What is competitiveness? There is no agreed definition of competitiveness nor well defined indicators to measure it. The book tries to investigate ways to define and, more importantly, measure competitiveness, with a focus on its external dimension and special reference to Europe and Italy. It deals with theoretical and methodological aspects of its measurement and looks at empirical evidence on Italy’s performance, the factors explaining it and potential policy implications. External competitiveness does not depend solely on the performance of exporting companies, but also on the allocation of resources within the economy, demand across tradable and non-tradable sectors, efficiency and productivity of all economic activities that impact on the cost structure of exporting firms. In this regard, sectoral and firm-level analysis are important. Moreover, the role of nonprice/ cost factors is substantial and rising, and is particularly relevant in assessing Italy’s situation. What is the picture that emerges for Italy? A superficial glance at selected macroeconomic indicators for Italy would give the impression of a loss in competitiveness over the past few years. Digging deeper into macro and micro data, however, provides interesting insights and shows a much more complex and articulated picture, with evidence of an ongoing process of creative destruction and adaptation to the new global competitive environment.