Smart Specialization With Short-Cycle Technologies and Implementation Strategies to Avoid Target and Design Failures

Given that latecomer firms and economies are “resource-poor late entrants,” they require not only “capability building,” but also “smart specialization” in a sector where they can receive better growth prospects and may survive by competing effectively with the incumbents. This chapter proposes the cycle time of technologies as a criterion for smart specialization. This criterion is arguably better than other criteria that are based on product spaces, and complements the latent comparative advantage idea of Lin (Lin J.Y., 2012. New Structural Economics: A Framework for Rethinking Development and Policy. World Bank Publications, Washington DC.). Qualified middle-income countries have comparative advantages in sectors with a short-cycle time because short-cycle technologies imply that the dominance of the incumbent is often disrupted and new technologies tend to emerge. This study also proposes several strategies for implementing this criterion; essentially, public interventions should avoid not only targeting, but also design failures by involving private firms from the beginning.