Globalization, state, and innovation: An appraisal of networked industrial policy

One of the most pressing questions in comparative social science is whether, and to what extent, the rapid advance of globalization has negatively affected states’ capacity to initiate successful economic and social policies. This paper puts forward the notion that states continue to be relevant because they have the potential to build and sustain networks of production and learning, which are sorely needed in the current era of globalization when productive arrangements are dominated by decentralized production networks. The paper argues that government efforts aimed at building and sustaining such networks, labeled as “networked industrial policy,” have become predominant. The study features a series of fixed‐effects time series cross‐section (TSCS) regressions linking innovation performance to several networked industrial policies in 17 countries from western and central Europe. The study finds that several of the policies have a robust effect on innovation performance and technology competitiveness, even after controls are included. These findings constitute considerable support for the notion of networked industrial policy. However, the results of the present study must be treated less as a definitive answer to the research question and more as a first step in an ongoing research process.