AJIBM  Vol.8 No.5 , May 2018
Investigation of Competitive Advantage of the Dairy Industry Cluster: The Case of Rwanda
Abstract: This paper explores the dairy industry cluster in Rwanda and its competitive advantage basing on the Porter’s diamond model. Additionally, this study identifies other factors critical to the competitiveness of the dairy industry cluster in Rwanda and includes them to the diamond model to create a multiple diamond model. This study argues that the direction taken to increase milk supply in Rwanda by increasing the number of cattle farmers through the government program known as “One cow per poor family” is not suitable in that it exerts more pressure on already scarce resources such as land. In fact, this study suggests that given the challenges facing the dairy industry, more emphasis should be put on improving efficiency and increasing productivity in the value chain. This study proposes the multiple-diamond model which extends Porter’s Diamond model to include other factors central to the competitiveness of the dairy industry cluster in Rwanda. To test the effect of the proposed multiple-diamond determinants, ARDL test was run. The findings confirmed the effect of trade openness on the dairy cluster industry competitiveness. Development assistance and milk cattle were found to have a negative and significant effect on the dairy cluster industry competitiveness while FDI inflow and market sophistication were found to have non-significant effect. The study concludes by providing recommendations for future studies in this field.
Cite this paper: Mahirwe, A. and Wei, L. (2018) Investigation of Competitive Advantage of the Dairy Industry Cluster: The Case of Rwanda. American Journal of Industrial and Business Management, 8, 1358-1388. doi: 10.4236/ajibm.2018.85092.

[1]   FAO (2018) Rawanda at a Glance.

[2]   World Bank (2013) Agricultural Development in Rwanda.

[3]   Karenzi, E., et al. (2013) Kivuguto Traditional Fermented Milk and the Dairy Industry in Rwanda, A Review. Biotechnology, Agronomy, Society and Environment (BASE), 17, 383-391.

[4]   JLIFAD (2016) Rwanda Dairy Development Project (RDDP).

[5]   Adekunle, J. (2007) Culture and Customs of Rwanda. Greenwood Publishing Group, Santa Barbara, California.

[6]   Onesme, N. (2016) Government Programs in Transforming Lives of Rwandans. A Case Study of Girinka Munyarwanda Program in Gicumbi District. Imperial Journal of Interdisciplinary Research, 2, 1387-1394.

[7]   MINAGRI (2013) Rwanda National Dairy Strategy.

[8]   Ezeanya, C. (2014) Indigenous Knowledge, Economic Empowerment and Entrepreneurship in Rwanda: The Girinka Approach. Journal of Pan African Studies, 6, 241-263.

[9]   Militery Ngamata, O., Mbonyinkebe, D. and Lebailly, P. (2013) Social Economic Resilience of Poor Households in Rwanda: VUP 2020 and Girinka Program. Tropentag 2013 Agricultural Development within the Rural-Urban Continuum: Book of Abstracts. 29.

[10]   Abdulsamad, A. and Gereffi, G. (2016) East Africa Dairy Value Chains.

[11]   Klapwijk, C., et al. (2014) The “One Cow Per Poor Family” Programme: Current and Potential Fodder Availability within Smallholder Farming Systems in Southwest Rwanda. Agricultural Systems, 131, 11-22.

[12]   Mutimura, M., et al. (2013) Status of Animal Feed Resources in Rwanda. Tropical Grasslands-Forrajes Tropicales, 1, 109-110.

[13]   Umuzigambeho, J.F. (2017) Gender Assessment of Dairy Value Chains: Evidence from Rwanda. FAO, Rome.

[14]   Porter, M.E. (1998) Clusters and the New Economics of Competition. Harvard Business Review, 76, 77-99.

[15]   Porter, M.E. (1990) The Competitive Advantage of Nations. Harvard Business Review, 68, 73-93.

[16]   Cho, D.-S., Moon, H.-C. and Kim, M.-Y. (2009) Does One Size Fit All? A Dual Double Diamond Approach to Country-Specific Advantages. Asian Business & Management, 8, 83-102.

[17]   Jin, B. and Moon, H.-C. (2006) The Diamond Approach to the Competitiveness of Korea’s Apparel Industry: Michael Porter and beyond. Journal of Fashion Marketing and Management: An International Journal, 10, 195-208.

[18]   Riasi, A. (2015) Competitive Advantages of Shadow Banking Industry: An Analysis Using Porter Diamond Model. Business Management and Strategy, 6, 15-27.

[19]   Chaabna, S. and Wang, H. (2015) Analysis of the State of E-Commerce in Algeria. International Journal of Marketing Studies, 7, 44.

[20]   Aghdaie, S.F.A., Seidi, M. and Riasi, A. (2012) Identifying the Barriers to Iran’s Saffron Export by Using Porter’s Diamond Model. International Journal of Marketing Studies, 4, 129.

[21]   Mann, M. and Byun, S.-E. (2011) Accessing Opportunities in Apparel Retail Sectors in India: Porter’s Diamond Approach. Journal of Fashion Marketing and Management: An International Journal, 15, 194-210.

[22]   Dunning, J.H. (2003) The Role of Foreign Direct Investment in Upgrading China’s Competitiveness. Journal of International Business and Economy, 4, 1-13.

[23]   Dunning, J.H. (1993) Internationalizing Porter’s Diamond. MIR: Management International Review, 7-15.

[24]   Rugman, A.M. (1992) Porter Takes the Wrong Turn. Business Quarterly, 56, 59-64.

[25]   Chang Moon, H., Rugman, A.M. and Verbeke, A. (1995) The Generalized Double Diamond Approach to International Competitiveness, in beyond the Diamond. Emerald Group Publishing Limited, Bingley, West Yorkshire, 97-114.

[26]   Cho, D.-S. (1994) A Dynamic Approach to International Competitiveness: The Case of Korea. Asia Pacific Business Review, 1, 17-36.

[27]   Cho, D.-S. and Moon, H.-C. (2000) From Adam Smith to Michael Porter: Evolution of Competitiveness Theory. World Scientific, Singapore, Vol. 2.

[28]   Rugman, A.M. and D’cruz, J.R. (1993) The Double Diamond Model of International Competitiveness: The Canadian Experience. MIR: Management International Review, 17-39.

[29]   Moon, H.C., Rugman, A.M. and Verbeke, A. (1998) A Generalized Double Diamond Approach to the Global Competitiveness of Korea and Singapore. International Business Review, 7, 135-150.

[30]   Cho, D.-S., Moon, H.-C. and Kim, M.-Y. (2008) Characterizing International Competitiveness in International Business Research: A MASI Approach to National Competitiveness. Research in International Business and Finance, 22, 175-192.

[31]   Cartwright, W.R. (1993) Multiple Linked Diamonds and the International Competitiveness of Export-Dependent Industries: The New Zealand Experience. MIR: Management International Review, 55-70.

[32]   O’Malley, E. and Van Egeraat, C. (2000) Industry Clusters and Irish Indigenous Manufacturing: Limits of the Porter View. Economic and Social Review, 31, 55-79.

[33]   Rugman, A.M. and Verbeke, A. (1993) Foreign Subsidiaries and Multinational Strategic Management: An Extension and Correction of Porter’s Single Diamond Framework. MIR: Management International Review, 71-84.

[34]   UNCTAD (2017) Urban Population as Percentage of Total Population.

[35]   UNCTAD (2005) Gross Domestic Product: Total and Per Capita, Current and Constant Prices, Annual, 1970-2016, 2017.

[36]   Bloom, N., Draca, M. and Van Reenen, J. (2016) Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity. The Review of Economic Studies, 83, 87-117.

[37]   Ali, M., Cantner, U. and Roy, I. (2016) Knowledge Spillovers through FDI and Trade: The Moderating Role of Quality-Adjusted Human Capital. Journal of Evolutionary Economics, 26, 837-868.

[38]   Blomstrom, M. and Kokko, A. (1998) Multinational Corporations and Spillovers. Journal of Economic Surveys, 12, 247-277.

[39]   Blomström, M., Kokko, A. and Mucchielli, J.-L. (2003) The Economics of Foreign Direct Investment Incentives. In: Herrmann, H. and Lipsey, R., Eds., Foreign Direct Investment in the Real and Financial Sector of Industrial Countries, Springer, Berlin, 37-60.

[40]   Borensztein, E., De Gregorio, J. and Lee, J.W. (1998) How Does Foreign Direct Investment Affect Economic Growth? Journal of International Economics, 45, 115-135.

[41]   Moosa, I.A. and Cardak, B.A. (2006) The Determinants of Foreign Direct Investment: An Extreme Bounds Analysis. Journal of Multinational Financial Management, 16, 199-211.

[42]   Moosa, I. (2002) Foreign Direct Investment: Theory, Evidence and Practice. Springer, Berlin.

[43]   Lipsey, R.E., et al. (1999) The Role of Foreign Direct Investment in International Capital Flows, in International Capital Flows. University of Chicago Press, Chicago, 307-362.

[44]   Romer, P. (1990) Endogenous Technological Change. Journal of Political Economy, 98, S71-S102.

[45]   Aghion, P., et al. (1998) Endogenous Growth Theory. MIT Press, Cambridge, Massachusetts.

[46]   Sanchezrobles, B. and Bengoacalvo, M. (2003) Foreign Direct Investment as a Source of Endogenous Growth. SSRN Electronic Journal, 20 p.

[47]   Li, X. and Liu, X. (2005) Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship. World Development, 33, 393-407.

[48]   Grossman, G.M. and Helpman, E. (1993) Innovation and Growth in the Global Economy. MIT Press, Cambridge, Massachusetts.

[49]   Kwok, C.C. and Tadesse, S. (2006) The MNC as an Agent of Change for Host-Country Institutions: FDI and Corruption. Journal of International Business Studies, 37, 767-785.

[50]   UNCTAD (1992) Transnational Corporations as Engines of Growth, in World Investment Report, United Nations Conference on Trade, New York.

[51]   Antoine, M.M. (2018) Moderating Role of FDI Spillovers: Evidence from China. International Journal of Research in Business Studies and Management, 5, 29-37.

[52]   Coe, D.T., Helpman, E. and Hoffmaister, A. (1995) North-South R & D Spillovers. National Bureau of Economic Research.

[53]   Ekanayake, E. and Chatrna, D. (2010) The Effect of Foreign Aid on Economic Growth in Developing Countries. Journal of International Business and Cultural Studies, 3, 1.

[54]   Durbarry, R., Gemmell, N. and Greenaway, D. (1998) New Evidence on the Impact of Foreign Aid on Economic Growth. CREDIT Research Paper.

[55]   Morrissey, O. (2001) Does Aid Increase Growth? Progress in Development Studies, 1, 37-50.

[56]   Bingi, S. and Tondel, F. (2015) Recent Developments in the Dairy Sector in Eastern Africa. European Centre for Development Policy Management, Briefing Note, 78.

[57]   MININFRA (2017) National Feeder Roads Policy and Strategy. Rwanda Ministry of Infrastructure.

[58]   Porter, M.E. (2000) Location, Competition, and Economic Development. Economic Development Quarterly, 14, 15-34.

[59]   Makoni, N., et al. (2014) White Gold: Opportunities for Dairy Sector Development Collaboration in East Africa. Centre for Development Innovation, Wageningen UR.

[60]   Keller, W. (2010) International Trade, Foreign Direct Investment, and Technology Spillovers. Handbook of the Economics of Innovation, 2, 793-829.

[61]   Madsen, J.B. (2007) Technology Spillover through Trade and TFP Convergence: 135 Years of Evidence for the OECD Countries. Journal of International Economics, 72, 464-480.

[62]   Coe, D.T. and Helpman, E. (1995) International R & D Spillovers. European Economic Review, 39, 859-887.

[63]   Xu, B. and Wang, J. (1999) Capital Goods Trade and R & D Spillovers in the OECD. Canadian Journal of Economics, 32, 1258-1274.

[64]   Filatotchev, I., et al. (2011) Knowledge Spillovers through Human Mobility across National Borders: Evidence from Zhongguancun Science Park in China. Research Policy, 40, 453-462.

[65]   Lokuruka, M.N. (2016) Overview of Dairy Processing and Marketing in East African Dairy Value Chains: Opportunities and Challenges. African Journal of Food Science, 10, 254-262.

[66]   NISR (2016) Statistical Year Book.

[67]   NISR (2015) Rwanda Poverty Profile Report (2013-2014).

[68]   Land O’Lakes, Rwanda Dairy Competitiveness Program II (RDCP II) Impact Report, 2017, Land O’Lakes.

[69]   Hill, R.C., Griffiths, W.E. and Lim, G.C. (2008) Principles of Econometrics. Vol. 5, Wiley Hoboken, NJ.

[70]   Piotr, S. and Krzysztof, H. (2016) Competitive Position of the Dairy Sector’s Foreign Trade in the EU. In ISER 42nd International Conference, World Research Library, Zurich, Switzerland.