Enterprises and Industrial Policy

Abstract

This chapter considers the central role of firm strategies in industrial policy. It focuses, in particular, on large firms which can make investments to realize economies of scale and scope, coordinate clusters of suppliers, and build capabilities. The main schools of thought addressing the theory of the firm and the development of productive capabilities are reviewed, especially with reference to the resource-based theory of the firm. Large firms generally have economic power and considerable political influence and, as such, a critical aspect is firms as agents in political settlements and the implications for industrial development. Substantive sections then cover the following key areas: market power, competition, and enterprise strategies; the internationalization of production and global value chains; and recent developments regarding digital platforms and the implications for industrial policy.