Technical change and industrial policy: The case of computer numerically controlled lathes in Argentina,Korea and Taiwan

This paper provides an analysis of how the substitution of computer numerically controlled (CNC) lathes for conventional lathes affects the conditions under which lathe producers in the newly industrializing countries (NICs) can successfully compete in the international market. Particular emphasis is given to the role of government policies in enhancing the competitiveness of CNC lathe producers in the NICs. The international market for lathes is analyzed, and it is concluded that the type of lathes that the NICs have specialized in producing is that which is mostly affected in the substitution process. We then proceed to map the barriers to entry into the production of CNC lathes, as well as to indicate the present position of some producers in Argentina, Korea and Taiwan within this industry. The role of government policy in fostering the production of CNC lathes is subsequently analyzed, where it is argued that firm-specific, custom-designed policies are the most efficient.