EXTERNAL VULNERABILITY AND INDUSTRIAL POLICY 93 ogy of the same generation. To boot, obtaining a foothold in markets not only requires investment in activities as varied as marketing and the creation of after sales networks, but also 'goodwill', which is a function of time. In the interim new entrants find it difficult to operate at capacity levels adequate to produce at competitive costs. All of this makes the task of competing with established international firms, either in the world market or even in the domestic market, extremely difficult for the late entrant. But this was not the only reason why protection for domestic producers was considered desirable. Without it, the additional demand for manufactures associated with increases in income would also result in an outflow of foreign exchange to pay for imports. For economies that are externally vulnerable because of their initial dependence on a range of primary exports characterized by relatively low income and price elasticities of demand, this path appeared unsustainable, since it leads to balance of payments problems even in the short run, given limited access to international liquidity. Some control over imports and some support from the State, both to conserve foreign exchange and to reserve and exploit the domestic market as the initial base for a nascent industry, were considered inevitable. There are three assumptions underlying this perspective that are now seen as irrelevant in the wake of globalization. These are: (i) that the nature of industrial technology and industrialization is such that the investment and transfer costs of replicating production based on such technologies is high; (ii) that there are definitive limits on the current account deficit that developing countries could incur, because of their limited export potential and their limited access to international liquidity; and (iii) that firms which dominate the international market for goods are reticent to relocate production capacities to new sites to exploit a range of cost and other advantages, so that industrialization cannot be based predominantly on a partnership with international firms. Those who argue for a departure from the pqst-War perspective on development challenge all of these assumptions. To start with, the post-War revolution in technology and communications is seen to have not only reduced transportation costs and increased the availability and rendered cheaper the communication facilities needed for the international coordination and control of production, but also permitted the segmentation of production processes and the relocation of individual segments to any appropriate site for production (Frobel, Heinrichs and Kreye, 1980). Further, in a number or areas, including those characterised by 'generic* technologies like computing, technology is seen to be characterized by an entrepreneurial (as opposed to routinized) technology regime which provides an additional 'window of opportunity' to developing countries (Brunner, 1995). In industries characterized by an entrepreneurial technology regime, technological change results in a lowering of barriers to entry, with new entrants being in a position to access technology through non-market sources. For example, it is argued that