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Example text

The development of TCs in enterprises, industries and economies follows an evolutionary and idiosyncratic path. Investments in knowledge, skill and capability are cumulative and path-dependent. Easier capabilities and activities are mastered first. At the enterprise level, individual firms operate with the technological knowledge they have accumulated, depending on the technologies they use and the modifications they have made. 2 Implications for Government Policy In most neoclassical approaches, government intervention is justified only when there is market failure: the textbook cases are externalities, public goods and non-competitive market structures.

This definition was a static one, based on a optimisation framework in perfect markets from which deviations had to be remedied to restore an allocative optimum. It continued with certain simplifying assumptions about micro-level technological phenomena. 33 The 'market friendly' strategy depended crucially on a setting where enterprises optimized and industries deepened and developed without engaging in a complex and risky learning process with enormous externalities. Without a realistic micro-level theory of the development of industrial capabilities, however, it is not possible to understand what happened in the more industrialized NIEs (and Japan).

In these models, as in earlier ones, the question of where national advantages come from is not directly addressed, even though strategic approaches point to important ways in which differential learning capabilities at the firm level may have determined trade patterns, and where history and policy may have been critical in the development of such capabilities. Since there are no longer any simple or general presumptions in favour of neoliberal policy prescriptions, political economy arguments are used to strengthen the neoliberal case.

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