Industrialization as Capacity Building: Skills, Technical Progress, and Technical Capabilities
Many confuse industrialization with the construction of factory buildings. In fact, it is primarily a skill accumulation and a capacity-building process with a significant intangible aspect; more than hardware, industrialization resembles software. Succes
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Industrialization as Capacity Building: Skills, Technical Progress, and Technical Capabilities
Within the industrial layer, the industrial firm is a key determinant of successful industrialization.1 Consequently, the design of the industrial policy should consider market failures arising from firm capabilities and should be selectively applied.2 Industrialization is primarily a process of capacity building (of the industrial layer) with skill accumulation, technical progress, and physical infrastructure and superstructure as key ingredients (Fig. 10.1). Skill requirements rise as industrialization proceeds (middle panel of Fig. 10.2). That is why, in some countries such as Germany and Sweden, vocational education and the manufacturing sector developed in tandem or the former preceded the latter. A successful industrialization process, which consists of forming an internationally competitive industrial layer, goes hand in hand with ‘technical progress’ (bottom panel of Fig. 10.2) in addition to simple capital deepening and the ensuing factor accumulation, which is only a visual aspect of industrialization, consisting of factory buildings and machinery. Technical progress means getting more outputs from the same amount of inputs in the country. That is, technical progress means more value added (more GDP) from the same amount of labour (population); a country with higher technical progress compared to another will command a higher per capita GDP.
© The Author(s) 2018 M. A. Yülek, How Nations Succeed, https://doi.org/10.1007/978-981-13-0568-9_10
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Superstructure (buildings, machinery etc)
Individual and institutional learning outcomes
Physical infrastructure
Educational system, Institutions
Human and institutional capacity
M. A. YÜLEK
Physical capacity
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Fig. 10.1 Components of industrial capacity Stages of Stage I Industrialization Import and Use Machinery Skill Requirements
Stage II Technology Adoption (Better Use of Machinery)
Stage II Technology Adoption (Servicing and Repairing Skills)
Stage III Imitation
Stage IV Innovation
High
Low Technical Progress
Fig. 10.2 Stages of industrialization, skills, and technical progress
Technical progress, in turn, is driven by technical capabilities, requiring critical skills (Table 10.1 and Fig. 10.3). The industrial layer accumulates technical capabilities to manufacture new, technologically more developed products or to manufacture the same products with new processes more efficiently. Following Radošević and Yörük (2015: 5), the taxonomy of technical capabilities relating to the industrialization process can be divided into three categories (Fig. 10.3). Firstly, the ‘production capabilities’ are
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Table 10.1 Technical capabilities: primary features and necessary skills
Primary skills Absorptive skills Manufacturing skills: ability to manufacture world class products R&D skills Features Learning-by-doing spillovers Imitation Absorption Innovation: product and process improv
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