Strategic Industrial Policy Research Articles

Industrial and innovation policies in times of crisis: a widening technological divide?

Purpose The purpose of this paper is to analyze the ongoing revival of industrial and innovation policies across developed and developing economies. Design/methodology/approach The paper compare the scale and scope of recent industrial and innovation policy initiatives across developed and developing economies. Also, it analyzes recent data regarding R&D investments and other innovation indicators. Findings There are enormous disparities across economies in their capacity to implement industrial policies, particularly those to support science, technology and innovation. Most developed economies, and a few developing economies, are implementing bold, ambitious and medium-term innovation policies towards bolstering R&D investments, supporting advanced manufacturing and green energies and strengthening technological capabilities. Amid lack of fiscal policy space and vulnerable debt sustainability positions, institutional deficiencies and weak innovation ecosystems, developing economies – particularly in Africa and Latin America – face enormous challenges to implement strategic industrial and innovation policies. Research limitations/implications Under the current economic, financing and institutional conditions, together with subdued global trade and ongoing geopolitical fragmentation, the technological divide and innovation asymmetries across economies will likely widen even further, paving the ground for a “development divergence” in the coming decade. Originality/value The paper analyzes the implications of the current industrial and innovation policy trends across developed and developing countries. Under the current economic, financing and institutional conditions, together with subdued global trade and ongoing geopolitical fragmentation, the technological divide and innovation asymmetries across economies will likely widen even further, paving the ground for a “development divergence” in the coming decade.

Industrial Alliances for the Energy Transition: Harnessing Business Power in the Era of Geoeconomics

In a context of rising geoeconomic competition, the EU is embracing stronger industrial interventionism to address societal challenges and reduce external dependencies in strategic sectors. Developing this type of strategic industrial policy requires close government–firm relations. This article investigates whether and how the EU succeeds in articulating public–private collaboration in the pursuit of strategic goals by examining the role of the recently launched EU Industrial Alliances in clean energy technologies. We build on a “governed interdependence” (GI) approach to assess whether the Alliances resemble the embedded public–private networks that are common in states deploying strategic industrial policy. Our findings, obtained through desk research, surveys, and qualitative interviews, offer a mixed picture. On the one hand, in line with GI, the Industrial Alliances provide a novel, institutionalised venue for public–private collaboration, led by geostrategic objectives and contributing to reducing information gaps and fostering policy coordination. On the other hand, Industrial Alliances adhere less well to a GI system in their composition and structure, and in their loose articulation of risk-socialisation mechanisms.

Incentives for photovoltaic energy generation: A comparative analysis of policies in Spain, Germany, and Brazil

This paper examines the comparative analysis of photovoltaic (PV) energy policies and data from Spain, Germany, and Brazil, focusing on understanding the factors influencing PV deployment and efficiency in these countries. This study identifies critical policy recommendations to enhance PV capacity, generation, and efficiency based on a comprehensive review of policy measures and statistical data from 2000 to 2022. These recommendations include prioritising legal stability and transition periods in policy implementation, addressing regional inequalities in PV deployment, and promoting the association of PV with other energy industries and sectors. Additionally, the study suggests the need for a strategic industrial policy to encourage domestic PV manufacturing, considering the potential benefits for economic development and employment.

Technological sovereignty in Germany: techno-industrial policy as a form of economic statecraft?

Technological sovereignty has emerged as a prominent topic, with states positioning themselves to ensure security and economic competitiveness. However, German economic policy rarely involved strategic government interventions and industrial policies due to its deep-rooted adherence to ordoliberalism. In response to the influence of foreign big tech companies and growing economic competition from China, the German state is now formulating a strategic techno-industrial policy agenda, advocating interventions for the preservation of sovereignty. This article analyses the proposed agenda using an inductive process-tracing approach (Trampusch and Palier, 2016) and document analysis (Bowen, 2009) of strategy papers, policy documents and selected media reports. Drawing on the concepts of structural power (Strange, 2004 [1988]) and economic statecraft (Weiss and Thurbon, 2021), we argue that Germany’s pursuit of technological sovereignty represents a distinctive form of (geo-)economically motivated statecraft, primarily directed at enhancing commercial competitiveness rather than prioritising security. However, we identify limitations to this approach where the regulatory regime and institutional legacy, both at the national and EU levels, impede strategic government interventions in the economy, thus constraining the pursuit of technological sovereignty.

Strategies for green industrial and innovation policy–an analysis of policy alignment, misalignment, and realignment around dominant designs in the EV sector *

Governments in industrialized as well as emerging economies are racing to implement policies to accelerate clean energy innovation and capture the economic benefits of decarbonization. This paper explores which combination of technology-push and demand-pull policies best situates a country to lead in clean energy innovation, as new or dominant designs emerge and replace older technologies. A new analytical framework for green industrial policy is introduced regarding the alignment, misalignment, and deliberate misalignment of policies. This framework is applied to battery electric vehicle drivetrain technology to examine the use of policy alignment and misalignment by countries with big automakers as they pursue strategic green industrial policy. We find that countries that achieved early and sustained (not inconsistent) policy alignment gained a first-mover advantage compared with countries that deliberately or accidentally misaligned their policies. We also find that first-mover advantage can be lost due to deliberate misalignment of policies caused by an inability of governments to effectively incentivize their firms to develop and deploy cleaner and more efficient technologies. In situations where governments adopt misaligned or conflicting policies, incumbent industries tend to pursue their prior comparative advantage and maximize return from investments in prior technologies. We also find that deliberate misalignment of policies can be an effective catching-up strategy.

НОВАЯ ИНДУСТРИАЛИЗАЦИЯ: АНАЛИЗ ВОЗМОЖНОСТЕЙ ПРОМЫШЛЕННОГО СЕКТОРА БАШКОРТОСТАНА

The processes of deglobalization and multipolarity, changing the trend of Russia's development in the global economic paradigm require the immediate formation of a new model of economic development of the country, based on new industrialization and a departure from policies focused on the development of raw materials exports. This imperative determines, in particular, the need for an early reorientation of strategic priorities and industrial policy of Russian regions to achieve technological breakthroughs in various industries. The article analyzes the capabilities of the Republic of Bashkortostan to implement the policy of new industrialization, and concludes that it is necessary to take a comprehensive set of measures to overcome the inertia of industrial development with a focus on raw materials.

Towards a post-neoliberal mode of European economic integration? A regulationist critique of the failing forward-approach

In light of the Euro crisis and disintegrative tendencies, recent approaches in European integration research increasingly emphasise constraints and crises of integration, most prominently elaborated in the so-called failing forward-approach. However, we argue that this approach is significantly limited in understanding both the nature of crises and the potential breadth of current ruptures in European economic integration. Based on regulation theory, we develop an alternative and more encompassing account of how different periods and modes of integration emerged as a response to crises but simultaneously unleashed new crisis tendencies. More specifically, we detail how the specific and asymmetric Europeanisation of forms of regulation provided a response to the crisis of the Fordist mode of development but concomitantly set the scene for the Euro crisis to emerge. This triggered a partial reconfiguration of the post-Fordist, neoliberal European mode of regulation since 2010, without, however, substantially addressing its underlying crisis tendencies. Against this background, and in the face of mounting geopolitical rivalries and the climate crisis, we analyse significant ruptures in the neoliberal mode of regulation in the EU currently underway, namely in the area of the regulation of the wage relation (European Minimum Wage Directive, Posting of Workers Directive), fiscal policy (NextGenerationEU, reform of the Stability and Growth Pact) as well as in the regulation of competition (strategic industrial policy, relaxation of competition law). Together, and although it seems too early to discern a ‘post-neoliberal’ mode of development, these ruptures indicate a significant departure from the neoliberal mode of European economic integration.

Semiconductor and ICT Industrial Policy in the US and EU: Geopolitical Threat Responses

<p>This article analyses chips and critical ICT infrastructure policy in the US and the EU. It examines the increasing importance of Waltian geopolitical security threats on both sides of the Atlantic as a driver of industrial policy, export controls, self-sufficiency, and friendshoring as a replacement for dependence on global supply chains. It shows that threat perceptions are strong and bipartisan in the US, allowing comprehensive, strategic and well-funded industrial policy. Threat perceptions driving chip and 5G industrial policy are also present in the EU’s Economic Security Strategy and related policies. However, differing national preferences dilute a Waltian turn with continued attachment to liberal (global supply chain) approaches to chips and 5G infrastructure and a Waltzian realist stance (capacity-building to build, protect, and promote regardless of security threat) that occupies the middle ground.</p>

Modern paradigms and megatrends of industrialdevelopment

Implementation of long-term strategies by all industrial stakeholders. The global nature of the challenges necessitates the organic and harmonious integration of all national economies into a new paradigmatic development framework. This requires active rethinking of strategic concepts and industrial policies by political and economic elites at the national, regional, and global levels. There is a growing trend towards expanding the targeted multi-dimensionality of industrial development as a component of holistic socio-economic systems at any level. Thus, the task of deepening the balance and harmonization of individual vectors and processes, both in the sector itself and in related sectors of the economy, is becoming more urgent. As part of the implementation of the imperatives of the socio-humanitarian paradigm, megatrends are being formed to prioritize the inclusion of humanitarian progress goals in industrial strategies and policies, transition to customer-oriented business models, and reorientation of industrial activities to form/expand the "comfort zone" (in various dimensions). The trend of systemic changes in the models of production use of all types of resources on the basis of maximizing resources’ efficiency and environmental safety is strategically important for global industrial development. This will lead to a shift in emphasis in long-term strategies from maximizing the volume and quantity to optimizing the structural and quality parameters of industrial production. The prospects for implementing the innovative paradigm of industrial development will be mainly determined by the scale and dynamics of 4IR deployment in key technological areas (digitalization, robotics, Internet of Things, artificial intelligence, etc.). For sustainable and inclusive development permanent innovative adaptability to changes is becoming a necessary property of industrial production and economic systems at all levels. In the context of the technological trend caused by the 4IR, the factors of information and communication and human resources are becoming increasingly important. The implementation of the innovative paradigm of industrial development contributes to the dynamic formation and deployment of the trend of creativity in the development and modernization of business models and industrial projects. At the current stage of world industrial development, the implementation of the globalization paradigm is accompanied by contradictory phenomena. However, the economic effects of globalization, which have already manifested themselves or are potentially possible, provide grounds to consider the trends caused by it as relatively stable long-term trends. The current processes of national/regional autonomisation should be viewed as a tactical adaptation maneuver in the economic policy of states and regional entities.

СТРАТЕГИЯ НОВОЙ ИНДУСТРИАЛИЗАЦИИ ФАРМАЦЕВТИЧЕСКОЙ ПРОМЫШЛЕННОСТИ: НАЦИОНАЛЬНЫЕ ПРИОРИТЕТЫ И НОВЫЕ ВЫЗОВЫ

The article analyzes the strategic priorities of technological modernization of the pharmaceutical industry in the conditions of external constraints. The study showed that with the increasing sanctions pressure on Russia, it is necessary to revise strategic priorities and industrial policy instruments, including the strategy of new industrialization being implemented. The conclusion is made that, despite the decrease in the level of dependence on imports, the industrial policy on import substitution is characterized by fragmentation and it has a catch-up character.

Aleksandr I. Moskovskiy: on institutionalism

The article provides an overview and assessment of the legacy of most significant Russian researcher of the past decades in the field of theory and methodology of classical institutionalism — candidate of science in economics, associate professor Alexander Ivanovich Moskovskiy, who worked for many years at the Department of Political Economy at Lomonosov MSU Faculty of Economics. The article shows the original ideas of A. I. Moskovskiy on the correlation of classical political economy, other schools of the heterodox branch of economic theory and neoclassical, methodology and theory of classical institutionalism. Special attention is paid to the research of A. I. Moskovskiy on the relationship between the technological progress, socio-economic processes, as well as the content and role of labor. The article reveals that A. I. Moskovskiy is among the first and most profound researchers who not only criticized the processes of deindustrialization but showed the importance of focusing on rendustrialization of the economy, showing (based on classical institutionalism and modern Marxism methodology) that strategic planning and active industrial policy can become the most important means to solve this problem. The industrial era, during which huge enterprises were the main institutions for maintaining social order, is not coming to an end; that affects employment and the nature of work. At the same time, the scolar did not deny that postindustrial society is now increasingly characterized as a “knowledge society”, in which knowledge and information become a key resource for technological, economic, and social development. An important point relates to the analysis of A. I. Moskovskiy changes in the methods and forms of managing skilled workers in conditions of increasing complexity and knowledge-intensive labor.

Green hydrogen value chains in the industrial sector—Geopolitical and market implications

The global transition to a low-carbon economy will significantly impact existing energy value chains and transform the production to consumption lifecycle, dramatically altering interactions among stakeholders. Thanks to its versatility, green hydrogen could play a significant role in reaching a carbon-free future by 2050. Its adoption will be critical for decarbonizing industrial processes at scale, especially hard-to-abate ones such as steel and cement production. This paper maps the role countries could play in future green hydrogen industrial markets based on three criteria: resource endowment, existing industrial production, and economic relatedness. Our analysis shows how the potential for green hydrogen production and leadership in industrial applications is distributed unequally around the globe. Countries like the United States and China could emerge as frontrunners in future green hydrogen markets and lead in industrial applications, such as ammonia, methanol, and steel production. Other resource-rich countries could upgrade along value chains and compete with import-dependent industrial powers for jobs and market shares. A transition in existing value chains will also give rise to new market and geopolitical dynamics and dependencies. This paper contributes empirical evidence to the debate on the geopolitics of hydrogen and guides in defining strategic industrial policies.

Foreign Ownership, Privatization and Strategic Industrial Policy in a Free-Entry Cournot Oligopoly

In this paper, we show that under mixed oligopoly and free market entry, the government’s output subsidies are positive and will not be affected by foreign holdings; however, under complete privatization and free market entry, the government needs to collect a production tax due to excessive market entry. We further demonstrate that the social welfare with privatization will be lower than that without privatization regardless of the shareholding of foreign owners in the free entry equilibrium. This result implies that when the market is completely free and open, it is necessary for state-owned enterprises to enter the market to ease excessive market competition.

РОЖДЕНИЕ НОВОЙ ЭПОХИ: ВЫЗОВЫ ДЛЯ РОССИИ И МИРА

Analyzing long-term trends and global transformations of technological and economic development, the author concludes that a significant renewal of economic relations and institutions is necessary, and proposes a strategy for moving towards a new state of society. Among the tasks associated with advancing to a new stage of Russia’s economic development are the formation of knowledge-­intensive production, the transformation of property relations, the solidarity of social strata. Among the means for solving these problems, the author highlights strategic planning and active industrial policy, the transformation of property relations aimed at the formation of new institutions of appropriation, disposal and use, the development of public health, education, culture, the formation of a system of relations that reduce inequality in access to development resources.

Industrialization, servicification, and environmental Kuznets curve: non-linear panel regression analysis.

This paper investigates whether the impact of income on CO2 emissions is invariant to endogenously estimated threshold levels for the economic structure (ES) represented by value added in manufacturing, industry, and service sector shares in GDP for a panel of 54 economies over the 1971-2017 period. Our panel smooth transition regression estimation results strongly suggest that the sensitivity of CO2 emissions to income is substantially much higher in countries with higher manufacturing and industry sector shares, whilst it is much lower in servicified economies. Given the argument that manufacturing is the engine of growth, this finding may not necessarily downgrade the crucial importance of an industrial policy which places the manufacturing at the core. The empirical findings in this paper suggest that countries may better to design and implement a strategic and systematic industrial policy which promote the use of emission reduction technologies and encourage manufacturing and industrial sectors with lower carbon emissions.

Investigating the linkages between industrial policies and M&A dynamics: Evidence from China

Mergers and acquisitions (M&As hereafter) have been widely examined in the economic and business literature under many perspectives. However, the industry-level view, specifically the relation between industrial policies and M&A waves at the sectoral level, has remained rather unexplored. This article contributes to fill this gap by empirically investigating the relation between selective industrial policies and M&A waves at the industry level in China. Referring to the four Five Year Plans covering the period 1996–2015, we explore whether being identified as an emerging sector in these plans generates positive or negative changes in the number of M&As. We reiterate the analysis according to the different types of M&As (vertical, horizontal or conglomerate) and the different natures of the acquirer (SOEs or private). Our results suggest that policies can differentially affect M&A waves according to the type of M&A. Moreover, while private firms are more responsive to both horizontal and vertical integration in emerging sectors, SOEs are more prone to engage in vertical M&As. We discuss the possible rationales behind the different behaviors. We also draw general policy implications on strategic industrial policy and market restructuring.

Do firms facing competitors from emerging markets behave differently? Evidence from Austrian manufacturing firms

PurposeThe purpose of this study is to explore the strategic positioning and product portfolio diversification of Austrian manufacturing firms that face competition from emerging markets as opposed to firms that do not.Design/methodology/approachThe research was conducted in two successive steps. Firstly, a literature review of dynamic capabilities was put into an international and import competition context, from which the domains studied empirically were derived. Secondly, a survey among the largest Austrian manufacturing firms was conducted to explore differences between firms that face competitors from emerging markets, and firms that do not. The questionnaire development was based on the strategic management literature. Even though the data are cross-sectional, backward- and forward-looking questions introduce a dynamic perspective. Both descriptive statistics and a regression analysis were used in the analysis.FindingsThe findings show that facing competitors from emerging markets is not always a force majeure, but the result of firms’ international activity. An analysis of the competitiveness profile reveals that existing strengths and weaknesses are more pronounced when firms face competitors from emerging markets. In addition, emerging market competition is associated with a broader product portfolio and triggers portfolio adjustments. Yet, a larger share of the companies facing emerging market competitors neither adjusts the product portfolio nor plans to develop new competences.Research limitations/implicationsOne limitation of this study is that it is confined to a survey among Austrian manufacturing firms. The findings may differ in other contexts, and thus, future research should be expanded to include firms from countries that are not from a small, open economy like Austria or from the service sector. The study uses cross-sectional data, and longitudinal/panel data would add causality.Practical implicationsEmerging markets play an increasing role in international business and there is a fierce debate about the strategic reactions of firms that face such competitors, especially from China. The findings provide guidance to managers who adjust their business strategies in a dynamically evolving competitive environment. The results also provide evidence relevant for strategic industrial policies aiming to reduce pressures from low-cost emerging market competitors while maintaining a free trade regime.Social implicationsImport competition from China (and other emerging economies) has been argued to contribute to the decline of the manufacturing industry, especially from the USA. The findings provide a building block of the efforts that aim to alleviate competitive pressures.Originality/valueEven though researchers increasingly debate the effects of competition from emerging markets, research about incumbents’ responses focuses on broadly defined product diversification or patent analyses. This study aims to fill this gap by providing comprehensive evidence about the strategic positioning of firms, thereby adding to theory. This paper also adds methodologically by offering a comprehensive picture that allows researchers to paint a nuanced picture of firms’ competitiveness.

English

This study deals with industrial policy, an issue that has been hotly debated in economic development. It argues that strategic and proactive industrial policy is a key to unlock the potential and wade through industrialization for low-income countries such as Ethiopia where market failures are pervasive. More specifically, it argues that industrial policy should be tailored to factors endowment structure. In the case of Ethiopia, as its economic structure is yet to transform substantially from agriculture to manufacturing, the current policy focus should be on labor-intensive sectors. Using the analytical framework of new structural economics supported with the primary survey data covering 80 manufacturing firms and secondary data sources, a comprehensive analysis has been conducted to explore the potentials, latecomer’s advantages, and the binding constraints of labor-intensive manufacturing industries in Ethiopia. Accordingly, it proposes five policy domains to unlock the labor-intensive manufacturing potentials of Ethiopia: Facilitating the linkage between agriculture and manufacturing industry along the value chain; fostering industrial park and cluster-based industrial development; strengthening the cooperation between government and the private sector; improving doing business environment; enhancing the industrial upgrading and diversification along with the changing endowment structure.   Key words: Industrial policy, industrialization, labor-intensive manufacturing, structural transformation.

A Research on the Enhancement of the Hosting of Foreign Direct Investment in Korea’s Free Trade Zones

Purpose : The aim of this study is to suggest some ways to enhance the hosting of foreign direct investment(FDI) in Korea’s seven Free Trade Zones(FTZ). Research methodology : Comparative studies are applied to Korea’s three Special Economic Zones(SEZ) of FTZ, Free Economic Zones(FEZ) and Foreign Investment Zones(FIZ) to examine the performances of the Korea’s FTZ and efficacies of the present policies for the attraction of FDI in the Zones.. Results : No differentials are found between the three SEZ regarding the performances of FDI. The Zones in the Capital metropolitan areas show much greater scores for FDI than the Zones situated in the rural areas. Conclusions : Market forces play dominant roles in the flow of the FDI in the Zones. The Korea’s FTZ and FEZ are public funded SEZ for FDI. To address the intended FDI targets, more aggressive policy tools such as Advanced Enterprise Policies, Regional Strategic Industrial Policies and Trade Promotion Policies including trade credit and insurance schemes. Invest Korea’s more active role are desired to host FDI in FTZ.

Global Value Chains, Industrial Policy and Economic Upgrading in Ethiopia's Apparel Sector

ABSTRACTThis article examines whether low‐income countries can still benefit from participating in manufacturing global value chains (GVCs) in terms of broader industrial development in a global context of greater competition and higher requirements. It contends that developing internationally competitive local firms and domestic linkages, in addition to upgrading, is crucial for participation in GVCs to drive industrialization. The study focuses on Ethiopia's recent experience with developing an apparel export industry through strategic industrial policy. Based on original empirical data collected through firm‐level surveys and interviews with government officials, industry experts and buyers, the article analyses the upgrading and localization trajectories of foreign and local apparel‐exporting firms. It argues that value‐capture benefits in assembly positions in apparel GVCs have become more difficult. The potential for localization benefits depends on the type of global buyers and foreign producers and their levels of embeddedness, but whether this potential is realized also depends on local firm characteristics and related industrial policy. Ethiopia's industrial policy has been relatively successful regarding national economy linkages, but less successful in developing competitive local export firms due to a weak local manufacturing tradition combined with a global context that has led to a supplier squeeze.