Industrial Policy

The 2008 crisis has highlighted the need for a more active industrial policy, and the lockdown and the collapse of supply chains due to the 2020 pandemic only reinforced this process. In this chapter, we show that the effectiveness of practical industrial policy solutions requires taking into account their geographical and sectoral aspects. Of particular importance are activities in the area of R&D support policy, which not only contribute to increased competitiveness of industry, but also determine the possibility of its transformation toward climate neutrality, especially in the renewable energy sector. We are well aware of the potential threats associated with the spending of public funds as they may interfere with the free market, but with an appropriate industrial policy these actions are likely to have more beneficial than potential negative effects. Taking into account the areas where firms source their inputs and the areas where they sell their products and services (they may do both locally and globally), we propose categorizing firms into four groups or cells. For each category, we propose a catalog of industrial policy tools. In our opinion, only actions that reflect the specificity of firms stand a chance of delivering the planned results. We suggest a generic way, from an institutional economic point of view, to analyse government policy in general and industrial policy in particular.