But the local industry is small because of poor local factor conditions. U.S. innnovation-based industries draw on general U.S. strength in basic science. Competitiveness in related industries is mutually reinforcing. Picky buyers are a blessing in disguise. Israeli Kosher wine, Japanese preference for extensive plastic packaging and small serving units.
Domestic rivalry is the single most important contributor to international competitiveness.
The more localized the rivalry, the more intense. And the more intense, the better. Further, it may be that Japan is able to support 9 motor vehicle manufacturers because its competitive advantage gives it ample success in export markets. Lacking that, the Japanese market would be too small and many of those companies would have to go out of business. The existence of rivalry may have indirect benefits by stimulating specific factor supply, input makers, complementary industries, and user industries.