... in uncompetitive practices (such as abusing market power by charging high prices), industrial policy encourages firms to do what they otherwise would not do. For example, if firms were left to their own wishes, many of them would not invest in research and development because of the extra costs they would incur. However, industrial or technology policy would provide incentives, such as subsidies on research expenditure, to ensure that research and development does actually occur. It is clear that industrial and technology policy is primarily concerned with making firms behave so they contribute to the objectives of society. Whereas competition policy is static and is interested in private gain, industrial policy is more dynamic and concerned with social gain. Why do we need industrial policy? There are many theoretical reasons given for its existence. Firstly, industrial policy is used to increase competitiveness. By this, we mean increasing the competitiveness of the ...

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