Path-dependent productive specialization: Should prematurely deindustrialized countries shift to a KIBS export-led strategy?

Abstract

The transformation of the services sector and the deindustrialization of most economies have increased support for a KIBS export-led growth strategy for premature countries. However, the literature on deindustrialization argues that premature countries develop non-dynamic services mostly, which casts doubt on the viability of that strategy. This article theoretically and empirically analyzes this hypothesis. Using evolutionary and neo-Schumpeterian arguments, we point out the relevance of the path dependency of the productive structure throughout the complex transition from an industrial economy to a service economy. The empirical section analyzes the importance of the previous industrialization of a country to be a successful KIBS exporter. It finds that countries that achieved a high level of industrialization before deindustrializing are more likely to export KIBS than those countries that did not achieve advanced industrialization. Science-based and specialized suppliers manufacturing are of key importance for the development of KIBS capabilities.