Skip to main content

Industrial policy

Industrial Policy

warning

This is an early draft and isn't yet up to our standard. You can contribute improvements.

Definition & Summary: Aligning with or influencing government investment and policy in an industry to accelerate its growth . In simpler terms, it's leveraging state support -- such as funding, infrastructure, or protection -- for strategic advantage. This can be a national-level accelerator for certain technologies or sectors.

Detailed Explanation: The origin of this concept is government-driven strategy: countries often choose sectors to promote (e.g., space, semiconductors). For a company, the strategy is to ride that wave -- or even steer it if possible. The purpose is to gain resources or legitimacy that would be hard to muster alone. Key principles: know the political agenda and frame your goals to match it ("what's good for my company is good for the country/region"). By doing so, you might get R&D grants, favorable regulations, or large procurement contracts. This accelerates evolution by injecting public funding and urgency (e.g., the government might push for quick progress for national interest).

Real-World Examples:

  • Historical: The aerospace industry in many countries grew via industrial policy -- e.g., Boeing and Airbus benefited from huge government defense and aviation contracts (and in Airbus's case, direct government co-ownership and subsidies in early years). This policy-driven infusion of capital and guaranteed markets accelerated aerospace innovation and scaled those companies much faster than private demand alone would have (Wardley notes Salesforce possibly benefiting from such plays too).

  • Contemporary: China's EV (Electric Vehicle) industry is strongly backed by industrial policy. The government identified EVs as strategic, provided subsidies to EV manufacturers, funded charging infrastructure, and enforced quotas. Companies like BYD and NIO expanded rapidly under this protective, nourishing environment -- an accelerator courtesy of policy. Now they're at global-scale competition level likely years earlier than if purely market-driven.

  • Hypothetical: A renewable energy startup aligns its product development with a government's green infrastructure plan. It partners on a publicly funded pilot project for wave energy. Through this, it gets access to testing facilities and funding that drastically speed up its tech development. If successful, government promises to be the first big customer (for coastal power). This industrial policy backing de-risks and accelerates the startup's growth, outpacing competitors that rely solely on private capital.

When to Use / When to Avoid:

  • Use when: Your industry is targeted by government for growth or transformation (e.g., healthcare IT, defense tech, green energy), and you can position yourself to capitalize on that support. Especially if high capital barriers exist -- policy support can provide capital or guarantees. Also use if you can influence policy (larger firms lobbying for subsidies or standards in their favor).

  • Avoid when: The strings attached outweigh benefits -- sometimes public funding means heavy oversight or constraints. If policy winds shift (new administration), you could be stranded. Startups often avoid depending on slow bureaucratic moves unless in deeptech because it can be a feast-or-famine risk. Also avoid if it distorts your strategy too far from market signals (some companies chase grants but fail to ever appeal to real customers).

Common Pitfalls:

  • Overreliance: Becoming essentially a government contractor can leave you vulnerable if budgets cut or policy changes. Also, lack of focus on commercial competitiveness (the "subsidy trap").

  • Bureaucracy & delay: Working through government programs can be slow and rigid, possibly slowing your agility.

  • Public scrutiny: Accepting public funds means failures are very visible and can attract criticism (and success might attract competitors lobbying that you have unfair advantage).

Related Strategies: Lobbying (the act of influencing industrial policy to begin with), Market Enablement (government often enables markets via policy -- if you align, you join that enablement), Standards Game (government might push standards; if you're part of that, it's akin to this strategy).

Further Reading & References:

  • Wardley, S. -- note on "Industrial Policy: Government investment in a field." . Suggests how external climate (policy) can be leveraged as part of strategy.

  • InfoQ Interview with S. Wardley -- touches on examples like Chinese industrial policy in tech and how it shifts competitive landscapes (context: wardleymaps and climatic patterns).

  • Case Study: "The Rise of Airbus" -- detailing how European industrial policy (consortium of governments) accelerated Airbus's evolution to challenge Boeing (through subsidies, joint development). This exemplifies industrial policy in action.