The Sources of Industrial Leadership: A Perspective on Industrial Policy

This essay reports on a historical study of the evolution of seven major high-tech industries. The aim was to identify key factors leading to the emergence of industrial leadership. A few lessons have come to the fore. First, firms that become dominant on world markets first became strong in their home market. Second, important sources of comparative advantage often reside in sectoral support systems e.g. a university especially strong in organic chemistry. As to the debate about industrial policy, history shows many instances that support the case for targeted support. On the other hand, we should not ignore that the success of industrial policy depends to a large extent on the interaction between firms and the relevant government agencies.