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State capitalism and clusters: the case of Brazilian shipbuilding

Frank L. DuBois (Kogod School of Business, American University, Washington, Washington D.C., USA)
Marcos Andre Mendes Primo (Department of Management, Federal University of Pernambuco (UFPE), Recife, Brazil)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 18 April 2016

Abstract

Purpose

State capitalism is an economic model that relies on the role of a strong central government to support chosen firms and industries with subsidies, tax benefits and other advantages to which non-favored firms or industries do not have access (Bremmer, 2010). From an economic development perspective state capitalism is often used to redirect economic activity to underdeveloped regions (Wickham, 2009; Chobanyan and Leigh, 2006; Porter, 2008). The purpose of this paper is to examine the case of the Brazilian shipbuilding to illustrate the use of state capitalism to direct economic activity.

Design/methodology/approach

Using Porter’s diamond factor model the authors analyze the development of an economic cluster focussed on the shipbuilding industry in northeastern Brazil. Using interviews with company executives and archival information, the authors profile the investments and incentives that the government has made in this region with particular attention to the mechanisms and policy directives designed to support local involvement in cluster activity.

Findings

The authors find that the Brazilian shipbuilding industry offers a unique perspective on the role that governments play in the inducement of economic activity. The authors document the challenges that confront the local enterprise in meeting the requirements of the state controlled buyer and the difficulties associated with developing a local supplier base and finding a qualified workforce. The authors conclude with comments with regard to the applicability of this model to economic development activity in other country contexts.

Research limitations/implications

This research adds to the body of literature on the role of governments in the creation of economic clusters.

Practical implications

Economic development in emerging markets is often associated with strong government intervention. The authors use the Brazilian shipbuilding industry to illustrate the role of a state owned enterprise in facilitation of economic development.

Social implications

Some countries may suffer from what has been known as the “resource curse,” that is, the misallocation of resource wealth into non-productive activities. In this paper, the authors illustrate and attempt by the Brazilian government to use this wealth to create employment opportunities in an underdeveloped region of the country.

Originality/value

Emerging markets are challenged in developing viable enterprises that are competitive in global markets. Most research on the development of industrial clusters is focussed on developed markets. These markets do not have to confront the same challenges found in emerging markets. The research illustrates these challenges and the efforts that may be made to surmount them.

Keywords

Acknowledgements

The authors would like to thank Leslie Armijo of Portland State University, the participants in the workshop sponsored by FGV and American University on Brazil and the Liberal Order: Brazil’s Influence on Global Norms and Institutions as well the anonymous reviewers for their comments on earlier drafts of the paper.

Citation

DuBois, F.L. and Primo, M.A.M. (2016), "State capitalism and clusters: the case of Brazilian shipbuilding", International Journal of Emerging Markets, Vol. 11 No. 2, pp. 214-231. https://doi.org/10.1108/IJoEM-03-2012-0023

Publisher

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Emerald Group Publishing Limited

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