Abstract

public management, policy capacity, innovation and development erkki karO rainer katteL* In this paper we discuss the question of what factors in development policy create specific forms of policy capacity and under what circumstances development-oriented complementarities or mismatches between the public and private sectors emerge. We argue that specific forms of policy capacity emerge from three inter-linked policy choices, each fundamentally evolutionary in nature: policy choices on understanding the nature and sources of technical change and innovation; on the ways of financing economic growth, in particular technical change; and on the na-ture of public management to deliver and implement both previous sets of policy choices. Thus, policy capacity is not so much a continuum of abilities (from less to more), but rather a variety of modes of making policy that originate from co-evo-lutionary processes in capitalist development. To illustrate, we briefly reflect upon how the East Asian developmental states of the 1960s-1980s and Eastern European transition policies since the 1990s led to almost opposite institutional systems for fi-nancing, designing and managing development strategies, and how this led, through co-evolutionary processes, to different forms of policy capacity.