Public-Private Institutions As the Foundations for Innovation and Firm Upgrading in Emerging Market Countries: How Latin American Firms Might Leap into East Asian Productivity

How can emerging market societies accelerate the ability of their firms to innovate and thus compete in international market in a sustainable fashion?  Much of the work on this issue focuses on two ways that domestic firms can learn and improve their dynamic capabilities – via their ties to MNCs as suppliers or via their ties to one another in local cluster. These sources are not sufficient, as neither the critical knowledge nor the adequate learning relationships are forthcoming.  Instead, my research shows first how local firms need access to a variety of applied or experiential knowledge resources, not simply pioneering technology.  Second, I find that certain public-private institutions can act as vital social and knowledge bridges to facilitate the creation and dissemination of such knowledge.  These institutions, in turn, have the capacity to reshape the ties of old clusters and the relationships with MNCs. The context for this work is Latin America, in many ways a critical or least likely case.  Compared to their peers in East Central Europe and East Asia, small and medium size firms in Latin America account for the vast majority of manufacturing employment and output but lag tremendously in terms of productivity, technological upgrading, and participation in global value chains. In turn, insights into the types of knowledge diffusion and institutional constellations that contribute to process and product upgrading in these firms can have broad ramifications for suppliers and SMEs in the developing world.