What is comparative advantage and how does it compare to competitive advantage?

Comparative advantage is the ability to produce something at less cost due to having resources that others might not have. Competitive advantage is the ability to produce something at less cost due to resources that one has created, perhaps by gaining additional expertise in a field.

In economics, comparative advantage refers to the ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another.

Comparative advantage, sometimes referred to as location-specific advantage, influences the decision of where to source and market. It is based on the lower cost of a factor (labor, for example) in one country relative to another, favoring industries that use this factor intensively. On the other hand competitive advantage, sometimes referred to as firm-specific advantage, influences the decision of what activities and technologies along the value-added chain a firm should concentrate its investment and managerial resources in, relative to other firms in its industry.