Productive Capabilities Indicators for Industrial Policy Design

Antonio Andreoni
UNIDO Working Paper Series

The debate around industrial policies is increasingly shifting from ‘why’ industrial policies to ‘what’, ‘when’ and ‘how’ these can be more effectively designed and implemented. Paradoxically, although industrial policies are by definition ‘selective policies’, we still lack an appropriate set of industrial diagnostic tools which support governments in the design and implementation of ‘selective measures’ aimed at the sectoral restructuring and technological upgrading of their country. The likelihood of governments achieving a specific set of macro- policy goals (i.e. structural change) depends on their capacity to understand, monitor and influence productive capabilities dynamics underlying structural change as well as on the technological upgrading of the overall economic system. Productive capabilities refer to personal and collective skills, productive knowledge and experiences embedded in physical agents and organizations that firms need to perform different productive tasks; they need to furthermore adapt and implement in-house improvements across different technological and organizational functions. This paper provides a theoretical framework for the analysis of productive capabilities and their role in structural change dynamics. On this basis, the paper critically reviews various synthetic indicators adopted by international organizations and researchers in cross-country comparisons of productive capabilities, industrial as well as of competitive performance. Finally, by identifying the methodological problems and informational limits of the various indicators that are currently available and the need to adopt multiple informational spaces, the paper introduces a new methodology for mapping the different drivers of structural change dynamics and for measuring productive capabilities at the national, industry and firm level.