If the state is incompetent, do it yourself: private alliance as an institutional architect in the catch-up process

Abstract

We examine the Finnish pulp and paper industry’s century-long catch-up journey, focusing on the intertwined development of technical and institutional capabilities. Using historical methods, we highlight how a private, self-organized R&D alliance evolved into an institutional architect, ultimately shaping not only governance but also regulation and entire innovation systems. Our findings demonstrate that sectoral systems of innovation emerge from both technological advancements and from private actors crafting adaptive institutions. The role of private actors is critical when governments are incapable of formulating and enforcing industrial policy. Overall, we propose that substantive experts contribute not only to technical but also to institutional capability.