Knowledge, skills and organizational capabilities for structural transformation

Abstract

Structural transformation requires raising productivity and achieving competitiveness in increasingly higher-valued activities. This process can be constrained by different types of knowledge gaps. The importance of codified knowledge and practical know-how or skills are well recognized. But another type of knowledge critically affects the value of both. A society must have firms with the organizational capabilities to organize production competitively so that educated and skilled people can be employed profitably. This is a specific type of collective knowledge distinct from the codified knowledge and know-how embodied in individuals. Without appropriate organizational capabilities, investments in other types of knowledge can fail to achieve adequate returns. The required organizational capabilities can range from basic, intermediate to dynamic, depending on whether firms in the sector are catching up or innovating. Effective learning strategies have to identify and target interdependent knowledge gaps and to do this effectively, they also have to recognize distinct institutional and political economy problems of implementation. The general points are illustrated with reference to the emergence of the garments industry in Bangladesh and the challenges facing its upgrading.