Rethinking Industrial Policy for the Digital, Green, and Geopolitical Transitions

This chapter rethinks industrial policy for latecomer economies facing simultaneous digital, green, and geopolitical transitions. It argues that traditional models of industrial policy, based on static planning and donor-driven reform, are ill-suited to today’s rapidly changing environment. Using the Developmental Network State (DNS) framework, the chapter proposes adaptive industrial policy as an institutional infrastructure for learning, coordination, and strategic upgrading. It examines three global transformations—digitalization, the green transition, and geopolitical restructuring—and their combined implications for the Western Balkans. Each exposes structural weaknesses such as fragmented governance, low capability bases, and external dependence, while also opening opportunities for new forms of regional integration and innovation. The chapter highlights the role of adaptive governance instruments, including cross-sectoral task forces, transformation units, and structured pilot programmes, as mechanisms for managing complexity and uncertainty. It also explores how donor alignment, diaspora engagement, and collaborative learning can enhance policy ownership and institutional resilience. The chapter concludes that successful industrial transformation depends not on centralized control or imitation of external models but on the ability to build learning-oriented governance systems that adapt, coordinate, and evolve within the constraints of late development.