Industrial policy in the era of global value chains: Towards a developmentalist framework drawing on the industrialisation experiences of South Korea and Taiwan

Abstract

In this paper, I present a framework for GVC‐oriented industrial policy that merges the so‐called GVC perspective and the so‐called developmentalist perspective—the latter of which is a perspective that industrial policy is most often analysed through, but has been somewhat neglected by the GVC perspective. I argue that the GVC perspective too quickly dismisses the relevance of industrial policy in the East Asian development experience, particularly those in South Korea and Taiwan between roughly 1960 and 1990. By drawing on the industrialisation experiences of these two countries, my framework for industrial policy suggests that the GVC perspective's ideas for industrial policy would be strengthened by more clearly acknowledging the continued importance of three observations by the developmentalist perspective: (a) the need for governments in developing countries to bargain with foreign investors for the purpose of domestic industrialisation; (b) policy design should not only focus on increasing exports, but also focus on replacing some imports with domestic production; and (c) linking up to the value chains of transnational corporations based in high‐income countries can bring about some benefits, but ultimately, successful industrialisation necessitates a degree of competing with transnational corporations. State‐owned enterprises have historically played an important role in this respect.

Potential for Upgrading in Financialised Agri-food Chains: The Case of Ghanaian Cocoa

“…Inspired by the success of the economies of Korea, Taiwan and China, Lee et al ( 2017 ) developed the ‘in–out–in’ hypothesis which suggests iterative learning and absorption of technologies through inclusion, followed by exclusion and infant industry protection to fend off competitors and establish own brands. Hauge ( 2020 ) made a similar argument, drawing on the experiences of South Korea and Taiwan, and Lombardozzi ( 2020 ) demonstrated how targeted macroeconomic policies have enabled upgrading in Uzbekistan’s horticulture sector. These contributions reconsider and emphasise the leading role of the state in shaping upgrading opportunities.…”

Global value chains, import orientation, and the state: South Africa’s pharmaceutical industry

“…Nevertheless, emerging research has focused on the state buyer role in terms of public procurement (Hughes, Morrison, & Ruwanpura, 2019 ). More broadly, growing attention has been placed on the active ways states are shaping their engagement with global trade (Evenett, 2019 ), including through industrial policy (Hauge, 2020 ; Kaplinsky & Morris, 2015 ; Whitfield, Staritz, & Morris, 2020 ).…”

“…Although often overlooked in research on GVCs, consumers may benefit from imported products if they are cheaper, better quality, or offering products hitherto unavailable (Kaplinsky & Messner, 2008 : 204). At the same time, a longer-term perspective on producer interests may also consider factors such as learning opportunities and longer-term prospects for structural change, which can initially arise through participating in domestic and regional markets (Altenburg, 2006 : 510; Hauge, 2020 ). Imports of intermediate goods can be used as inputs and may complement local manufacturing to some degree (Edwards & Jenkins, 2015 ).…”

“…However, situating this challenge of developing local manufacturing in a GVC context provides a deeper understanding of the scale of the challenge facing local producers. Moreover, and building on recent work on the state–GVC nexus (e.g., Alford & Phillips, 2018 ; Hauge, 2020 ; Mayer & Phillips, 2017 ; Smith, 2015 ; Werner, 2020 ; Yeung, 2016 ) and on international business policy (Lundan, 2018 ; Van Assche, 2018 ), the article demonstrates the limitations of the state facilitator role in the context of import-oriented engagement with GVCs and the consequent turn to, and also challenges regarding, the producer (state ownership) and buyer (public procurement) roles of the state. Rather than the commonly used term import substitution (e.g., Irwin, 2021 ), import orientation is referred to here to describe a relationship between territories and GVCs, which involves a range of policies, processes, and strategies, which extend beyond restricting imports of manufactured goods and include encouragement of imported products.…”

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