Institutional Geometry of Industrial Policy in Sustainable Development

Abstract

This chapter focuses on the supportive network of developmental institutions that is needed for governments to succeed in nudging or kicking their countries into a more productive and higher-value added economic structure. No country has achieved industrial and postindustrial transformation without the use of targeted and selective government policies to shift the production structure towards activities and sectors with higher productivity, better paid jobs, and greater technological potential. Moreover, those countries that succeeded in this shared a broadly common geometry in the institutions established within government and within business. The chapter shows that the opportunities these create for information sharing, dialogue, feedback, learning, and monitoring played a vital role in their success. In particular, it describes the need for governments to have a degree of “embedded autonomy” within the broader economy and mechanisms for “reciprocal control” to ensure that when government supports business, it is translated into the desired outcomes.