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Paper short abstract:

We identify common barriers and opportunities for creating, sustaining, and expanding backward linkages from NR sectors. We find that overcoming barriers and harnessing opportunities require what we call 'negotiation' capabilities, which are crucial for navigating complex industry environments.

Paper long abstract:

We analyse 75 cases of knowledge-intensive suppliers to natural resource (NR) industries in Latin America to identify the main barriers and opportunities for creating, sustaining, and expanding backward linkages. We find that the barriers suppliers face differ depending on their level of development, thus we distinguish between barriers to entry (e.g. lack of credibility), barriers to survival (e.g. managing power asymmetries), and barriers to growth (e.g. navigating complex regulatory requirements). We then identify three key opportunities used to enter, survive and expand in the sector: leveraging localisation (proximity), adapting to local NR specificities (adaptation), and harnessing new knowledge (innovation). A novel finding from our research is that overcoming barriers and harnessing opportunities for linkage development and diversification require not only strong technological capabilities but also non-technological ones, particularly what we call 'negotiation' capabilities, which are crucial for navigating complex industry environments. Efforts to expand technological capabilities need to align with efforts to build, sustain, and expand negotiation, and other non-technological capabilities if firms are to succeed in the highly competitive NR supplier markets.

A better understanding of diversification away from NRs in resource rich countries is crucial given concerns that the rising demand for natural resources, driven by the global shift towards cleaner technologies, may lead to a ‘green resource curse’, deepening commodity dependence, economic overspecialisation and disarticulation, and fueling socio-environmental conflicts. Promoting diversification is essential not only for ensuring long-term economic benefits for these countries, but also for the justice and feasibility of the transition itself.