Take off and Crash: Lessons from the Diverging Fates of the Brazilian and Argentine Aircraft Industries

What are the factors that allow for success or failure of developing countries' attempts to enter high-tech sectors? We make a initial attempt to answer that question through a comparative study of success and failure in manufacturing aircraft. Aircraft production is one of the key industries in the world today, as reflected in the intense Boeing-Airbus rivalry. It is also one of the most cyclical, technologically-sophisticated, and capital-intensive industries, and therefore an unlikely place for a developing country to compete. But almost from the birth of modern commercial aircraft manufacturing, Argentina's Fábrica Militar de Aviones (FMA) was at the forefront of production. Brazil's aircraft industry was tiny in comparison at that time. Yet, by the 1990s, Brazil's Embraer had become the world's third largest aircraft manufacturer, while the Argentine aircraft industry has virtually disappeared. We examine the history of each company to explain the differences in trajectories and their fates. Our analysis demonstrates that an evolutionary but consistent partnership between state and firm, one attuned to both the exigencies of sectoral development and to changes in the nature of global markets, is necessary for success.

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