The political economy of capabilities accumulation: from catching-up lessons to transformative industrial policies

Mario Cimoli, Giovanni Dosi and Joseph E. Stiglitz

Chapter 2 in The New Role of the State for Transformative Innovation, 2026, pp 20-43 from Edward Elgar Publishing

Abstract: This chapter explores the political economy of capabilities accumulation, emphasizing the pivotal role of industrial policies in fostering economic development and technological innovation. Drawing from historical and contemporary cases, the authors argue that industrial policies—broadly encompassing trade, technology, education, and investment strategies—are fundamental to both “catching-up” economies and advanced nations. Historical examples such as the industrialization of Germany, the USA, and more recently China, underscore the importance of state-led initiatives in knowledge accumulation and institutional engineering. The chapter critiques the neoliberal “Washington Consensus” and its emphasis on market fundamentalism, highlighting its failures to address development challenges effectively. Instead, it advocates for discretionary, context-sensitive policies to promote dynamic learning, innovation, and industrial transformation. Key themes include the co-evolution of technological capabilities with institutional frameworks, the limitations of intellectual property regimes in fostering innovation, and the necessity of mission-oriented public programs to address contemporary challenges such as climate change and inequality. The chapter concludes that industrial policies remain indispensable for achieving sustained growth and global competitiveness in both developed and developing economies.

Keywords: Industrial Policy; Capabilities Accumulation; Economic Development; Technological Innovation; Political Economy; Globalization and Trade (search for similar items in EconPapers)
Date: 2026
ISBN: 9781839100253
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