Transplanting Economic Development: Don't Pick Winners, Buy Losers!

17 Pages Posted: 24 Sep 2014  

Dan Ciuriak

Ciuriak Consulting Inc.; C.D. Howe Institute; Centre for International Governance Innovation (CIGI); BKP Development Research & Consulting GmbH

Derk Bienen

BKP Development Research & Consulting GmbH; Addis Ababa University

Date Written: September 16, 2014

Abstract

This paper addresses the issue of how developing economies acquire new capabilities and the role of industrial policy in facilitating the technology acquisition that underpins these new capabilities. We focus on the role of the firm as aggregator of production technologies, business methods, market intelligence, and tacit human capital (“know-how”), and draw a link between the disappointing pace of diversification and technology upgrading in many developing economies to the low numbers of formal firms capable of operating at scale and of entering global markets. We equate the acquisition of new capabilities with the establishment of new firms and consider the alternative modes of acquiring new firms – build, “borrow” (attract FDI), and buy. Given the self-evident difficulties many economies have in utilizing the “build” and “borrow” modes, we develop a case for considering the scarcely utilized “buy” mode. Under this approach, developing countries would acquire the assets (and management) of technologically interesting plants/firms, which failed in their original environment, but, transplanted to developing country environments, would represent significant technology upgrades for the developing country. Thus, rather than “picking winners” to drive development, we consider the efficacy of “buying losers”. We provide examples of the successful use of this mode and discuss its potential use as a strategic approach to accelerate technological upgrading and industrial diversification in the developing world.

Keywords: economic development, technological advance, catch-up growth, transplants, incubators, picking winners, industrial policy

JEL Classification: F21, F63, G34, L52, O14, O17, O25, O33, O43, O47

Suggested Citation

Ciuriak, Dan and Bienen, Derk, Transplanting Economic Development: Don't Pick Winners, Buy Losers! (September 16, 2014). Available at SSRN: https://ssrn.com/abstract=2500419 or http://dx.doi.org/10.2139/ssrn.2500419

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

BKP Development Research & Consulting GmbH ( email )

Romanstrasse 74
München, 80639
Germany

Derk Bienen

BKP Development Research & Consulting GmbH ( email )

Jutastr. 14
München, 80636
Germany

Addis Ababa University ( email )

King George VI St
Addis Ababa, 1000
Ethiopia

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