Geoeconomics, Geopolitics, and the Competitive Advantage in Conflict Areas (CACA): A Focus on Palestine

Abstract

Business analysis, economic growth, and customer behavior in conflict areas have specific characteristics associated with various challenges. While “stability” plays a fundamental role in the various components of economic growth and prosperity, the repeated absence of this “variable” in conflict areas becomes a key criterion and a critical factor affecting the entire economic cycle. Self-ethics, patriotic feelings, and local values are other essential and decisive factors that are becoming increasingly important. Despite the extensive literature on the theory of competitive advantage, there is a lack of information regarding its application in areas of conflict. This research helps to fill this critical gap. In conflict areas, normal market processes and the rule of law can suddenly break down, so that market players turn to other criteria to determine their behavior. It is therefore more important than ever to understand the role of “patriotic sentiments and ethics” in forming new economic trends and more responsible customer behavior in conflict areas, thus shaping what the author conceptualizes as the “competitive advantage in conflict areas” (CACA). This chapter focuses on the local Palestinian context, which suffers from divergent customer attitudes and unstable growth models due to the illegal Israeli occupation that led to the long-lasting Israeli-Palestinian conflict.

1. Introduction

Economic phenomena and trends usually have temporal, geographical, and socio-political characteristics. Governments worldwide present economic plans to ensure social stability and acceptable prosperity. For this reason, economic studies and analysis are constantly on the agenda, and the dominant role of the state in guiding the global political economy is becoming clear [1]. A sound economic situation is the foundation on which the other components of development depend. Key economic and physical development factors include natural resources, telecommunications, transportation, technology, infrastructure, and education. Other factors that affect the purchasing power and disposable income of individuals, households, and organizations include economic growth, interest rates, inflation, and exchange rates, as well as the proportion of unemployment and foreign direct investment. Human development is therefore closely linked to economic growth [2, 3].

The relationship between politics and economics is a very active field of research. The literature on political economy shows that the asymmetric development of global growth (Figure 1) cannot be explained by the economy alone. To understand the socio-political determinants of growth, the main interrelated factors should be examined, such as political instability, economic growth, income inequality, state power, and government political ideology [5, 6]. The growth rate in many developing countries is limited; international trade and interconnected supply chains contribute in many ways to the decline of international commodity and goods prices and, therefore, discourage the industrialization process of many developing countries. This is a fact that widens the gap between rich and poor states [7].

Figure 1.

Gross domestic production (GDP) universal comparison: (a) GDP of 2014, (b) GDP growth percentage of 2023 [4].

Conflict zones are high-risk areas in which conflicts prevail. They can have a cross-border spatial extent, that is, at the regional or international level, or they can be designated locally within a country or at a national level. Applying this concept to the urban level results in a variety of terms such as segregated cities, polarized cities, partitioned cities, fragmented cities, and finally, divided cities [8]. It has been shown that in conflict areas, the dominant group imposes different challenges on the weaker group. As a result, deliberate and discriminatory acts against the weaker population occur time and again [9]. The number of conflict areas is exploding worldwide, and thus, a large part of the globe is still embroiled in many forms of conflicts due to various reasons such as political, sectarian, ideological, and ethnic conflicts, rivalries over natural resources, and territorial disputes.

In the Arab world, widespread conflicts have spread, such as the civil wars in Syria, Libya, Yemen, and South Sudan. Other notable territorial disputes include the Nagorno-Karabakh conflict (Armenia/Azerbaijan), the Kurdish-Turkish conflict (Turkey/Kurds), and the Russian-Ukrainian war, which began in February 2022 and is considered the largest attack on a European country since the Second World War. Maritime boundary disputes such as the East China Sea Dispute between China and Japan, and the South China Sea Dispute between China, Vietnam, and the Philippines, also lead to significant territorial conflicts. Based on sectarian backgrounds, violence has increased in various areas, as in the case of the Central African Republic and the Rohingya crisis in Myanmar. However, a radical conflict zone reflects several sources driving the conflict. This is a typical case corresponding to the Israeli-Palestinian conflict, which is a deep-rooted dispute dating back to 75 years of acquiescence and instability.

Since October 7, 2023, the geopolitical, socio-economic, and security situation in the West Bank, Gaza Strip, East Jerusalem, and Israel has changed dramatically, affecting all areas of life. On October 7, 2023, some of the Palestinian resistance groups in the Gaza Strip launched surprise cross-border attacks against Israel, after which the latest unprecedented Israeli war against the Palestinians in the occupied Palestinian territory (oPt) broke out. Israel has inflicted exceptional damage to Palestinian physical built-up areas and basic civil and vital infrastructure [10]; at least half of Gaza’s buildings were damaged or destroyed [11]; as such, the Israeli brutal destruction in Gaza was criticized as “domicide” [12]. This Israeli war against the Palestinians has claimed more than 95,000 victims since October 7, 2023 [13]. In the first 3 months of the war, Israel forcibly displaced 85% of the population of the Gaza Strip (1.9 million Palestinians) [14]. In addition, the Israeli army has killed more than 27,950 Palestinians there (70% of whom are women and children) and seriously wounded more than 67,500 Palestinians, a large proportion of whom are children, and more than 8000 Palestinians are missing under rubble in the Gaza Strip [15], this unhumanitarian situation is accompanied by a severe risk of famine and a prominent total collapse of the healthcare system in Gaza [16]. Meanwhile, in the West Bank and East Jerusalem, 387 Palestinians were killed, 4450 Palestinians were injured, and 198 Palestinian households and a further 537 Palestinians were forcibly displaced during Israeli military operations there, which in total resulted in an unprecedented death toll and destruction of civilian infrastructure [14, 15]. In addition, Israel arrested at least 6920 Palestinians in the West Bank during the same period [17]. Regrettably, all of these figures are susceptible to augmentation until the war is over.

Theorizing the geopolitical and geoeconomic ramifications of Israeli colonial policies on the Palestinian populace in general, and in particular, on the local market and customer behavior in such a complex situation, remains understudied and necessitates further investigation. This chapter provides insight into that and contributes to academic knowledge in order to fill this significant void. In conflict areas, the normative rules of customer behavior and business development typically do not apply. The traditional components of competitive advantage also fail to perform well under a variety of intricate geopolitical and economic constraints. Therefore, ethics and patriotic sentiments in conflict zones become key factors that crucially influence and reshape the “classical” competitive advantage to allow innovative, ethical competition for business, mainly by adopting influential boycott policies against colonial products and goods. This radical change in theory is conceptualized by the author as the competitive advantage in conflict areas (CACA). Furthermore, this chapter sheds light on the conflict area of Palestine and explores the “CACA” concept there. The case of the Israeli-Palestinian conflict establishes a remarkable conflict area due to the Israeli occupation of the Palestinian territories, the longest in modern history. The indigenous Palestinian people have experienced innumerable hardships and challenges as a result of this conflict in all aspects of their lives, making it an issue that cannot be disregarded in any context.

2. Geoeconomics in conflict areas

One of the most fundamental prerequisites for investigating and understanding a phenomenon is—its definition. Economy, in a broad sense, is the relationship between the production and consumption of goods and services, trade, and the supply of money in a particular spatial unit, such as a country or a region. Basically, it is about the prudent use of available resources. Economics is a moral science [18] that intersects with many fields, including sociology, politics, geography, mathematics, sociology, psychology, engineering, management, urbanism, sustainability, and climate change [19, 20, 21, 22]. It is concerned with the study of resource use, production, growth, and prosperity over time. The main focus is on identifying and determining the most effective use of resources to achieve public and private social goals. It comprises two principal levels: microeconomics, which focuses on individual factors and the effects of individual decisions, and macroeconomics, which examines how an economy behaves holistically, considering many factors such as growth rate, inflation, gross domestic product, price level, employment, and unemployment rate.

It is assumed that “normative” economics promotes the dynamism of goods, increases productivity, and fosters prosperity. However, in conflict zones, when economics becomes an instrument for gaining power and controlling other groups, in addition to the above-mentioned advantages, it turns into geoeconomics. Geoeconomics, with its pronounced dimensions of power and control, could be regarded as a new global force replacing geopolitics [23]. However, the concept of geoeconomics is gaining momentum in academic research. In contemporary studies, the term geoeconomics implies not only the classical state-controlled conflicts by economic means but also the embedding of the security dimension through the “securitization” of economic policy [24] and the “economization” of strategic policy [25]. The intersection of geography, politics, economics, and state interests leads to cross-border economic relationships and generates tension poles (Figure 2) that increasingly influence the ability to weaponize these cross-border connections and use them for internal state advantage [26]. Such misuse of the weaponized geo-economy and coercion under the pretext of national security has blurred the line between security and economic policy [27].

Figure 2.

Geopolitical space and geoeconomics resulting tension poles and conflict forces (author).

Geopolitical and geoeconomic relations are relative, constantly changing, and intertwined [28]. In conflict zones, these relationships are bridged to a high degree of complexity that is increasingly correlated with various influencing factors. However, the geoeconomic relationships and their influencing factors are still poorly researched [29]. If the dimensions of these factors are integrated, a broader understanding of geoeconomics emerges; it could be viewed as the geostrategic deployment of economic power and political power. In this view, geoeconomics produces two contrasting sets of relationships between the various geoeconomic actors, namely cooperative and competitive relationships [30]. These relations are bound to time – a “temporal dimension” – and to space – a “spatial dimension” – and are therefore referred to as spatio-temporal relations. Identifying a basic list of spatio-temporal relations is very complex due to the relativity or “in-betweenness” that is intimately connected to both time and space [31]. It is in the nature of things that geoeconomic space-time relations are accompanied by geopolitics. The politicizing tendency of geoeconomics brings challenges and feeds poles of tension that constrain geoeconomic development for some geoeconomic actors, while in the meantime opening doors for other “more ‘powerful’ actors.”

Indeed, economic growth, governance reforms, and development plans remain widely aspirational in the areas of conflict, unless holistic institutional and socio-political obstacles, including military control over certain economic and political spheres, are overcome [32]. The conceptual framework that characterizes the geoeconomics in conflict areas is illustrated in Figure 3. It is evident that the geo-economy is based on two major economic classes: the “dominant” economic class of the “strong group,” and the “controlled” economic class of the “weaker group.” As can be seen from the figure, the extent to which the overlay of the former has shaped and influenced the latter is outstanding. While the dominant economy plays a central role at the national and international market levels, the controlled subdual economy exhibits a restrained pattern of limited growth, so it is assumed to form fragmented local economic networks and unconnected ties at the international market level. The two types represent a completely contrasting economic system.

Figure 3.

Geoeconomics in conflict areas: A schematic outline (author).

The geo-economy is understood dialectically as a dynamic economic system with constant interactions between different, interconnected components. Consequently, it develops changing, challenging, and multidimensional processes. Dialectics therefore recognizes reality as a structure of evolving processes. This is a direct result of dialectical philosophy, which considers the dynamics of things as the fundamental cornerstone for understanding phenomena. Dialecticians argue that change is real while stability is illusory [33]; hence, the dialectical nature of geoeconomics views change as a must. Because of these characteristics, the dialectical way of thinking is well suited to the analytical cycle of this phenomenon [34]. Understanding geoeconomics requires an interdisciplinary analysis of geopolitics, strategic forecasting, and economic insights [35]. In addition, various factors influencing geoeconomic relations should be considered, such as ethnic-cultural, socio-economic, political, strategic, diplomatic, resource, and geographical factors [29]. These wide-ranging relationships lend themselves well to dialectical thinking, which provides flexibility in understanding complex relationship analysis [36].

The cycle through which geoeconomics is shaped could be captured through a consideration of world systems theory (WST), which offers a critical perspective on the structures and dynamics of the modern world and challenges conventional assumptions about economic development, globalization, and power relations between nations and regions [37]. The WST is a perspective in sociology and political economy that analyzes the world as a complex system of interconnected parts, with an emphasis on understanding the dynamics of capitalism, imperialism, and globalization [38]. Understanding the cyclical patterns of expansion and contraction that characterize the global system and explaining unequal development and wealth between societies in the modern capitalist world are the main objectives of the WST [39]. Its principal concepts include the division of the world geopolitical landscape into a “core” – (most economically developed and industrialized), a “semi-periphery” – (occupying an intermediate position), and a “periphery” – (the least developed regions). The WST overlaps interestingly with the dependency theory, which states that the economic development of poorer countries is hindered by their dependence on wealthier countries and multinational corporations, which exploit their resources and labor for their own benefit [40]. In addition, the WST emphasizes the role of imperialism, colonialism, and the expansion of capitalist relations in shaping the global division of labor and the unequal distribution of wealth and power. It offers insights into the dynamics of globalization and emphasizes the ways in which economic, political, and cultural processes are interlinked at the global level [41]. Hence, it highlights the role of transnational corporations, international financial institutions, and global markets in shaping patterns of development and inequality across the world system. The numerous concepts incorporated within this theory remarkably reflect the occult factors that shape, nurture, and propel the diverse processes of geoeconomics.

3. Geopolitics in conflict areas

Unlike geoeconomics, which is a relatively new expression, geopolitics is an old term identified and formulated by both usages, the academic and popular, highlighting colonial and imperial concerns with relations, links, and ties between geography, state territoriality, and global power politics [42]. The term geopolitics stands for the close interdependence and lively overlap between geography and politics. Geography in this sense encompasses the two dimensions of physical and human geography. Geopolitics therefore describes the massive influence of various geographical factors on politics and, in particular, on international relations. It explains how territorial entities, e.g., states, attempt to secure their supremacy and achieve political goals by controlling certain spatial units and geographical features. The geopolitical determination of state perspectives affects spatial strategies and leads to their final transformation into geostrategies. The development of geostrategies is thus a direct result of geopolitics. The geopolitical economy ultimately depends on its definition and integration of the role of the state in international relations and politics, and thus on the international political economy. The focus on the dynamic links and relationships between the economy, geography, state power, and external market exposure has become increasingly important [43]. The more a state plays a dominant role, the more it controls the political economy at the national level and the geopolitical economy at the international level.

Many conflicts arise as a direct result of the interaction between politics and economics. Considering the geographical factors (physical and human), resource conflicts and territorial sovereignty disputes are at the forefront at national and global levels. World population growth is approaching 8.5 billion people in 2025, and in the next 50 years, it will increase to 10 billion by 2027 [44]. In the meantime, studies show that human societies are becoming increasingly dependent on non-renewable resources for energy prospects and natural resources in general. The unprecedented growth of the world’s population is putting an unbearable strain on these resources, making them increasingly scarce. Many scholars regard the influence of geopolitics on geoeconomics as the direct cause of the state’s changing policies, which in sum constitute its strategic discourse. The hypothesis of wars over scarce resources states that states or people will engage in intense conflict and fight for access to resources essential to their survival, with the scarcer the resources, the more intense the wars [45].

In geopolitics, the complex set of embedded relationships and variables requires a critical understanding of power (state), knowledge (geography), and identity (people and culture). Indeed, geopolitics was seen as a remnant of the Cold War, after which the world entered the era of globalization and transnational liberalism, and so geopolitics was overtaken for a brief period by the ideology of globalization embodied in geoeconomics [42]. The accumulation of conflict-driving factors represents a growing international problem for the great powers and the weaker contender states. The importance of geopolitical economics is amplified by the direct involvement of the state in the capitalist economy, giving the state a crucial role in shaping the global economy [46]. In any case, geopolitical conflicts endanger the multiple prospects of human civilization.

4. The conflict area of Palestine

The conflict over Palestine is considered one of the most complex of its kind in the world. The core of this conflict lies in a colonial act that was carried out more than a century ago. This conflict was triggered by the British Mandate for Palestine (1917–1948), which controlled the territory of the former Ottoman Empire after the First World War. In 1917, the British government announced the Balfour Declaration, which expressed unreserved British support for the establishment of a national home for the Jewish people in Palestine [47]. The Israeli-Palestinian conflict is deeply rooted and clearly crystallized in 1948. Over time, this conflict has continued to intensify and complicate. The colonization project in Palestine, namely the founding of Israel in 1948, represents the longest occupation in modern history. Due to the imperial colonization project supported by the Western superpower, the Israeli-Palestinian conflict has unfortunately claimed tens of thousands of lives and displaced some 7 million Palestinians around the world. As a result, Palestinian land has inexorably shrunk, and the old map of Palestine in terms of geopolitical borders has almost disappeared (Figure 4).

Figure 4.

Fragmentation of Palestine and loss of the Palestinian land: A questionable future (author).

The area of historical Palestine before the Israeli occupation is estimated at 27,000 km². This area has drastically shrunk to 6220 km², corresponding to two physically separate land masses, the West Bank (WB) and the Gaza Strip (GS), which are now referred to as the occupied Palestinian territories (oPt) as a result of the Israeli occupation. The Palestinian population was approaching 14 million in 2021, of which 38% live in the oPt, 12% in the 1948 territories, while the remaining 50% were forced to live outside Palestine, that is, in the diaspora, due to the Israeli occupation. In 2023, it is estimated that 5,583,450 Palestinians live in the oPt, of which 3,256,906 live in the West Bank and 2,226,544 in the Gaza Strip [48]. Before the Israeli occupation of Palestine, especially during the British Mandate, the Jews used only 6.2% of the total land of historic Palestine. Today, however, the Israeli occupation claims and is exploiting more than 85% of the total area of historical Palestine [49].

In consequence, Israel is illegally annexing more and more Palestinian land and encouraging Jewish settlers to live in Palestinian areas. Thus, more than 745,000 Israeli settlers live illegally in the occupied West Bank (Figure 5), spread over 67 urban Jewish settlements in the West Bank and 22 in the Jerusalem Governorate [50]. All Israeli settlements in the West Bank have been classified as illegal by the International Court of Justice. The negative effects of the Jewish settlements in the West Bank are countless. They damage all areas of spatial sustainability for the Palestinians, namely the ecological, social, cultural-historical, and economic dimensions. In addition, economic development in the occupied Palestinian territories is severely hampered by the expansion of illegal Jewish settlements [51].

Figure 5.

Illegal progressive implantation of Jewish settlers in the West Bank (1990–2022) [50].

Jerusalem is the capital of Palestine and lies at the center of the Israeli-Palestinian conflict. The city of Jerusalem was first divided into East and West in 1948 after the founding of Israel, when West Jerusalem was declared the capital of Israel, while East Jerusalem was administered by Transjordan. After the Six-Day War of 1967, however, Israel annexed East Jerusalem and introduced Israeli laws under Jewish administration. In 1980, Israel declared the united Jerusalem, East, and West, as its capital, and the Palestinians suffer from this annexation to this day [52, 53]. The Israeli-Palestinian conflict has now been going on for more than 75 years. Israel declared its independence in 1948, and the Palestinians declared their disputed independence 40 years later, in 1988. Nevertheless, the Palestinians have been fighting for geopolitical demarcation and other rights of their state ever since. The world powers play an important role in this conflict, especially since many of the major Western powers still do not recognize a Palestinian state, while ultimately supporting the colonization project in Palestine (Figure 6).

Figure 6.

Political world recognition map of Palestine (edited) [54].

The geopolitical map of the divided and shrinking occupied Palestinian territories is very complex (Figure 7). Several factors exacerbate the conflict in the Palestinian territories due to Israel’s unilaterally regressive planning policies, which include the following: illegal annexation and confiscation of Palestinian land, destruction of neighborhoods and desocialization, expansion and installation of a large number of military checkpoints and physical barriers throughout the West Bank, 645 physical barriers recorded for the year 2023 (including, for example, 216 checkpoints, 304 roadblocks, mounds and road gates, and 73 earth walls, barriers and ditches) [56], the systematic destruction of Palestinians’ homes (290 buildings were demolished/confiscated and 413 people displaced in the West Bank in the first quarter of 2023) [57], inadequate public services and poor infrastructure, unequal zoning laws and land-use regulations, unfair building restrictions for Palestinians, changing residency rights and permits, and permits, and the construction of apartheid wall with massive land expropriation [58, 59]. It is worth noting that Israel is pursuing an aggressive policy of ethnic segregation against the Palestinians. In a clear and unprecedented violation of international law, Israel illegally erected the separation wall, also known as the “colonial wall,” “apartheid wall,” and “isolation wall” [60], to isolate all Palestinian communities in the West Bank, thus turning Palestinian communities into ghettos, segregated spaces, and segregated groups. In the urban areas, the Separation Wall is an eight-meter-high wall made of reinforced concrete, while in the non-urban areas, it forms an extraordinarily multi-layered barrier more than 40 meters wide, consisting of barbed wire, an anti-vehicle ditch, a dirt path to accommodate footprints, an electric fence, another dirt path, an asphalt road, another dirt path, and more barbed wire.

Figure 7.

Geopolitical unfair classification in the West Bank (edited) [55].

The previous figure shows how the geopolitical dimension is integrated into the Israeli planning system. This unilateral geopolitical dimension was first introduced with the Oslo Accords, which provided for a fragmented geographical division of Palestine into three main areas, namely “Area A” under primary control of the Palestinian Authority, “Area B” under partial control of the Palestinian Authority, and “Area C” under full control of Israel. The overwhelming majority (more than 60%) of the West Bank is assigned to Area C, which is closed to Palestinian construction, and only less than 1% of “Area C” is designated for partial Palestinian construction. The everyday socio-economic life of Palestinians is directly affected by this geopolitical division, which increases spatial fragmentation and hinders any integration and articulation of Palestinian urban and urban-rural relations. Furthermore, this geopolitical segregation prevents Palestinians from building an effective national infrastructure and hinders the Palestinians from constructing an effective national infrastructure or formulating an integrated national policy for key sectors [61]. As such, the Palestinian social, cultural, environmental, and economic life aspects face unsustainable development patterns due to the Israeli colonial geopolitical dimensions.

5. The competitive advantage in conflict areas

Since the introduction of the theory of competitive advantage in 1985, it has attracted a great deal of attention, with the result that this influential concept has become increasingly accepted in both its theoretical and practical dimensions. However, little could be found about this theory when dealing with areas of conflict. Basically, this theory crystallized the assumption that states and companies should pursue dynamic policies that produce high-quality products that can prevail in the markets at high prices. It also emphasizes productivity growth as the central axis of national strategies [62]. In this regard, the notion of competitive advantage is primarily utilized at the state, company, or organizational levels, but it can also be utilized by individuals. This term therefore stands for the characteristics that enable an entity to be successful and outperform its competitors [63]. In a normative situation, six key factors shape and influence competitive advantage, namely innovation, quality, operational efficiency, differentiation, cost leadership, and customer responsiveness. These fascinating factors, if collected, would play a great role in enabling entities, such as states and companies, to differentiate themselves from their competitors, achieve remarkable performance, and create special value for customers [64].

Ethics play a growing role in business landscape and continue to attract attention on theoretical and practical terms. Nonetheless, theoretical and empirical examinations of ethical decision making in business entities are in relatively short supply [65]. It is debatable how business and ethics relate to one another and how they should be defined [66]. Business ethics is a floating concept that presents controversial discussions regarding the difficulty of establishing substantive definitions for ethical behavior [67, 68, 69]. The development and application of business ethics are founded on, three distinct, yet logically interconnected elements. First, the initial concern pertains to an “ethical issue” that can be formulated as a situation where an individual’s actions, when undertaken with the utmost discretion, may cause harm or benefit to others [70]. It is imperative that such actions are taken based on a conscious decision, after careful consideration, and will undoubtedly have a favorable or unfavorable impact on others. The second is an “ethical agent,” which could be identified as a person who makes a moral decision. The third is an “ethical decision,” which is characterized as one that satisfies the legal and moral needs of the general public. According to social psychology theories, a community’s “moral intensity” is influenced by a variety of circumstances and variables that together shape moral decision making and behavior on a wide range of levels [65].

In conflict areas, on all levels of state, company, or individuals, other dominant factors enforce and, in many cases, direct the competitive advantage. The complex situation imposed on Palestinians by the Israeli occupation has cumulatively formed rising “moral” socio-economic trends, that have created a growing “social dynamic” with strong patriotic sentiments to empower and give privilege to the local Palestinian market in the occupied Palestinian territories. This critical, and innovative, social behavior is theorized in this research as the “competitive advantage in conflict areas” (CACA). These nationalistic sentiments have led to a new collective consciousness that results in many Palestinians boycotting Israeli products, thus favoring all local “national” Palestinian products. In this sense, patriotism and ethics plays an important role in shaping the motivations and dynamics of the economic boycott movement in Palestine. It serves as a catalyst for collective action, solidarity, and resilience in the face of the political, economic, and social challenges posed by the Israeli occupation. By using patriotism as a driving force, Palestinians mobilize grassroots support for boycott initiatives and amplify their voice for justice and self-determination. The Palestinian boycott movement against Israeli products is part of the broader Boycott, Divestment, and Sanctions (BDS) movement, which aims to exert economic and political pressure on Israel to end its occupation of Palestinian territories, grant equal rights to Palestinian citizens of Israel and recognize the right of return of Palestinian refugees [71]. The boycott of Israeli products by Palestinians consists of avoiding the purchase of goods and services produced in Israel or Israeli settlements in the occupied Palestinian territories. This movement encourages Palestinians and supporters around the world to boycott Israeli goods as a non-violent way to protest Israeli policies and practices that are seen as oppressive and discriminatory toward Palestinians (Figure 8).

Figure 8.

Example of actions that promote the CACA: Stickers indicating “national Palestinian products” installed on shelves of a Palestinian supermarket in Ramallah, to distinguish local Palestinian products, and to encourage the boycott of Israeli products (author).

Looking at the Palestinian-Israeli conflict, one can clearly distinguish between the two existing economic models. That is, the growing and strong “dominant economy” of the Israeli colonial occupation – model 1, and the shrinking and weak “controlled economy” of the occupied Palestinian territories – model 2. In the first model, the Israeli economy is characterized by a strong emphasis on technology, innovation, and a diverse industrial base. The country has a robust high-tech sector with companies operating in areas such as cybersecurity, biotechnology, and telecommunications. Agriculture and manufacturing are also important contributors. Israel benefits from a well-educated workforce and a supportive ecosystem for start-ups. However, geopolitical challenges, such as regional conflicts, can affect economic stability. Overall, Israel has developed a dynamic and resilient economy focused on technological progress. In the second model, the economy of the oPt faces major challenges due to political tensions and conflict. It is highly dependent on agriculture, services, and remittances. The unemployment rate is high, and restrictions on freedom of movement affect economic activity. International aid plays an important role in maintaining the economy.

The competitive advantage of the first model, the Israeli colonial economy, lies in its innovation and technology sector. Not only does the country have extensive political power on the international stage, but it also has a thriving ecosystem of start-ups, research institutions, and a highly skilled workforce, particularly in areas such as cybersecurity, biotechnology, and information technology. Israel’s ability to foster innovation and entrepreneurship has made the country a global leader in various high-tech industries. In addition, strong connections to international markets, strategic geographic location, and a robust infrastructure contribute to Israel’s competitiveness. The focus on research and development, supported by government initiatives, has enabled the Israeli market to remain at the forefront of technological advancement and attract global investment and partnerships. For the second model, the controlled economy of the occupied Palestinian territories, the main competitive advantage of the Palestinian market lies in its strategic location and potential for economic development. It serves as a gateway between the Middle East and Europe and offers opportunities for trade and investment. However, this central advantage is unfortunately not active due to the Israeli occupation, which imposes upon the Palestinian communities various illegal geopolitical and security restrictions. In addition, a skilled and well-educated workforce contributes to the market’s competitiveness, especially in areas such as technology and services. Despite the challenges, the Palestinian market offers untapped potential for growth and cooperation.

Natural resources play a fundamental role in any sustainable economic cycle. The different categories of resources such as financial, human, physical, organizational, and technological resources shape a crucial factor in determining effective and efficient competitive advantages. Decision makers and managers plan the use of these resources to achieve strategic goals. Therefore, resources, if managed and deployed efficiently, represent a large opportunity cost and also impact performance [72, 73, 74]. In the conflict area of Palestine, the control and utilization of Palestinian natural resources are complex issues intertwined with the Israeli-Palestinian conflict. The Israeli occupation of the West Bank has led to the control and exploitation of resources such as water, land, and minerals. Jewish Israeli settlements and associated infrastructure have been built in the West Bank, affecting the use of land and water resources, in most cases to the detriment of Palestinians. Water resources in particular were a source of contention. Israel’s control over aquifers and water infrastructure affects Palestinians’ access to water and impacts agriculture, industry, and daily life. In addition, restrictions on movement and access to certain areas limit Palestinians’ ability to fully utilize their resources. These issues are contentious and part of the broader political and territorial disputes between Israel (the occupying power) and Palestine (the restraining nation), adding to the complexity of the regional situation.

The unbalanced power of the Israeli-Palestinian conflict led to major discrepancies in the economic profile of the two models. The Israeli (model 1), and the Palestinian (model 2), economies differ greatly due to various factors, including historical, political, social, demographic, geographical, and regional circumstances. Overall, while Israel and the Palestinian territories are geographically close to each other, their economies have significant differences that are largely influenced by political factors, access to resources, trade relations, cultural and ideological backgrounds, as well as level of development. Achieving economic parity and sustainable growth in the occupied Palestinian territories remains a major challenge, given the ongoing Israeli-Palestinian conflict and regional instability. Table 1 shows some key points of comparison between the two economic models of each side of the conflict area, namely between model 1 and model 2, in terms of size and development, GDP, trade and access to markets, infrastructure, and resources, employment and labor force, and eventually the dependency on aid.

Comparative economic overview of (model 1) and (model 2)
Size and development	For model 1, the Israeli economy is significantly larger and more developed compared to the Palestinian economy – model 2. Israel has a diverse economy with robust sectors such as technology, innovation, finance, and agriculture. It benefits from a highly educated workforce and substantial foreign investment. In contrast, the Palestinian economy is smaller and less developed, characterized by high levels of unemployment, poverty, and dependence on international aid.
GDP	For model 1, Israel typically maintains a significantly higher GDP compared to the occupied Palestinian territories – model 2. For model 2, The GDP of the occupied Palestinian territories is considerably lower compared to Israel. Economic conditions in Palestine are often constrained by political instability, conflict, restrictions on movement, and limited access to resources and markets.
Trade and access to markets	Israel has access to international markets and maintains trade relations with countries worldwide. It benefits from preferential trade agreements and has a well-established export-oriented economy. In contrast, the Palestinian economy faces significant restrictions on trade and movement imposed by Israel, limiting access to markets and hindering economic growth.
Infrastructure and resources	Israel has invested heavily in infrastructure development, including transportation, telecommunications, and energy. It has access to natural resources and advanced technologies, which contribute to its economic strength. The Palestinian territories suffer from inadequate and damaged infrastructure due to the ongoing Israeli war, as well as limited access to resources due to political, economic, and security constraints.
Employment and labor force	Israel has a diverse and skilled labor force, with employment opportunities across various sectors of the economy. Unemployment rates in Israel, while fluctuating, tend to be lower compared to those in the Palestinian territories, where job opportunities are limited, particularly in Gaza and parts of the West Bank.
Dependency on aid	The Palestinian economy relies heavily on international aid and assistance to sustain basic services and support livelihoods. Foreign aid constitutes a significant portion of the Palestinian Authority’s budget. In contrast, Israel is not as dependent on foreign aid for its economic stability.

Table 1.

Comparative economic overview of model 1 and model 2 in the conflict area (author).

Several countries that were under occupation have utilized the boycott strategy [75]. Therefore, Palestinians adopted the “popular boycott” of Israeli goods as a means of advancing their national economy and strengthening their business environment. For the time being, Palestinians are thought to be using this strategy as a non-violent means of protest against Israeli occupation. The boycott entails abstaining from any products and services made entirely or in part in Israeli settlements built unlawfully in the oPt in violation of international law. Any industrial, agricultural, food, or technological items that are made, stored, or packed in any Israeli settlement in the Golan Heights, East Jerusalem, or the West Bank, whether fully or partially, fall under this category [76, 77]. Along with trialing proponents of Israeli settlement products, the boycott also calls for replacing Israeli goods with Palestinian ones [78]. Palestinian businesses are heavily involved in advocating for the boycott of Israeli goods. This can be accomplished by making an attempt to manufacture premium products at affordable costs, competing with Israeli goods, and outright refusing to buy them. In an effort to overtake Israeli products and actively contribute to their fall, Palestinian companies offer high-quality, nutritious, and healthy products with the goal of capturing a large market share [79].

The political and business landscapes of the world at large echoed the boycotting strategy. For example, in May 2023, the European Trade Union Confederation (ETUC) – which represents over 45 million European workers and their trade unions – made the decision to boycott goods made in illegal Israeli settlements and to back the Palestinian people’s right to establish an autonomous, economically viable, and geographically contiguous state with East Jerusalem as its capital [80]. In line with EU treaties and international law, the ETUC also emphasized the significance of regulatory measures to stop EU legal entities from buying or exporting goods made in illegal Israeli settlements [81]. Furthermore, the Arab boycott policies formed a new critical dimension of the political economy in the conflict area of Palestine [82]. While the Palestinian economic boycott cannot single-handedly paralyze the Israeli economy, it is a form of non-violent resistance and protest against Israeli policies and practices that are perceived as unjust or oppressive. Its effects are intertwined with the broader political, social, and economic dynamics that characterize the Israeli-Palestinian conflict and efforts to find a just and lasting solution. Thus, patriotism can influence the economic boycott in Palestine in various ways:

1. National identity: Patriotism fosters a sense of national identity and solidarity among Palestinians and strengthens their commitment to collective action, including economic boycotts, as a means of resistance to the Israeli occupation and to assert their right to self-determination and sovereignty.

2. Symbolic resistance: For many Palestinians, participating in economic boycotts of Israeli products is a form of symbolic peaceful resistance against perceived oppression and injustice. It serves as a tangible expression of patriotism and national pride and reflects a desire to support Palestinian businesses and promote self-reliance and autonomy.

3. Solidarity with the Palestinian cause: Patriotism encourages Palestinians to demonstrate their solidarity with other Palestinians living under occupation, siege, or discrimination by boycotting Israeli goods and businesses involved in the occupation. It is an expression of commitment to the broader Palestinian struggle for freedom, justice, and equality.

4. Empowerment and agency: Participation in the economic boycott empowers Palestinians to take proactive action against Israeli policies and practices that undermine their rights and dignity.

5. Cultural identity: Economic boycotts can also be influenced by cultural factors. Palestinians may prioritize the purchase of goods and products that reflect their cultural heritage and national identity, further strengthening their commitment to supporting local industries and businesses.

In the conflict area of Palestine, the growing social consciousness and associated patriotic sentiments are seen as a fundamental competitive advantage in conflict areas in the local Palestinian market, giving superiority to all products and goods produced and manufactured in the national territories. Consequently, Palestinian “national” products and goods have a privilege over other products, regardless of their quality and price level. However, Palestinian products show a continuous improvement in terms of quality and variety and therefore have a growing potential and a promising role at the local and regional levels.

6. Conclusion

The combination of economics, geography, and politics is a remarkable field of study. This combination becomes even more complex when one adds the dimension of “power” and “interests” of the state, which together can in many cases lead to areas of conflict. Economic and physical development depends on numerous factors, such as natural resources, education, technology, and infrastructure. Rivalries over resources are considered to be one of the main causes of cross-border territorial disputes that lead to high-risk conflict areas. In conflict areas, the dominant group poses various challenges to the weaker group to slow down their development and exploit their legitimate resources. While the normative economy promotes the exchange of goods and the increase of productivity, the economy in conflict areas becomes a means of gaining power and controlling other groups, thus becoming a geo-economy. As such, the geo-economy plays an increasingly important role in the expansion of power and control and is therefore considered a fast-changing and impacting global force replacing geopolitics. In conflict areas, it is not easy to recognize the overlap between geopolitical and geoeconomic relationships, which are constantly changing and intertwined. Overall, there are two classes of economy in conflict zones: the dominant economy of the stronger group and the controlled economy of the weaker group. The first type – the dominant economy – has a stable economic base and growth rate related to strong networks in the international market. The second type – the controlled economy – has a restrained, limited growth rate and is only connected to the international market to a limited extent. This explains why many conflicts arise as a direct result of the interaction between politics and economics.

The theory of competitive advantage has been the subject of a large body of literature, but little is known about how it is used in conflict situations. Through the development and theorization of the concept of competitive advantage in conflict areas (CACA), this research contributes to closing this significant gap. Palestine has received special attention in this study since it offers an intriguing illustration of a multifaceted conflict zone. The Israeli occupation has hampered Palestinian development. The division of the occupied Palestinian territories into disjointed areas with limited Palestinian control has hindered the establishment of a viable Palestinian state. Palestinians living under occupation face restrictions on movement, including checkpoints, barriers, and a permit system that severely limits access to education, health care, economic development, and employment opportunities. The construction of the separation wall in the West Bank has led to the confiscation of Palestinian land, restrictions on Palestinian movement, and the fragmentation of communities. All of this has led to intolerable economic consequences, as the occupation has severely hindered economic development in the Palestinian territories by restricting trade, freedom of movement, and access to natural resources. Israeli control over borders, airspace, and natural resources has limited the opportunities for the Palestinian economy’s ability to grow and thrive independently. Moreover, the prolonged occupation has led to widespread feelings of frustration, hopelessness, and resentment among Palestinians, contributing to cycles of violence and unrest. Palestinian communities have faced displacement, massive home demolitions, and loss of livelihoods, resulting in significant social upheaval and trauma. In consequence, the Israeli-Palestinian conflict has contributed to regional instability and has been a source of tension in the Middle East for decades. The lack of resolution to the conflict undermines efforts for peace and security in the broader region.

Although Israel and the Palestinian territories are geographically close to each other, their economies differ significantly, largely influenced by political factors, access to resources, trade relations, and levels of development. In the Israeli-Palestinian conflict, the strong and growing economy – the “dominant economy” – is represented by the Israeli colonial occupation. The shrinking and weak economy – the “controlled economy” – is represented by the occupied Palestinian territories. Given the ongoing Israeli-Palestinian conflict and regional instability, achieving economic equality and sustainable growth in the Palestinian territories remains a major challenge. While the Palestinian market faces enormous challenges, it also has its own strengths and opportunities which, if effectively utilized, can contribute to sustainable economic development, job creation, and prosperity for the Palestinian people. Overcoming political obstacles, promoting innovation, and investing in human capital are crucial steps to realize the full potential of the Palestinian economy and improve its competitive advantage in the global market. However, by boycotting Israeli products and goods, Palestinians have innovatively created a new competitive advantage in conflict areas (CACA) for their local market and national products. This was initiated and shaped by strong patriotic feelings and a collective Palestinian consciousness to strengthen and privilege the local Palestinian market and products. As a result, Palestinian national products and goods gained superiority over other products, regardless of other factors that may influence customer behavior, such as quality and price. Patriotism is thus a living and invisible competitive advantage as well as a symbolic, peaceful resistance that promotes collective action, solidarity, and resilience in the face of the political, economic, and social challenges posed by the Israeli occupation.