PERIGROWTH · States, firms and, sustainable economic growth: A view from the periphery

States, firms and, sustainable economic growth: A view from the periphery

"This project explores the role of state-firm coordination in enabling late industrializing economies to reach the efficiency frontier in complex (skill-, capital- and knowledge-intensive) industries. The underlying motivation of this project was to explain late stages of economic development in the context of globalization. The study was based on empirical analyses of two countries that have become advanced economies in the past four decades by increasing the complexity of their production structures, Spain and South Korea (Korea). the research was based on qualitative case studies of three complex upstream industries that are central to both national economies: information and communication technologies (ICT), banking, and the automotive industry. The analysis focused on the period between 1985 and 2019. In the past four decades only 21 countries have managed to increase their standard of living from somewhere between 20-50 percent of the US GDP per capita to above 50 percent of the US income per capita level. Of these new advanced economies, 8 continue to have economies that are heavily dependent on extractive industries or agriculture, and only three (Spain, Korea and Taiwan), are the home base of at least one lead firm that controls the process of design, production and distribution of a global production network, has global market power, and a recognizable brand name. The scarcity of countries that have managed to overcome the so-called middle-income trap makes examples of countries that have done so, valuable to gain a better understanding of this process and the types of approaches that new generations of emerging economies could pursue to achieve similar outcomes. The overall objective of the project was to gain a better understanding of how late industrializing economies become advanced countries using the experiences of Spain and Korea. The research showed that upgrading is a coordination problem in which the key actors are states and firms. We argued that that upgrading in Spain and Korea was based on quid pro quo exchanges and interdependences between states and firms. In these interdependent models, national governments and firms exercised control over their decisions and came to develop a set of mutually agreed-upon working rules that enabled both parties to reach beneficial outcomes. The project defined to different, yet equifinal pathways to upgrading, an ""integrational"" path based on foreign direct investment, technological outsourcing and regional integration, and a ""techno-industrial"" one, based on self-sufficiency and technological autonomy."

Data: CORDIS, © European Union