TECHNOLOGICAL CAPABILITIES AND INDUSTRIALIZATION

This paper reviews the implications for industrial strategy of recent research on technological capabilities at the firm and national levels. After exploring the nature and determinants of microlevel technological development, a simple framework for explaining the growth of national capabilities is set out, based on the interplay of incentives, capabilities and institutions. Each may suffer market failure and so require corrective intervention. The experience of some industrializing countries is described to assess the validity of this framework. It is concluded that interventions, carefully and selectively applied, are necessary for industrial success.