Industrial Policy Changes and Firm-Level Technological Capability Development: Evidence from Northern Brazil

SummaryMuch has been written about the impacts of the policy changes of the 1990s on industrial performance, particularly in Latin America. Most of the studies are based on aggregated analyses that argue for or against such reforms in the policy regime. This study offers an alternative view to this debate based on a longitudinal empirical scrutiny of technological capability development in 46 local and foreign firms from three sectors in Northern Brazil. There were inter-sector and inter-firm variations in terms of the manner and rate of capability development for specific technical functions. Overall, the patterns of firm-level capability development exhibited a positive response to the structural reforms, but such responses were not a mere consequence of trade openness. A combination of government policy, foreign competition, and intra-firm capability building efforts proved essential for speeding up capability development in some of the sampled firms. Thus policies for accelerating industrial technological capability development in a developing area such as the one examined here would involve not only macro-level incentives and competition, but, very importantly, measures that facilitate intra-firm capability building efforts.