Perilous Evolutionary Paths of Industrial Policy in a Developmental Context: Evidence from the Chinese Medical Industry

Industrial policy, as one of the most potent weapons employed by governments, is recommended to adhere to the principles of high relatedness and high economic complexity, which can minimize risks and maximize returns. However, this approach may not be optimal in developing countries with poor industrial bases, limited innovative capabilities and weak institutional frameworks. Based on relatedness and economic complexity, this study illustrates the evolution paths of industrial policy in China and identifies underlying influencing factors deciding the patterns of policymaking. Different from developed countries, it takes several steps for developing countries to reach the final target, the smart specialization approach, instead of one‐step jumping. Moreover, industrial policy is not always the panacea, and the effects of industrial policy vary depending on local contexts. In sum, this study extends research towards the complex co‐evolution process of policy and industries in developing countries and provides more insights for policymaking.