The institutional framework of Industrial policies

Abstract

This paper argues that the institutional framework of industrial policies derives from the analysis of industries as systems. Industries are embedded in specific institutional frameworks with which they co-evolve. However, industrial systems are primarily organised at local level: industries may be global but in the sense that they constitute global networks of local systems. The institutional framework of industrial policy derives from this result: industrial policy acts at different levels, primarily the local one with regional policies, but also national and supranational. The paper argues that regional industrial policies are key policies to favour industrial development, and performing regions are those that combine dynamic capabilities (pool of resources: raw materials, infrastructure, competencies and knowledge, human capital) and an institutional system characterised by governance and leadership. This is illustrated with the case of the Emilia Romagna region in Italy. Dynamic capabilities both favour the development of local firms and attract firms and resources (financial, human) from outside the region. Governance is taken in the sense of Stoker (1998) of a collective decision-making process, involving all stakeholders. We add that leadership is also essential in such a framework. Finally, the success of industrial policy depends not only on the local institutions but also on their relationship with the wider institutional framework