Industrial policy beyond market failure: structural dynamics, innovation and economic governance for industrial development

This chapter argues that what emerges from theoretical reflections and real cases analysed in the literature on industrial policy is that orientating industrial development towards specific trajectories is possible by using a wide array of instruments at micro, meso and macro levels. A key issue in defining industrial policy (IP) and its implementation is therefore the coherence of actions across policy fields and across policy levels, as well as the economic governance of the evolution of the industrial and economic system. A key feature which has also emerged in the last two decades of reflection on and practice of industrial policy is that this policy is dynamic, and concerned with the evolution of industries, embedded in industrial systems or ecosystems, and wider socio-economic systems. These systems are characterised by interdependencies and co-evolution of different actors and institutions. As a result, industrial policy must be holistic, based on visions and expectations.