The UAE is considered to be one of the most quickly developing economies of the world. With the GDP per capita of about 40,450 USD, it is the second largest economy in the Arab World (Schwab, “The Global Competitiveness Report 2015-2016”). The country has been known to widely endorse innovation. This tendency was evidenced by numerous marvels of modern engineering, such as Burj Khalifa and other architectural wonders. Despite being a country naturally rich with oil, UAE is also known for its policies towards business and high levels of entrepreneurial ventures. In the past decade, the UAE government has put a great effort into diversifying the economy by promoting a collaborative effort among small and medium-sized enterprises. This helped move the country towards a new phase of growth. Its tendencies towards innovation are well-illustrated in its Vision 2021 economic strategy, and the more contemporary National Innovation Strategy, adopted in late 2014. In so doing, the country is dedicated to a more long-term plan for pursuing and achieving its national competitive advantage. The purpose of this paper is to analyze the development of UAE’s economy in the past 10 – 15 years through the lens of Porter’s Pillars of Competitiveness, microeconomic foundations of prosperity, macroeconomic environment, education and training, and innovative practices adopted in the region. Porter’s Views on Competitive Advantage According to the article written by Michael E. Porter in 1990, titled “The Competitive Advantage of Nations,” what defines the advantage of the countries is not the vast labor pool or impressive amounts of natural resources, its currency rates or its federal reserve funds, but rather it is the willingness of the government and the businesses to adopt innovative strategies and promote change coupled with the intensity of the competitive environment within the local market. Porter identifies 12 pillars, upon which resides the economic dominance of certain countries, when compared to the low economy countries that are not doing so well. These pillars are (Porter, “The Competitive Advantages”):   * Institutions: the institutional environment determines the legal and administrative frameworks within which the individuals and companies conduct business.   * Infrastructure: roads, railroads, ports, airports, etc.   * Macroeconomic environment: events happening in the region and the world that can influence the economy.   * Health and primary education: helps maintain a healthy and efficient workforce.   * Higher education and training: provides a steady supply of highly-qualified personnel, which is necessary for advanced industries.   * Goods market efficiency: provides healthy market competitions.   * Labor market efficiency: no excess of unemployed citizens due to the rigidness of the labor market.   * Financial market development: the evolution of the banking sphere goes hand in hand with economic progress, as banks provide funding for industrial ventures.   * Technological readiness: advances in technology are necessary for companies to be able to compete outside the country.   * Market size: a large internal market contributes to economic growth, as more customers give companies more reach. Howev