Sectoral System of Innovation and Technological Upgrading Strategies

Abstract

Latecomer sectors in late-industrializing economies follow different patterns in their development and growth processes, which largely determine the share acquired from the global value chain. The development and growth process of the sectors are generally argued to be the result of the interaction of a macro-level specific institutional context (e.g., system of intellectual property rights, labor market regulations) and micro-level firm strategic choices. In this study, the authors argue that meso-level sectoral systems also play a critical role in the development and growth process of latecomer sectors. Accordingly, they attempt to integrate three theoretical perspectives: Resource-Based View (RBV) of the firm, Sectoral System of Innovation (SSI) perspective, and Technological Capability Perspective (TCP) for late industrializing economies to explain the relative developmental failure of the Turkish automotive industry compared to other successful latecomer industries such as the South Korean automotive industry. In light of theoretical framework, the authors investigate sectoral technological upgrading trajectory and compare Korean and Turkish automotive industry development paths using the case study method. They conclude by discussing how a multilevel framework that takes into account the systemic factors can guide research on sectoral development in late-industrializing countries. In light of a comparative historical analysis of development of the Turkish and Korean automotive industries, it is argued that a pace of industrial transformation can be accelerated by multilevel proactive state intervention.