Governing Capability Accumulation

This chapter introduces the Developmental Network State (DNS) as a governance framework for building capabilities in fragmented, low-capacity, and donor-dependent contexts. It reconceptualizes governance as an adaptive, networked process rather than a hierarchical or market-driven one. Drawing on developmental state theory, innovation systems, and adaptive governance, the DNS integrates three interdependent functions: learning, coordination, and embeddedness. These functions enable states to navigate uncertainty and foster cumulative capability building. The chapter situates DNS conceptually within debates on experimentalist governance, political settlements, and dynamic capabilities, and contrasts it with both the East Asian developmental state and the Washington Consensus. Using examples from Western Balkan economies, it demonstrates how DNS principles can address persistent capability traps through iterative experimentation, multi-actor coordination, and trust-based collaboration. It outlines practical mechanisms such as sectoral councils, innovation funds, and cross-ministerial task forces that institutionalize feedback and foster system-wide learning. The chapter concludes that the DNS provides a realistic governance model for post-socialist and latecomer economies, enabling them to transform fragmentation into a source of adaptive capacity and to align diverse actors around shared missions for technological upgrading and sustainable development.