The New Era of Industrial Policy Is Here

Governments around the world are increasingly intervening in the private sector through industrial policies designed to help domestic sectors reach goals that markets alone are unlikely to achieve. As a result, companies in targeted sectors—such as automakers, energy companies, and semiconductor manufacturers—may experience dramatic changes in their operating environments. The policies could create new costs or deliver financial incentives to shift R&D or manufacturing investments. They may also incent firms to alter their supplier networks or change their trading partners. Managers who have grown up in markets without such interventions are now facing an unfamiliar environment. This article will provide an overview of policy approaches and give managers a framework for responding to them.