The ‘Flying-Geese’ Theory of Tandem Growth and Regional Agglomeration
New Horizons in International Business series
Chapter 5: Structural Upgrading, Infrastructure Development, and Insatiable Quest for Natural Resources
5. Structural upgrading, infrastructure development, and the insatiable quest for natural resources INTRODUCTION 5.1. Infrastructure is the backbone of economic development and growth. The faster the rate of growth, the greater the need for infrastructure in support of both productive and consumptive activities. Infrastructure is basically a non-tradable good, since it is location-bound. As in any other sectors of an economy, furthermore, infrastructure facilities have evolved in types and services, especially in the way they are operated – pari passu with economic growth, technological progress, and changes in the modalities of production and consumption. They were traditionally provided as public goods by local and state governments in individual countries. Many state-run infrastructure facilities, however, have turned out to be inefficient and costly. This is not so much because of the poor quality of the physical facilities per se but because of how they are operated and maintained in providing services. In this respect, infrastructure-specific software (institutional arrangements including policies, regulatory framework, and oversight) is the decisive factor. Moreover, modern infrastructure requires sophisticated management and operational skills. Without such requisite software provision, no physical infrastructure is itself capable of functioning effectively and efficiently. In the recent past, consequently, some types of infrastructure have been privatized, and MNCs have begun increasingly to engage in the construction and management of infrastructure facilities in host countries. After all, MNCs from advanced countries possess valuable firm-specific knowledge, skills, and experiences to run the physical facilities efficiently and productively. And in doing so, they are making the...
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