Institutions and the Process of Industrialisation: Towards a Theory of Social Capability Development

Chang, Ha-Joon; Andreoni, Antonio

Abstract

Institutions were at the foundation of development economics, when it was first established as a separate branch of economics. Indeed, one important impetus behind the emergence of development economics was the recognition that developing countries have socio-economic institutions that are different from the ones that exist in the industrialised countries. The chapter provides a long term analytical perspective on the theory of institutions in economic development – from old institutionalism to new institutional economies – and critically assess todays’ mainstream view on institutions and economic development. Specifically, we engage with four main analytical issues, that is, (i) the definition of institutions, (ii) the conceptualisation of the role of institutions, (iii) the theory of the relationship between institutions and economic development, and (iv) the theory of economic development. Building on this critical review, the chapter then highlights the importance of focusing on the variety of types, forms and functions that institutions have taken historically, and even more critically on their collective nature. In this respect, we build on Abramovitz’s concept of social capability understood as “tenacious societal characteristics” embedded in productive organisations, as well as a variety of political, commercial, industrial and financial institutions. The chapter develops the idea of social capability by analysing and providing historical examples of six specific types of institutions and their role – forms and functions – in the industrialisation process. The institutional taxonomy includes six types of institutions: (i) institutions of production, (ii) institutions of productive capabilities development, (iii) institutions of corporate governance, (iv) institutions of industrial financing, (v) institutions of industrial change and restructuring, and (vi) institutions of macroeconomic management for industrialisation. The chapter concludes by emphasising the importance of developing productive capabilities, not just at the individual or the firm level but also at the sectoral and social level, in the process of economic development, and especially industrialisation.

Citation

Chang, H.-J., & Andreoni, A. (2019). Institutions and the Process of Industrialisation: Towards a Theory of Social Capability Development. In M. Nissanke, & J. A. Ocampo (Eds.), The Palgrave Handbook of Development Economics: Critical Reflections on Globalization and Development (409-439). Palgrave Macmillan. https://doi.org/10.1007/978-3-030-14000-7_12

• Acceptance Date: Mar 21, 2025
• Publication Date: Aug 28, 2019
• Deposit Date: Jan 4, 2019
• Publicly Available Date: Oct 31, 2019
• Publisher: Palgrave Macmillan
• Pages: 409-439
• Book Title: The Palgrave Handbook of Development Economics: Critical Reflections on Globalization and Development
• ISBN: 9783030139995
• DOI: https://doi.org/10.1007/978-3-030-14000-7_12
• Keywords: Institutions,; Economic development,; Industrialisation,; Social Capability,; Institutional taxonomy
• Related Public URLs: https://www.palgrave.com/gp/book/9783030139995