State-firm Coordination and Upgrading in Spain's and Korea's ICT Industries

ABSTRACT

Generating sustainable growth and reaching advanced economy status depend on the ability of countries to host local, globally competitive firms in skill-, capital-, and knowledge-intensive industries. However, few countries succeed. This paper asks whether state activism is necessary to foster economic transformation at high levels of complexity in the globalisation era, and if so, what strategies are effective. Using evidence from Spain's and Korea's ICT industries since the 1980s, the paper argues that state-firm coordination remains necessary to reach the efficiency frontier in complex industries. However, coordination has shifted from hierarchical structures to nonhierarchical models in which states and firms develop mutually agreed-upon working rules to reach beneficial outcomes. Nonhierarchical coordination may involve adopting different institutional configurations, depending on the identities and capabilities of firms and national governments and on the nature of linkages with other nations. These linkages may lead to alternative pathways to upgrading and diverse productive specialisations.

KEYWORDS:

• Political economy
• state activism
• business-government relationships
• industrial upgrading
• late development

Acknowledgements

The author would like to thank Saul Estrin, Robert Hancké, and Stephan Haggard for their comments and stimulating discussions, and Peter Hall and Cornelia Storz for their comments on earlier versions of the document. Any remaining errors are my own.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Angela Garcia Calvo is a Marie Curie Global Fellow at the London School of Economics and a visiting fellow at the Harvard Kennedy School of Government. Her areas of research include business-government cooperation, competitiveness, late development, and industrial policy. Her book State-firm coordination and upgrading (under contract with Oxford University Press), examines the role of public-private cooperation in enabling Spain and Korea to overcome the middle-income trap beginning in the 1980s.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 Henceforth Korea

2 For fiscal year 2019, the World Bank defined lower middle-income economies as those with a GNI per capita (calculated using the World Bank Atlas method) between $996 and $3,895; upper middle-income economies as those with a GNI per capita between $3,896 and $12,055, and high-income economies as those with a GNI per capita of $12,056 or more. The United States’ GNI per capita for 2017, the latest year available at the time, was $58,270.

Additional information

Funding

This project has received funding from the European Union's Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie grant agreement No 747943.