Handbook of Innovation Systems and Developing Countries Building Domestic Capabilities in a Global Setting
Building Domestic Capabilities in a Global Setting
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Edited by Bengt-Åke Lundvall, K. J. Joseph, Cristina Chaminade and Jan Vang
Chapter 12: Institutions and Policies in Developing Economies
12 Institutions and policies in developing economies1 Mario Cimoli, Giovanni Dosi, Richard R. Nelson and Joseph E. Stiglitz 12.1 Introduction The existence of profound relationships of some sorts between innovation, industrialization and economic development is now generally acknowledged in both economic history and economic theory. However, the conditions which foster technological learning and its successful incorporation into the economy and in particular the role of institutions and policies continues to be more controversial. This chapter addresses these issues and tries to offer a framework for the interpretation of the ways activities of ‘institutional engineering’ and policies shape technological catching-up and industrial development. Let us start from a first simple empirical observation to show that no example can be found in history of a process of development nested in an environment even vaguely resembling the institution-free tale of economic interactions that one finds in a good deal of contemporary economic theory. On the contrary, all historical experiences of sustained economic growth – starting at least from the English ‘Industrial Revolution’ – find their enabling conditions in a rich set of complementary institutions, shared behavioural norms and public policies (more in Reinert, 2007). Indeed, the paramount importance of institutions and social norms appears to be a rather universal property of every form of collective organization we are aware of. Moreover, much more narrowly, discretionary public policies have been major ingredients of national development strategies, especially in catching-up countries, throughout the history of modern capitalism (Amsden, 1989; Freeman, 2004; Mazzoleni and Nelson, 2009; Peres, 2009;...
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