What are the factors which affect comparative advantage?

Mr Mohammad Tohamy Hussein Hussein's comments are perfect enough that adding complementary issues to them is so difficult.

I think geograpthy, government, politics, culture, regulation and jurisdical system, tax and tariffs are the main factors of comparative advntage.

Two factors prevent, in particular, the clean and tidy ordering of industries along the chain of comparative advantage.

The first factor is the cost of transportation and tariffs, which can create strong barriers between nations and permit domestically located firms to survive despite a disadvantage in f.o.b. prices. These costs are especially effective for goods characterized by low value to weight. Tariffs and transportation costs may prevent a clean ordering of trade between countries, but the general tendency of trade to reflect the comparative advantages of nations is certain to influence the allocation of world resources. The chain of comparative advantage will not hold for industries where factor cost differences between countries are small. It can be expected to hold for industries where these differences are large, although governments can, of course, strongly affect the allocation of production.

The second factor is the difference in competitive advantages among firms. Firms can, in particular, exploit certain economies along and between value-added chains which create competitive advantages that can sometimes be transferred globally. Three economies are particularly relevant: scale, scope, and learning. If the economies captured by large-scale production outweigh the disadvantage in factor costs, then a firm can remain competitive despite a poor location. Similarly, the production of one good might lower the costs for the production of another. Thus, if a firm has a competitive advantage in one good, the production of a second may be profitable despite a location disadvantage. Finally, a firm may possess an advantage in knowledge or skill gained over time. Japanese trading companies have no apparent competitive or location advantage in acting as agents for non-Japanese firms selling outside of Japan, yet they have knowledge of trading on world markets. Learning might also take the form of superior technology in the manufacturing or marketing of goods. Because learning is not easily transferred or replicated, some firms maintain a competitive advantage through product or process technologies.

The second factor is particularly pertinent to analysis of the interplay between the comparative advantages of countries and the competitive advantages of firms. When firms achieve a competitive advantage in terms of scale, scope, or learning, firms can be disadvantaged in terms of their location but still compete successfully. In other words, the competitive advantage of a firm can overcome the comparative disadvantage of country location. However, the stronger the location disadvantage, the more potent the competitive advantage of the firm must be.