In principle, firms in developing countries benefit from the fact that advanced technologies and products have already been developed in industrialized countries and can simply be adopted, a process often referred to as industrial upgrading. But for many firms, this advantage has remained elusive. What is getting in the way? This paper reviews recent firm-level empirical research on the determinants of upgrading in developing countries. The first part focuses on how to define and measure various dimensions of upgrading — increases in productivity, quality improvements, technology adoption, and expansions of product scope, among others. The second part takes stock of recent empirical evidence on the drivers of upgrading, classifying them as output-side drivers, input-side drivers, or drivers of firm capabilities. The review concludes with some thoughts about promising directions for future research in the area.
