Working Paper: CEPR ID: DP16725
Authors: Eric A. Verhoogen
Abstract: In principle, firms in developing countries benefit from the fact that advanced technologies and products have already been developed in industrialized countries and can simply be adopted, a process often referred to as industrial upgrading. But for many firms this advantage remains elusive. What is getting in the way? This paper reviews recent firm-level empirical research on the determinants of upgrading in developing countries. The first part focuses on how to define and measure various dimensions of upgrading --- learning, quality upgrading, technology adoption, and product innovation. The second part takes stock of recent micro-empirical evidence on the drivers of upgrading, classifying them as output-side drivers, input-side drivers, or drivers of know-how. The review concludes with some thoughts about promising directions for research in the area.
Keywords: firm-level upgrading; developing countries; industrial upgrading; microempirical research
JEL Codes: O1; L2; F1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exporting to richer markets (F10) | quality of goods produced by firms (L15) |
| access to high-quality inputs (L15) | product quality (L15) |
| reductions in import costs for high-quality inputs (F14) | product quality (L15) |
| export demand (F10) | quality and wages (J31) |
| local demand from multinational corporations (F23) | upgrading outcomes (J24) |
| market constraints (L13) | lack of upgrading (L15) |
| demand conditions in international markets (F49) | higher-quality varieties (L15) |