Abstract

This paper builds on influential studies of technological catch-up (e.g. Lim and Lee, 2001) to examine a slightly different kind of “path-creating” capability accumulation trajectory in latecomer natural resource-processing industries across discontinuous policy regimes. Drawing on multiple-case evidence from 13 forestry, pulp and paper firms in Brazil (1950-2007) the study found that: (1) Firms’ innovation capability accumulation paths involved a qualitative departure from the established technological trajectory at the early stage of their capability development; (2) Firms’ paths along the new technological segment involved a high degree of variability (from world-leaders to laggards) in terms of levels and speeds of innovative capability accumulation; (3) Firms that attained progressively higher levels of innovative performance more rapidly, across discontinuous policy regimes, engaged pro-actively in internal creative capability building efforts, as they developed bottom-up synergetic relationships with government policies, other than protectionism. The paper suggests that in-house innovative capability accumulation efforts affect the extent to which latecomer firms overcome hurdles and cross policy discontinuities as they pursue significantly new directions in the international technological frontier. Thus firm-centred innovative capability building should be a key policy target.