This chapter examines the development of Brazil’s inward-oriented industrialization strategy, commonly termed “import-substitution industrialization” (ISI). Originating in the 1930s under the corporatist administration of Getúlio Vargas, by the 1960s the strategy had succeeded in transforming the structure of the Brazilian economy, turning it into a major industrial powerhouse. Successful though the strategy initially was in promoting growth and structural change, it nevertheless suffered from inherent flaws, notably its heavy reliance on imported inputs and a failure to produce and export efficient industrial sector. This chapter considers the achievements and failings of ISI in some detail and also discusses the results of attempts to reintroduce the strategy on a limited scale in the first decade of the 2000s.
David Lawther Johnson
For regions seeking to advance economic competitiveness, building appropriate clusters of concentrated economic activity remains an effective strategy, even as traditional “smokestack-chasing” approaches to economic development grow increasingly problematic. Still, cluster approaches face their own challenges in addressing the costs and risks of innovation, producing significant numbers of new jobs in the short term, carrying out credible claim marketing efforts in a data-driven global marketplace, and demonstrating sufficient breadth of benefit from their necessarily focused concentrations of investment and talent. For the past 15 years, Central Indiana has pursued a series of cluster initiatives through an unusual organizational strategy and structure that provides an instructive view of the opportunities and challenges in 21st-century cluster development.
Philip E. Auerswald
Governments and nongovernmental grant-making organizations seeking to advance local competitiveness have turned increasingly to entrepreneurship-focused interventions. Based on initial experience with such interventions, numerous informed practitioners have advocated for approaches that de-emphasize direct financial support for entrepreneurs in favor of more broad-based strategies of engagement aimed at enabling “entrepreneurial ecosystems” at the scale of the city or the subnational region. The chapter uses a detailed algorithm to evaluate the effect of the entrepreneurial ecosystem complexity and its effects on local competiveness. In this chapter I seek to take seriously the idea of the entrepreneurial “ecosystem,” considering what sort of guidance to research and policymaking is provided by direct analogy to the substantial literature on ecosystems within the fields of evolutionary biology and ecology.
Paulo César Morceiro
Production and employment in the Brazilian manufacturing industry grew significantly in the decade from 2004 to 2013, but the technological intensity of production activities declined. Growth was driven by domestic demand, which performed well due to the significant job creation, real minimum wage increases, and the credit boom. However, Brazilian manufacturing lost competitiveness, presented a negative labor productivity growth, and registered trade deficits in most sectors, including those traditionally associated with surpluses. The chapter also shows that the manufacturing sector is integrated into the global value chains by imports, but not by exports—which is a case of introverted fragmentation.
Christopher S. Hayter
Regions worldwide increasingly confront large-scale grand challenges: complex, transnational problems like climate change, vaccine development, and water security. While society typically views science as the primary mechanism for addressing complex problems that confront it, traditional scientific institutions and policies are not optimally structured to provide the resources, technical depth, or scale needed to successfully address grand challenges. The emerging grand challenge model of R&D, however, offers a promising vehicle for mobilizing existing, often geographically dispersed knowledge assets in furtherance of a common goal: solving grand challenges. This chapter investigates the emergence of the grand challenge model through the establishment of several grand challenge programs and initiatives, several key elements critical to its operation and success, and its implications for regional competitiveness.
Doug Henton and Jessie Oettinger
Local economic development has changed in fundamental ways as innovation has become critical to competitiveness in the global economy. As regional economies look to develop global strategies and compete in an increasingly knowledge-based economy, the purview of local economic development is changing. Increasingly, public and quasi-public agencies are looking to understand their role in spurring and supporting innovative industries and how to make appropriate financial, cultural, and physical investments in innovation infrastructure. This chapter describes the innovation economy and the key role played by innovation brokers in making the important connections between entrepreneurs and the resources they need to succeed in this new environment.
Erik Stam and Niels Bosma
This chapter identifies types of local policies that are conducive to generating high-growth firms. It discusses the transitions on the person level that precede the realization of a full-fledged high-growth firm: transitions into ambitious individuals, entrepreneur, and ambitious entrepreneurs. Insight into these preceding transitions is necessary in order to increase the pool of potential high-growth firms and to target particular transitions in the path toward becoming a high-growth firm. Important enabling high-growth firm policies can be found in the areas of education policy and labor market policy. Even though these enabling policies are rather generic in nature, they can be made more effective by targeting particular groups that are more relevant for particular transitions toward becoming a high-growth firm. In addition, there are many targeted industrial policies and regional cluster policies that also have direct implications for the presence of high-growth firms. In order for local policies to be effective they should not conflict with national and supranational policies.
This chapter examines a little explored and yet important aspect of the poor productivity in Brazil: the performance of the service sector. It shows evidence that the meager long-term performance of the services sector is a key factor in explaining the poor aggregate productivity and manufacturing competitiveness in Brazil. The reasons for that are twofold. First, Brazil is experiencing a profound structural transformation in favor of the services sector, mainly at the expense of the manufacturing sector, to the point that the shares of services in output and in employment have become unusually high by emerging market standards. Second, manufacturing firms in Brazil are increasingly outsourcing all types of services to the point where the share of services in total costs have become comparable to that of advanced economies.
Zoltan J. Acs
This chapter recasts Schumpeter’s famous thesis on capitalism, socialism, and democracy in a new light by replacing socialism with philanthropy. While both socialism and philanthropy appeal to our better side, socialism is about equality in servitude and restraint, while philanthropy seeks equality in opportunity. Philanthropy strengthens both capitalism and democracy by creating competition through investment in opportunity that in turn leads to local competitiveness. By focusing on university research—necessary for technological innovation, economic equality, and economic security—that creates a large functioning middle class. This investment in education and opportunity creates local competition in the education marketplace, leads to innovation and entrepreneurship in the region and therefore greater local competitiveness. Therefore, philanthropy is a key ingredient for the successful prosecution of regional competitiveness.
Philip McCann, Raquel Ortega-Argiles, and Dominique Foray
In recent reforms to the European Union regional and urban development policy, known as Cohesion Policy, the creating and sustaining local competitiveness is such a priority that the European Commission recently introduced a new policy approach to enhance the economic performance of regions of Europe—Smart Specialization Policy approach. This approach puts entrepreneurship and its role in driving innovation at the center of the regional economic development agenda. This chapter provides an explanation of the underlying thinking and ideas leading to the development of the Smart Specialization approach. The chapter then explains how this new policy approach is enhancing local competitiveness and implemented in the context of the European Union Cohesion Policy Reforms.
Maryann Feldmann and Sam M. Tavassoli
Emerging industries have great potential for both entrepreneurship and regional transformation. The emergent earliest stage of the industry lifecycle is when there is the greatest potential and when local factors matter most, however, we typically can only identify new industries in retrospect. This chapter provides an overview of the transformative potential of emerging industries and considers the challenges associated with studying emerging industries in real time. The chapter considers the regional context for studying new industries and offers a set of regional factors that might promote the emergence of new industries.
David Zilberman, Madhu Khanna, Scott Kaplan, and Eunice Kim
Agriculture has benefited from new technologies such as crops for new biofuels and modern irrigation systems. Adoption of these new technologies has had a profound impact on land use and land values. This chapter first considers the basic theories of agricultural technology adoption and how the characteristics of new technologies influence patterns of adoption. It then examines the impact of various economic and noneconomic factors on patterns of adoption and how the economic implications of technology are evolving in a modern world with an integrated supply chain and contracting. In addition, the chapter looks at how adoption and diffusion affect the introduction of technological innovations and describes policies that play an important role in the adoption of new land use technologies.