Industrial policy refers to a group of instruments aimed at promoting economic transformation. It is typically characterised by a concerted effort by government to encourage and promote a specific industry or sector with an array of policy tools. Despite the name, industrial policy is applied to service sectors and agriculture as well.
Dani Rodrik, one of the thought leaders on industrial policy, states that “development is fundamentally about structural change: It involves producing new goods with new technologies and transferring resources from traditional activities to these new ones”.
Most industrial policies are applied in a top down fashion by national governments. Provinces and sub national governments typically also have programmes aimed at promoting certain industries or kinds of economic activities, but often these are not referred to as industrial policies, although they can be described as such. As we get closer to local industries, industrial policies (which are typically specified) tend to become very generic.
Over the last few years Mesopartner has become increasingly involved in the promotion of innovation systems, regional development and regional structural change.
With this theme of Industrial Policy and Structural Change, Mesopartner will dedicate resources and form collaboration networks to specifically develop a knowledge base around revitalising industries, developing important meso-level institutions, and the promotion of specific meso level industrial policies to promote industries “from the bottom up”.
But bottom-up industrial policy and regional structural change cannot work without top-down support, an enabling environment and the necessary resources within regions. Bottom-up development must always be integrated into national and regional development programmes and policies.
What is bottom-up industrial policy and regional structural change all about?
- It is about figuring out which industries to support within a region in order to improve competitiveness, productivity and job creation
- It is about understanding how meso level institutions, programmes and development organizations need to be strengthened in order to be more responsive to the current and the near term needs of the private sector
- It is about figuring out how to create more options for entrepreneurs and firms through experimentation, exploration and a search for possibilities
- It is about understanding the lifecycles of key industries and regional technological competencies and how these lifecycles affect the regional economy.
- It is about future anticipation of certain developments and creating early opportunities
- It is about building on industrial and technological capacities and promoting new sectors based on these knowledge aspects
- Lastly, bottom up industrial policy and structural change must focus on identifying key regional competencies that create an economic legacy and that must be leveraged.
Many instruments that are used to develop regional and local economies such as value chain promotion, cluster promotion, TED/LED and innovation system promotion are important instruments of bottom-up industrial policy. But there are instruments missing, and many instruments will have to be adapted slightly to be more complementary with top-down programmes.
Lastly, Mesopartner will integrate our recent experience of working with complexity into our work on industrial policy. This means that we will have to think carefully about how we approach industrial systems, how we support learning, self-reflection, experimentation and emerging signals.
In bottom up industrial policy we look at how some of our old familiar instruments must be combined, adapted and supplemented to lead to industrial growth. Some familiar tools include value chain and cluster promotion. Systemic Competitiveness provides an useful organising framework.
- What are the market failures experienced by firms that are pervasive and that must be overcome through targeted interventions?
- How do we deal with structural change, emergence of new industries, weak signals and complexity in making top down industrial policy more responsive to what is needed in the economy?
- What are the services, technological expertise and knowledge services that are needed in the meso level organizations to respond to the needs of industries?
- Who are the outlier firms and outlier experts or institutions that have overcome constraints that are perceived as being systemic?
- How do we have to adapt or use well known instruments such as cluster promotion, value chain promotion, etc to promote bottom up industrial policy?