Since M. Porter (1990) published “The Competitive Advantage of Nations”, competitive advantage worldwide began to spread and had a significant impact on the theoretical researchers and policy makers around the world. Nevertheless, there are still some shortcomings in people’s understanding of competitive advantage. A major misunderstanding of them is that the followers of competitive advantage always tend to consider the theory of competitive advantage and comparative advantage as two opposing concepts, or think the purpose of proposition of competitive advantage is just to replace the theory of comparative advantage. [1] This paper argues that such opposing views that separate these two advantages are mostly wrong.

The misconception between comparative advantage and competitive advantage will bring potential harm to the national (or regional) economic development pathways. The idea may lead countries (or regions) to choose strategy against their own comparative advantage in the formulation of economic development strategies. As a result, a decision which should focus on improving the industrial competitiveness conversely harms the national economic competitiveness and development prospects

My analysis will show that in the comparative advantage and competitive advantage, there doesn’t exist a relationship of mutual opposing substitution or contradiction. In contrast, only give full play to the comparative advantages of the economy, can one nation (or region) be possible to create and sustain their own industrial competitiveness. I will also apply this conclusion to the situation of developing countries which never attracted the scholar’s attention before in this region.

Accordance with the above study, the framework of theoretical study accordingly divided into the following parts: The first and the second part will first review the competitive and comparative advantages respectively; On this basis, the third part will give a detailed analysis of the relationship between these two advantages; The fourth part is an empiric study. It applies the theoretical model to the developing country and describes the significant meaning of the relationship between the two theories to the economic development and their selection of ways to develop. Finally, discussions and conclusions will be given at the end of this essay.