Countries’ governance and competitiveness: business environment mediating effect

Abstract

Purpose The purpose of this study is to analyze how institutional governance and business environment affect countries’ competitiveness and their relative importance. Design/methodology/approach In this paper, the authors analyze how institutional governance and business environment affect countries’ competitiveness, their relative importance and what are the implications for Brazil. The authors have collected data from 131 countries related to the institutional governance, business environment and competitiveness of these countries. For the analysis of the mentioned influences, the technique of partial least squares structural equations modeling is used. Findings Results indicate that the main role in countries’ competitiveness is played by the quality of institutional governance. The quality of the business environment reinforces the positive effect of the quality of institutional governance on countries’ competitiveness (mediation effect). Brazil has poor governance quality indicators when compared to high-middle income countries, especially regarding government effectiveness, political stability and control of corruption. Research limitations/implications The study provides a better understanding of the relative importance of governance quality and business environment quality for countries’ competitiveness. One limitation of this study is that the research was restricted to data related to the year 2019. Practical implications For strategists and decision-makers, understanding these effects on countries’ competitiveness and their relative importance is fundamental to understanding what makes their companies internationally competitive. Social implications The presence and appreciation of institutional governance quality need to be cultivated in society. Originality/value Instead of using the original diamond model, which presents circular relationships, the authors have used the business environment construct, composed of elements of the diamond model to test the relationships between the quality of institutional governance, competitiveness and the business environment.