Sticky industrial policies and divergent value chain upgrading patterns: lessons from Querétaro and Jalisco, Mexico

In proposing industrial policies to promote development-enhancing upgrading, both the Middle-Income Trap (MIT) and Global Value Chain (GVC) literatures imply a “technocratic” approach that matches a given technical challenge to the right policy instrument. This paper suggests that, apart from the technical demands of the problem at-hand, it is also necessary to observe how governments at the subnational level practice path-dependent “sticky” styles of industrial policy that consistently favor some policy tools and approaches over others. Drawing upon four industry cases in the Mexican states of Jalisco (electronics, and information and communication technologies) and Querétaro (automotive and aerospace), we identify two distinct local industrial policy styles, as the former state deployed a Business-guided style while the latter relied upon a State-guided alternative. These styles, in turn, were each biased towards some forms of upgrading over others, leading to two main conclusions: first, that local policy styles must be taken into account to understand how deviations from technocratic policy selection appear. And second, that these styles can generate long-term impacts on the kinds of industrial upgrading observed.