Technological Development and State Intervention: A Study of the Brazilian Capital Goods Industry

Fabio S. Erber, Thesis for the Degree of Doctor of Philosophy at The University of Sussex

This dissertation addresses the discussion of the problem of developing local design capacity in the capital goods industry in a less developed country (LDC) in the light of the possibility of using licensing from the more advanced countries (ACs), as well as the relationship of such development to State policies, focusing on the Brazilian case. The structure of presentation is as follows: In Chapter II, Fabio discuss the choice of design strategy by the capital goods enterprises – developing its own design or using another enterprise’s design – from the point of view of the firm. Chapter II analyses first the different requirements the design of capital goods must satisfy, indicating the main trends in such requirements, based on an extensive reading of engineering literature and discussions with engineers. It then analyses the different stages of the design process and the resources needed for each stage, comparing licensing with the development of designs by the firm (which the author calls, for short, self-reliance). It is an attempt, albeit limited, to open the R&D “black box” for the case of capital goods. Chapter III presents a theoretical discussion of the reasons why the State may support design activities in the capital goods industry, developing first the general arguments from the economic literature on R&D (e.g. Nelson, 1959; Arrow, 1962) for such support, and then discussing the licensing alternative in comparison with local development, focusing specifically on the case of the LDCs. Chapter IV analyses the results of the interviews, interpreting them in the light of the argument developed in the second Chapter. Chapter V discusses the main economic policies affecting the choice of design strategy of the Brazilian capital goods enterprises and the policy-making for the industry in detail, covering the period from the mid-fifties when the main features of the present structure of the industry were established, until approximately 1976. The chapter also includes the important changes in policies that were introduced after the interviews, some of which stimulated local design in the Brazilian capital goods industry. Besides using secondary sources, this chapter draws also on a study made at FINEP on the purchasing policies of State Enterprises in Brazil, presenting original material, as well as from Erber´s experience at FINEP and at National Development Bank (BNDE). Finally, Chapter VI presents an interpretation for the State policies and the strategy of the enterprises interviewed, based on the comparison between the reasons of State intervention discussed in Chapter III and the main traits of the Brazilian pattern of development. It concludes with a discussion of the possible implications of the recent policies adopted for the development of design capacity in Brazil.

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