Industrial Policy and Its Role in Driving Structural Transformation in Developing Economies

Abstract

This article explores the role of industrial policy in driving structural transformation in developing economies, a topic that has gained renewed attention amid shifting global economic dynamics and development challenges. The main research question asks how industrial policy contributes to economic upgrading and what factors determine its success or failure in different national contexts. Through a systematic literature review, the study synthesizes evidence from peer-reviewed journal articles, institutional reports, and key academic works. The review identifies recurring themes related to institutional capacity, coordination mechanisms, learning processes, and the evolving scope of industrial policy beyond traditional manufacturing. The analysis is organized thematically and draws on both historical and contemporary examples to examine how policy tools interact with broader development strategies. The findings highlight that industrial policy can significantly support structural change when it is context-specific, performance-based, and integrated with complementary investments in infrastructure and skills. This study contributes to ongoing debates by offering a clearer understanding of what makes industrial policy effective in fostering long-term economic transformation in the Global South