Abstract

Structural transformation to higher productivity and value-added activities remains a key objective for developing countries. Industrial policy has historically had an important role in supporting such transformation processes. Today, the external context is fundamentally different with the rise of global value chains (GVCs). This requires a reconceptualization of how GVCs shape industrialization paths and industrial policy options in developing countries. The chapter does this by (1) providing a critical discussion of opportunities and challenges for industrialization in developing countries related to the rise of GVCs; (2) highlighting the importance of different GVC types and of the contested nature of upgrading; and (3) stressing industrial policy implications relating to the importance of connecting to and leveraging lead firms, of thinning, stretching and thickening in different GVC types and integration phases, of strategically linking global, regional and domestic markets, and of building locally embedded productive capacities.