Explaining the Key Components of Successful Industrial Policy

Document Type : Research Article

Authors

• mohammad kazempour teymourloy ¹
• Saeed Zarandi ²
• Reza Vaezi ³
• Vajhollah Ghorbanizadeh ³

¹ PhD student, Department of Public Administration, Faculty of Public Administration, Allameh Tabatabai University, Tehran, Iran.

² Assistant Prof., Department of Public Administration, Faculty of Public Administration, Allameh Tabatabai University, Tehran, Iran.

³ Prof., Department of Public Administration, Faculty of Public Administration, Allameh Tabatabai University, Tehran, Iran.

Abstract

Highlights

Extended Abstract 

Introduction:

Following nearly two decades of international adherence to the Washington Consensus as the dominant paradigm in development thinking and policymaking, it has been in decline both intellectually and politically since the late 1990s, paving the way for a more heterogeneous global outlook compared to national models. Simultaneously, a shift has occurred in the debate over the use of industrial policy by national governments to promote economic development. This is evident not only in the revival of industrial policy by policymakers but also in the renewed academic interest in the subject. Looking at the classical history of industrial development policy, we find that the industrial development of advanced countries is rooted in active state support. These countries have designed and implemented diverse policies for their industrial development, gradually smoothing and enabling their industrial development path through policy evaluation and learning. The issue most governments face today is not whether they should have an industrial policy or not, but rather how to design and implement an industrial policy in the best possible manner. Since the formulation of industrial policies and the factors influencing their formulation and implementation is an important and fundamental subject in the national policymaking system, the necessity for research on industrial policy and its main components exists as an imperative. In this research, the factors influencing industrial policy are examined. This study seeks to answer the following question: What are the most important key components of industrial policy?

Theoretical Foundations and Research Background:

Industrial policy has been as contentious in economic literature as in political debates (Chang, 1994). Industrial policy has a long history both in theory and practice. It became a central focus of development research and policy analysis after World War II, although its meaning, scope, and tools have varied significantly, making it a subject of continuous critique and debate, especially during the 1980s and 1990s. Since economics is susceptible to prevailing intellectual styles and transient fashions, the standing of industrial policy has also fluctuated. A brief review of its history shows that these policies have never vanished; instead, they have persisted under various names and forms. Even in the face of strong ideological currents against it, they have been implemented in both developed and developing countries. Industrial policy plays a role in public policy decision-making and influences the behavior of agents, thereby impacting the dynamics of the 'real economy,' even when not explicitly labeled as 'industrial policy.' Chang (1994) describes industrial policy as government actions to support production and technological capacities in strategic industries for national development. The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, 2020) presents four conventional types of industrial policy: (1) horizontal industrial policy, (2) sector-specific industrial policy, (3) matrix industrial policy, and (4) industrial cluster policy.

Methodology:

This research is applied in purpose and descriptive-analytical in nature and method of execution, based on documentary study. The data collection method was library and documentary research, and its statistical population consists of all valid scientific articles and texts (domestic and international) in the field of industrial policy.

Research Findings:

Through the review and content analysis of articles and the perspectives of scholars, the components of a successful industrial policy were identified as follows, which should be considered when designing industrial policy.

Catching Up: Catching Up  refers to the efforts of developing countries and emerging economies to reduce the technological and economic gap with advanced countries through learning and technology transfer.

Structural Transformation: Structural transformation refers to the shift from low-productivity activities and sectors toward high-productivity activities and industries, encompassing the diversification into new industries and the specific upgrading of industrial sectors. This process requires the development and expansion of productive.

Conclusion:

The success of industrial policy depends on a systemic perspective and simultaneous attention to all identified components. These components interact dynamically with each other, and their effective implementation requires institutional capacity, a pragmatic approach, and constructive interaction between the government, private sector, and universities. Ultimately, industrial policy must be flexible and aligned with the specific conditions of each country.

Keywords

• Industrial Policy
• Components
• Political economy
• structural change
• Government Intervention