Why did some developing countries adopt export-oriented industrialization strategies?

Developing countries adopted export-oriented industrialization (EOI) strategies primarily as a response to the limitations and shortcomings of import substitution industrialization (ISI). While ISI aimed to foster domestic production, it often resulted in inefficient, small-scale enterprises protected from international competition, leading to slow productivity growth and economic stagnation.123

Countries shifted toward EOI for several key reasons:

• Market Scale: Most developing nations possess domestic markets too small to support efficient, large-scale industrial production. EOI allows firms to overcome these constraints by accessing global markets.3
• Comparative Advantage: EOI enables countries to specialize in producing goods—particularly labor-intensive manufactured products—that align with their comparative advantage, allowing them to utilize their most abundant resource: unskilled labor.3
• Efficiency and Innovation: By participating in international trade, countries are exposed to global competition, which provides incentives for firms to adopt efficient production techniques, new technologies, and better organizational methods.3
• Economic Growth: EOI strategies, most notably adopted by the newly industrialized countries (NICs), were associated with extremely high rates of growth and a greater ability to maintain economic momentum during global recessions compared to those relying on ISI.3