Strategizing by the government: Can industrial policy create firm‐level competitive advantage?

Despite the prevalence of governmental action devised to foster firms and industries, the link between industrial policy ( IP ) and competitive advantage has received scant attention in strategic management. I propose a model where such a link is mediated by the accumulation and churning of local resources and capabilities. I also introduce the concept of support‐adjusted sustainable competitive advantage ( SASCA ), which occurs if a firm's observed performance is superior to the expected performance of competitors had they received the same array of policies. I argue that achieving SASCA through IP is a difficult endeavor and requires the interplay of three conditions: insertion in global production networks, geographical specificity, and governmental capability. Thus, the model expands the potential determinants of competitive advantage into the context of governmental intervention .