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Catch-up strategies and the latecomer effect in industrial development

Scholarly attention to the issue of world industrial development now spans at least 60 years – if we go back just to debates over the ‘Big Push’ of Paul RosensteinRodan or to the strategy of construction of forward and backward linkages as emphasised by Albert Hirschman. The great Russian economic historian, Alexander Gerschenkron, outlined an approach to development based on capturing the ‘latecomer effect’ in the 1950s. My purpose in this article is to provide a review of development debates and concepts – such as forward and backward linkages – that is informed by strategising concepts in the modern business literature, as well as by the experiences of development over the past 25 years that post-date these early intellectual contributions. Strategies have a goal or purpose, and the principal purpose of development is to close the gap between the advanced and what Gerschenkron called the ‘backward’ countries. Various institutional and strategic measures have been devised by successful developing countries, permitting some of them – such as those from East Asia – to break into the ranks of relatively advanced countries. The issue is to what extent these institutions and strategies that worked in the post-war period will be expected to work, with suitable modification for new conditions, in the current period. To what extent do the great debates over economic development, which took place 50 and 60 years ago, remain relevant to the task today? To what extent do the hypotheses concerning latecomer development, formulated by Gerschenkron in 1952 for the case of latecomer countries in Europe industrialising in the 19th century, remain relevant to the needs of African or Latin American or Central Asian countries today? These are the issues addressed in this article. The situation facing countries and firms that arrive late on the industrial scene is one that combines apparently hopeless drawbacks, difficulties and inadequacies with advantages that flow precisely from being ‘late’ and not having to go through all the previous steps that incumbents had to endure. It is convenient to call firms in this position ‘latecomers’ – extending the usage introduced by Gerschenkron to the case of firms. Latecomer firms, like latecomer nations, are able to exploit their late arrival to tap into advanced technologies, rather than having to replicate the entire previous New Political Economy, Vol. 11, No. 3, September 2006