Industrial Development Through Tacit Knowledge Seeding: Evidence from the Bangladesh Garment Industry

Abstract

We explore how the establishment of an industry pioneer through foreign seeding of industry knowledge can subsequently catalyze the growth of a developing country’s industry by involuntarily propagating the knowledge to subsequent entrants. As industry knowledge has tacit elements, we focus on mechanisms that enable experienced workers from the pioneer to seed the knowledge to new entrants. We examine the relationship between entrants’ characteristics and the mechanisms exploited to access the industry knowledge, and the impact of the mechanisms exploited on firm performance. Empirical findings from two historical episodes in the Bangladesh garment industry suggest that industry knowledge seeding was essential for the initial establishment and subsequent expansion of the industry. Our paper highlights the role of experienced workers’ mobility in building new firm capabilities and provides novel insights into industrialization in developing economies.This paper was accepted by Bruno Cassiman, business strategy.