Medilo and Aniga </li><li style="flex:1">JEHRD Vol.6, 2018 </li></ul>bases in determining the number of Principal Components (PC) to include. The coefficients of the identified principal components were then obtained by multiplying the factor loadings of the variables under each component by the value of the variable. The products were either added to the value of the rest of the variables or subtracted from the value of the rest of the variables under the same component depending of the sign of the resulting product. Methodology This study developed a framework for attaining competitive advantage in a rural setting. Various characteristics of the municipalities in the province of Southern Leyte, Philippines <ul style="display: flex;"><li style="flex:1">were used in the analysis. </li><li style="flex:1">The data </li></ul>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. Also, several government institutions were the sources of the data used in the analysis. After the identification of the principal components, the competitiveness index was <ul style="display: flex;"><li style="flex:1">computed. </li><li style="flex:1">The competitiveness index is </li></ul>p Pcalculated as (PC)2. The resulting The Philippine Statistics Authority (PSA), Southern Leyte provincial office provided the data on density, total land area, number of literate residents, number of gainful workers, average household size, number of residents academic degree, and rate of population increase. The said data from the PSA are open for public and were easily provided by the provincial office through personal request. The data on revenue classification was downloaded from the Department of Finance website (Bureau of Local Government Finance, n.d.), which is also open for public use. competitive advantage index was used to rank the towns. Results and Discussion Data shows (see Table 1) that population is dense in Liloan, Limasawa, Padre Burgos, Pintuyan, San Francisco, and San Ricardo. Except for Padre Burgos, all these municipalities are in the islands of Panaon and Limasawa. characteristics, With their geographical which is mountainous, expansion is challenging. The rest of the municipalities in the province have more significant areas that can still accommodate a bigger population and development. The data on revenue classification was determined by dividing the 2015 revenue of the municipalities into three levels. Level 1 included the towns having P45,000,000.00 income and below. Level 2, municipalities with revenue of more than P45,000,000.00 but less than P90,000,000.00. Lastly, level 3 for municipalities with income more than P95,000,000.00. Meanwhile, municipalities with higher revenue classification are Hinunangan, Maasin, and Sogod. These municipalities have big land area utilized for agriculture and other industry. The municipalities with lowest revenue classification are Limasawa, Anahawan, Padre Burgos, and Pintuyan. <ul style="display: flex;"><li style="flex:1">With regards to literacy, most municipalities </li><li style="flex:1">The data on the rate of population increase </li></ul>was computed as the annual rate of growth have a good number of literates except <ul style="display: flex;"><li style="flex:1">of the municipalities’ population from 1965 to Limasawa, </li><li style="flex:1">Anahawan, </li><li style="flex:1">Pintuyan, </li><li style="flex:1">San </li></ul>2015. To attain consistency, the data used in Francisco, San Ricardo, and Silago having all the identified variables were from year 2015 the low number of degree holders. Moreover, <ul style="display: flex;"><li style="flex:1">and were standardized prior to analysis. </li><li style="flex:1">Anahawan, Limasawa, Padre Burgos, and </li></ul>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. 230 <ul style="display: flex;"><li style="flex:1">Medilo and Aniga </li><li style="flex:1">JEHRD Vol.6, 2018 </li></ul>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. Libagon, St. Bernard, San Juan, Silago have a significant number of hazards with Sogod as the highest with seven. These hazards include rain-induced landslide, earthquake-induced landslide, flooding, earthquakes, liquefaction, typhoon, and storm surge. It is noteworthy that some municipalities like Tomas Oppus, Pintuyan, and San Ricardo have only one hazard present in the area. Relative to the rate of population increase, majority of the municipalities are low and only few municipalities have higher population increase rate like Hinunangan, Libagon, Liloan, Maasin, St. Bernard, Silago, and Sogod. The municipality with the lowest increase rate of population is Pintuyan. There are four principal components identified in the analysis. The first component explains 53.2% of the competitive advantage of the municipalities. The first component is illustrated by the total area of the municipality, the revenue class of the municipality, the number of literate residents, number of gainful workers, and the number of residents with academic degrees. The said component is the general demographic index. The second principal component shows up to 75% of the variability of the competitive advantage of the municipalities. The second component is associated with density and dubbed as the crowding index. The competitive advantage index derived from the identified principal components suggests that competitive advantage, as seen by the people in the rural areas, is not the same with the current worldview of competitiveness. Measures of competitiveness accepted in the ˇliterature are economically related. Segota, Tomljanovicˇ, and Hudek (2017) defined competitiveness as an increase in the level of economic efficiency and quality of products and services which is a vital determinant of the long-term rise in living standards. Also, Haque (1995 as mentioned in Arslan & Tathdil, 2012) explained competitiveness as the ability of a country to produce goods and services that meet the test of the international markets and simultaneously to maintain and expand the real income and also rise the welfare level of its citizens. Whereas, Stanovnik and Kovacˇicˇ (2000) identified human and natural <ul style="display: flex;"><li style="flex:1">resources, </li><li style="flex:1">infrastructure, </li><li style="flex:1">management, </li></ul>capital, government intervention and the technological capability of companies as the factors, which can increase competitiveness. However, identified components in the rural communities point to non-economic factors of being competitive. Crowding is one major factor that rural people consider as vital to their competitive advantage. Helliwell, Shiplett, and Barrington-Leigh (2018) found an exciting <ul style="display: flex;"><li style="flex:1">result and happiness. </li><li style="flex:1">In additation, the </li></ul>association between population density in the 20 percent most miserable communities was more than eight times greater than the happiest 20 percent of communities (Helliwell, Shiplett, & Barrington-Leigh, 2018). The third factor indicates up to 85.1% of the competitive advantage variability, and the fourth factor explained up to 92.9% of the variability of the competitive advantage of the municipalities. The third component <ul style="display: flex;"><li style="flex:1">is associated with family size, while the </li><li style="flex:1">Related to the issue of crowding is family </li></ul>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 231 <ul style="display: flex;"><li style="flex:1">Medilo and Aniga </li><li style="flex:1">JEHRD Vol.6, 2018 </li></ul>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 hazard index has a negative influence on the competitive advantage. Figure 2. Scree plot of density, area, revenue classification, number of literate residents, number of gainful workers, average household size, number of academic degree holders, number of hazards present, and rate of population increase The factor loadings showed that when the area, number of literate residents, number of gainful workers, number of residents with academic degrees, and the revenue class of the municipality increase, the general demographic factor will also increase, thus, increasing the competitive advantage of the communities show that the perfect family size for a competitive rural community is 4.5. The Philippine’s average household size was 4.4 persons in 2015 (Philippine Statistics Authority, 2016) and rural areas generally have lower family size compared to their urban counterparts (Stinner, 1977). <ul style="display: flex;"><li style="flex:1">municipality. </li><li style="flex:1">In the second component, </li></ul>which is the crowding factor, the effect is also positive if the members of the population are contributory to the productivity of the municipality. This means that the increase in population for the municipalities is an advantage as far as the workforce is concerned. Since the Philippines is exposed to almost all types of natural hazards (Global Facility for Disaster Reduction and Recovery, 2017), people see life as prosperous if experienced away from natural calamities. Typhoons, in particular, have a significant negative impact on paddy rice production at the provincial level; and a significant adverse effect on the food security of the households in the affected areas (Israel & Briones, 2012). Hence, local government must improve and strengthen infrastructures that protect rice and farmland. This move will ensure that even with typhoons, the income of farmers is continuous because harvests are still relatively good. With the third component, the family size, the association is positive since most of the municipalities have not yet experienced overpopulation. Generally, the family size is still small which is manageable to raise and support. Meanwhile, hazard exposure hurts the competitive advantage of the municipality. As the municipality’s hazard exposure increases, its competitive advantage decreases.

Determining Competitive Advantage of Communities in a Rural Setting

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