Industrial policy and strategy: a contextual perspective and descriptive typology

Abstract

Defining what “industrial policy” is, and correspondingly defining and differentiating “industrial strategy” from this legacy term, is of analytic consequence to understanding what these concepts mean in the current public and business policy debates taking place in the world’s developed and developing economies. Of import to these debates, however, is accurately understanding the role of industrial strategy and its symbiotic relevance to industrial policy. In this paper, the author develops a typology allowing the analyst to utilize five key components—governance approach, public research and development investment, public incentives, public disincentives, and industry/sectoral participation—to evaluate the proposed national approach (vertical or horizontal) to industrial strategy. To illustrate this industrial strategy typology, the author uses examples from the People’s Republic of China (vertical) and the USA (horizontal). Recent legislation has moved the USA to a balanced approach of vertical and horizontal industrial strategies (incorporating both central planning and market-based approaches).