Production fragmentation and the evolution of industrial capabilities

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

ACDE Seminar

Date & time

Tuesday 13 December 2016
2.00pm–3.30pm

Venue

Coombs Seminar Room E, Coombs Building 9, Fellows Road, ANU

Speaker

Russell Thomson, Swinburne University.

Do national production capabilities evolve from existing capabilities, or do they emerge de novo? Hidalgo et al.’s (2007) highly influential theory of the Product Space contends that new industrial capabilities are most readily acquired if they are technologically adjacent to existing capabilities. The theory suggests primary producing countries can face highly limited opportunities for industrial upgrading while a country which begins producing simple labour intensive manufacturing has better prospects for moving into high-tech products. It follows that the theory supports selective intervention to promote supply-side capabilities. We argue that these propositions are not consistent with specialisation opportunities within global production networks. Evidence suggests that a primary producing country can join global production networks through trade and investment policy reforms, if the other preconditions are satisfied. At the same time, upgrading within production networks may be more difficult. In this paper we measure the extent to which existing capabilities predict the evolution of national industrial capacities in a manner consistent with the Product Space theory of Hidalgo et al (2007). We also examine the role of production sharing in developing capabilities in areas distant from existing national strengths.

Associate Professor Russell Thomson specialises in the economics of science, technology and innovation. He has published in leading international journals including the Review of Economics and Statistics, Strategic Management Journal and American Journal of Agricultural Economics. In addition to academic research Associate Professor Thomson regularly undertakes applied policy research for clients including the Department of Industry, Innovation and Science, Foreign Affairs and Trade and the Victorian Department of Treasury and Finance. He holds a PhD in Economics from Australian National University and a BSc (Mathematics) from the University of Melbourne.

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