Local-foreign technology interface, resource-based development, and industrial policy: how Chile and Malaysia are escaping the middle-income trap

A. Lebdioui*, K. Lee, C. Pietrobelli

*Corresponding author for this work

    Research output: Contribution to journalArticleAcademicpeer-review


    This paper starts by showing that Chile and Malaysia are on the path of escaping the middle-income trap in terms of their income level relative to that of the USA. In contrast to the conventional view, we find that the leading export sectors are not manufacturing (such as electronics) in Malaysia or mining alone in Chile. Instead, the engines of growth have been (1) resource-based sectors (petroleum, rubber and palm oil) in Malaysia; and (2) non-mining resource-based sectors (salmon, fruits, wine and wood-based) in Chile. Furthermore, the sustained growth of these sectors is not the result of free-markets, as frequently argued, but also of specific industrial policy measures, that have enabled the accumulation of productive and innovation capabilities through R&D support, fiscal incentives, export assistance, and quality control. We also find that the emergence of locally-controlled firms has been an important aspect of this long-term success, although the sources of the initial learning included foreign actors and FDI. The cases of Chile and Malaysia consequently show the possibility of escaping the middle-income trap not through manufacturing but instead through resource-based development. Such strategy differs from the so-called short cycle technology-based catch-up by the East Asian tigers and from the unsustainable commodity rent-extraction in resource-rich countries, but is consistent with the view that emphasizes the need to specialize in sectors with low entry barriers, and to promote investments in innovation and technological capabilities.
    Original languageEnglish
    Pages (from-to)660-685
    Number of pages26
    JournalJournal of Technology Transfer
    Issue number3
    Early online date20 Jun 2020
    Publication statusPublished - Jun 2021

    JEL classifications

    • o33 - "Technological Change: Choices and Consequences; Diffusion Processes"
    • o32 - Management of Technological Innovation and R&D


    • Chile
    • Electronics industry
    • Fiscal incentives
    • Foreign technology
    • Industrial policies
    • Industrial policy
    • Innovation capability
    • Malaysia
    • Middle incomes
    • Middle-income trap
    • Palm oil
    • Petroleum industry
    • Quality control
    • Rent extractions
    • Resource-based development
    • Salmon
    • Technological capability
    • Technology-based


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