Kenneth L. Kraemer , Vijay Gurbaxani and John Leslie King [1992, Public Administration Review, 52(2): 146-156]
The last 20 years have seen the emergence of several Asia-Pacific countries as significant economic powers. Notable in the accomplishments of these countries are consistent and rapid increases in the level of industrialization, particularly in high-technology industries and in the application of high technology to tradition industries (Amsden, 1989). The theoretical links between technical innovation, industrialization, and economic growth have been established for many years, dating at least from Schumpeter (1935), and argued forcefully ever since (Salter, 1960; Schmookler, 1972; David, 1975). The question of what gives rise to technological innovation, and thence economic growth, has been widely debated. Although the verdict is not yet in on the complete package of factors involved, it is clear that simple neoclassical economic theories of factor price differentials are insufficient to explain innovation, and that social institutions play key roles (Rosenberg, 1982).
A pressing public policy question, particularly since the advent of intense economic competition from Asian countries in the 1980s, has been whether the institutions of government play a necessary and special role in industrial development and technological innovation. This question has been debated at length since the early 1970s (Pavitt, 1971). The debate has become more heated in recent years, with prominent economists arguing for and against government involvement and the creation of an industrial policy (Thurow, 1984; Stiglitz, 1987). It has also received increased attention in theoretical and empirical research by various scholars (Amendola and Gaffard, 1988; Dosi et al., 1988; Freeman, 1987). In particular, empirical studies of the remarkable progress of Japan and other Pacific Rim countries have cited government policy as a major factor in that success (Johnson, 1982; Freeman, 1987; Amsden, 1989). These arguments are compelling, but much remains to be done before the empirical case incontrovertly linking industrial policy to economic growth is established.