ABSTRACT
This chapter analyses the role of governmental policies, business strategies, and knowledge centres in economic development. Developmental states get strongly involved in fostering the establishment of new businesses in the domestic economy. Innovations can involve small improvements in products. Instead of producing quality products with longer life cycles some businesses adopt ‘programmed obsolescence’ policies for their products over shorter time horizons in order to increase their sales’ volumes and to raise their revenues. Shareholders/investors in businesses are a heterogeneous group. Depending on the firm’s activities, certain categories of stakeholders have a legitimate pre-eminent claim on the value pie created. Governmental intervention is justified in periods of crises: to contain and correct market malfunctioning, re-invigorate economic activity, and sanction abuses. Accordingly, a labour market characterized by low unemployment will provide greater bargaining power to workers and their trade unions. Some host governments may entice ‘newcomer/footloose businesses’ by offering them exemptions from fiscal charges over long periods, and from regulatory requirements.
