Imitation, Innovation and State Capacity: What Do East Asian Industrial Policies Imply?

Abstract

Since the global financial crisis, industrial policy is back on the agenda in developing economies after a long break. The renewed interest in the industrial policy manifested itself in the discussions on the new directions for policymaking. A crucial aspect of the recent industrial policies is technology policies, in which the developing policies face the trade-off between imitation and innovation. In this study, we examine the association between industrial policy and state capacity based on a theoretical model. We elaborate on the successful interventionist industrial policies of the East Asian economies in the past in conjunction with state capacity and technology policies. As evidence from Korea, Singapore and Taiwan shows simultaneous implementation of imitation and innovation policies is possible. Recent experience in China further supports this conclusion. The results indicate that state capacity has played an important role in the success of East Asian industrial policies.