Introduction

Industrial firms in developing countries have to contend with acute shortages of physical infrastructure. Users in many of these countries face problems such as “brownouts and blackouts in power systems, intermittent water supplies from municipal systems, long waiting periods for telephone service connections, and increasing traffic congestion” (World Bank 1994a: p. 7). Not only has the quantity of public infrastructure stock and services failed to keep pace with demand, but the quality of the service that gets provided also is often poor. As a result, the subset of industrial users with access to public infrastructure still have to contend with highly unreliable and poor quality service. Nonetheless, industrial firms in developing countries do manage to produce and survive without access to infrastructure, such as reliable electric power and freight transportation systems. Indeed, in countries such as China and India, industrial firms appear to be not just surviving but also thriving, and often competing successfully in world markets, despite severe infrastructure deficiencies.