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Self-discovery in the dark: the demand side of industrial policy in Latin America

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  • Alberto Fuentes
  • Seth Pipkin

Abstract

Under what conditions do businesses choose to reconsider their immediate, short-term competitive niches and engage in long-term, systematic thinking by searching for new business models? This crucial question is left aside by the contemporary literature on industrial policy insofar as it assumes that the primary barrier to industrial upgrading and learning is on the ‘supply side’ of states facilitating private firms' pursuit of their already-established drives. We inquire into the necessary conditions for businesses' engagement with long-term thinking and innovation in contexts that reinforce preferences to stay in low-innovation, high-rent niches . Drawing from five cases in ‘inertial’ Latin American competitive environments where industries nevertheless voluntarily broke free of inertial trajectories to seek new approaches to business, we find that conditions of ‘systemic vulnerability’ -- a combination of shocks in demand, sectoral comp-etitiveness and civil/social conflict -- force business elites to reconsider their constituents and investment timeframes. Based on these observations, we contribute to theories of industrial policy and industrial upgrading by identifying the ‘demand side’ factors that affect whether firms are prepared to be competent partners in today's ‘assistive,’ market-reinforcing models of industrial policy.

Suggested Citation

  • Alberto Fuentes & Seth Pipkin, 2016. "Self-discovery in the dark: the demand side of industrial policy in Latin America," Review of International Political Economy, Taylor & Francis Journals, vol. 23(1), pages 153-183, February.
    • Handle: RePEc:taf:rripxx:v:23:y:2016:i:1:p:153-183
    DOI: 10.1080/09692290.2015.1104374
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    References listed on IDEAS

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    1. List, Friedrich, 1885. "The National System of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number list1885.
    2. Katz, Jorge, 2001. "Structural reforms, productivity and technological change in Latin America," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 2277 edited by Eclac.
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    Cited by:

    1. Stephan Manning & Cristiano Richter, 2023. "Upgrading against the odds: How peripheral regions can attract global lead firms," Journal of International Business Policy, Palgrave Macmillan, vol. 6(1), pages 1-23, March.
    2. Pipkin, Seth & Fuentes, Alberto, 2017. "Spurred to Upgrade: A Review of Triggers and Consequences of Industrial Upgrading in the Global Value Chain Literature," World Development, Elsevier, vol. 98(C), pages 536-554.

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