Institutions and Policies Shaping Industrial Development: An Introductory Note

In this work, meant as an introduction to the contributions of the task force on Industrial Policies and Development, Initiative for Policy Dialogue, Columbia University, New York, we discuss the role of institutions and policies in the process of development. We begin by arguing how misleading the "market failure" language can be in order to assess the necessity of public policies in that it evaluates it against a yardstick that is hardly met by any observed market set-up. Much nearer to the empirical evidence we argue that even when one encounters a prevailing market form of governance of economic interactions, the latter are embedded in a rich thread of non-market institutions. This applies in general and is particularly so with respect to the production and use of information and technological knowledge. In this work we build on the fundamental institutional embeddedness of such processes of technological learning in both developed and catching-up countries and we try to identify some quite robust policy ingredients which have historically accompanied the co-evolution between technological capabilities, forms of corporate organisations and incentive structures. All experiences of successful catching-up and sometimes overtaking the incumbent economic leaders – starting with the USA vis-a-vis Britain – have involved “institution building” and policy measures affecting technological imitation, the organisations of industries, trade patterns and intellectual property rights. This is likely to apply today, too, – we argue – also in the context of a “globalised” world economy.