Upgrading in Spain : an institutional perspective

• Main Author: García Calvo, Angela
• Published: London School of Economics and Political Science (University of London) 2013
• Subjects: 330.946; JN Political institutions (Europe)
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.617732

In the early 1990s, Spain faced the risk of losing the market for low-cost manufacturing outputs to Eastern Europe, and the threat of losing control of its complex service sectors to more sophisticated competitors from Western Europe. Most industries had few alternatives other than to upgrade. By the late-2000s, Spanish firms in complex services like Banking and Telecommunications were amongst the most efficient, profitable, and sustainable in the world but most manufacturing sectors had not achieved a comparable outcome. My thesis explains these changes in the Spanish productive structure through an analysis of the institutional structure beneath them. I argue that upgrading in Spain’s complex services was enabled by Peer Coordination (PC), a non-hierarchical variant of relational coordination based on the presence of public-private interdependencies and direct business-state interactions. Under PC, firms in complex services contributed to the fulfilment of public policy objectives in exchange for sector-specific advantages. PC enabled firms in these sectors to undertake significant restructuration that enabled them to reach the efficiency frontier in their industry. Liberalisation did not unravel PC in Banking and Telecommunications because national-level interdependences remained a structural feature of the two sectors. By contrast, PC imposed constraints on capital and skill intensive manufacturing sectors that required patient capital and stable demand to develop new complex products. Firms in these types of sectors found it difficult to secure capital and stable demand on their own, and the state had limited capacity to articulate top-down industrial strategies that could facilitate access to such resources. As a result, firms in capital and skill intensive sectors struggled to upgrade. In exceptional cases, regional institutional structures, based on forms of coordination other than PC, were able to provide support for these underserved sectors. In this regard, regional institutions complemented the national ecosystem and contributed to upgrading.