For a large proportion of developing country firms and governments the idea of striving to become internationally competitive marks a fundamental change in attitude. For decades one of the roles of the State in many countries has been to take compensatory measures for what was understood to be the inevitable lack of competitiveness of firms in their territory. Yet it seems an inescapable fact that the world is going towards open frontiers (whether within trading blocs or globally). To grow and develop, firms and countries will have to become capable of successfully competing in a much wider and much more demanding environment.

The transformation towards knowledge intensive production and markets is proceeding at different speeds in the various advanced countries and in the "catching-up" NICs. Within most of those countries, it is still only the more dynamic firms and industries that have adopted the new practices. Yet the competitive strength they display in the market makes it likely that technical dynamism and networking will become not only best practice but the normal behavior of well managed firms everywhere.

Among the developing countries there is a wide variation in terms of the level of awareness of these changing conditions and in the extent to which they are being taken on board in practical terms in strategies and policies. There are, of course, many obstacles in the way of widespread adoption of innovation oriented practices. Some are similar to those faced by firms in the more advanced countries, others are due to underdevelopment itself. But perhaps some of the more intractable ones are the institutional and ideological barriers inherited from the once effective ISI model, including powerful vested interests in the old way of doing things.

The period of industrializing by sheltering the domestic market left a valuable legacy of investment in plant and equipment, development of physical infrastructure, managerial and worker skills and experience, a higher level of education as well as varying amounts of engineering and research capabilities and facilities. This is the platform from which to launch modernization and reconversion efforts.

But for most countries this positive inheritance carries also a heavy burden. The typical ISI framework, excluding the few cases such as Korea that used it as preparation for competitive exports, remained inward oriented and allowed firms to grow with a particularly passive approach to technology and markets. The combination of high tariff protection, various forms of subsidy and restrictions to competition[77] made it possible for firms to be highly profitable with little or no effort to increase productivity or quality and with almost no risk of losing what were in fact captive local markets. Even the export promotion policies of later stages carried large subsidies to offset the lower local productivity.

This means that whatever the level of industrialization attained through an ISI strategy, each country will have to overcome two different sets of weaknesses if it is to become competitive. On the one hand it has to confront changes similar to those identified for U.S. industry by the MIT Commission; in other words, the technologies, the managerial practices, the know-how acquired through traditional technology transfer processes are now as partially obsolete as they are in their countries of origin and must be upgraded and modernized. Additionally developing country firms need to surmount dependency on state protection and subsidies while they become active in the mastery of technology and in market competition; in other words, firms must endogenize their sources of profitability.

Ironically, the process of weaning firms away from dependency on the state is likely to require support from government. The type of changes to be effected imply access to information, to technical services, training, consultancy and other inputs which must be available in the local environment if they are not to imply excessive expenses. They could also involve transition costs that many firms otherwise capable of surviving might not be able to afford on their own[78] .

In sum, while there is no denying that the changes currently underway have mixed consequences for development prospects, This paper has tried to emphasize some of the positive routes opened for development policies under these new conditions. These include:

1. The possibility of optimizing the use of scarce financial resources by reconverting existing plant through reorganization and by favoring modular growth which reduces the need for new investment in designing new plants;
2. The potential for reaping high returns from investment in change-generating human capital, while also contributing to greater workplace democracy and social equity;
3. The advantages that can be created by strengthening the national system of innovation, starting with efforts to bring together the technological capabilities existing outside and inside the productive system to concentrate on incremental innovation and mastery of the technologies already in use;
4. The possibility of rescuing the development value of natural resources by using these resources as a platform to build competitive advantages and as the core of innovative networks for upstream and downstream spin-offs; and,
5. In general, the opening up of a growing range of options for specialization stemming from the all-pervasiveness of new technologies, the increasing segmentation of markets and the growth of global networks. This wide spectrum allows each firm, group of firms or country to home in on those market targets that provide an optimal learning route and make the best use of its particular combination of conditions and competitive asset.
          

As technology and competitiveness become prominent among the tools and the goals of development strategies within countries, the objects of intercountry agreements will naturally follow along the same route. Even free trade areas, such as the one recently established by the countries of the Andean Pact, now go beyond looking for enlarged markets and explicitly state that a "modern and dynamic insertion in the world economy, reinforcing the competitiveness of Andean economies", is one of the main goals[79] . Given the demands of the new competition, we may be entering, as Lynn Mytelka suggests, a phase of innovation centered cooperation [80] .

In fact, collaborative links between firms, regions and countries are likely to multiply rapidly in all directions: North-North, North-South, East-West, South-South, etc. The more prominent of these will naturally be the supranational framework agreements, such as the Free Trade "Blocs". The other innumerable arrangements for partnering and cooperation between firms across borders and in wide international networks or the local initiatives among neighboring or similar regions will be less visible yet their impact in the long term will perhaps be the most significant. These are likely to be established for specific purposes, by the direct actors, in the context of common or complementary interests and strategies. Here we shall refer to some possible South-South collaboration initiatives to facilitate the processes of modernization.

These collaborative processes cannot be planned in the traditional manner nor will they occur by signing declarations. The actors must be involved, facilitating mechanisms will be better if they are simple and unbureaucratic but, most of all, cooperation is about specific actors joining to perform specific tasks for mutually beneficial results. Much imagination will be needed on the part of policy makers to avoid old style planning and to design schemes that stimulate and support the creativity of the economic actors themselves.

What has been argued throughout is that the present transition involves an upheaval in traditional common sense. This paper has tried to spell out a few of the main elements of that new common sense and hence to set up some guideposts for viable managerial and institutional creativity. Our intention has been to paint the general background of change on which to locate the possible roles and purposes of intercountry cooperation. Thus, of necessity the paper has been exploratory and suggestive rather than conclusive or normative. In the uncertain and turbulent world of today much experimenting will take place before a clear difference between successful and unsuccessful strategies can be drawn. There is no doubt, however, that an understanding of the nature of the changes taking place in technology, management and markets is a powerful tool in enhancing the likelihood of achieving positive results on the part of firms, groups of firms, governments or regional organizations.