Macro and Micro Foundations for Technology Upgrading and Innovation

Technological upgrading and innovation is necessary for long-term economic development. Nonetheless, creating the conditions that allow technological upgrading and innovation to occur is far from simple, especially for developing economies. While policymaking may create important macro- and meso-incentives for economic agents, it is at the micro-level that policy effectiveness can truly be verified. In this chapter we analyze the recent development of the Brazilian shipbuilding sector where an entire institutional setting was put in place to boost technological and industrial development. We investigate the policies and results by contrasting the macro-, the meso- and the micro-perspectives. Though policies put in place gave an initial boost to the sector, coordination uncertainties and critical bottlenecks at the micro-level generated high capability building costs that precipitated the subsequent failure of the shipbuilding industry to catch up and to upgrade sufficiently in order to really become internationally competitive.