Unrelated pioneer institutions

Pioneer industries in developing areas are likely to suffer from the absence of other establishments to which waste by-products might be passed. They may also be handicapped by the absence of institutions which in a more developed society would help to improve the skill of the labour force and facilitate the raising of capital. Where the work requires it, a new factory may have to organize its own training facilities – again a cost-raising expedient – but the lack of financial institutions is likely to be less tractable. This is a deterrent to industrial investment partly because it makes more difficult the raising of local capital and partly because it tends to reduce the liquidity of investment in secondary industry. In much the same way, the day-to-day operations of a manufacturing establishment are likely to be less smooth and hence less efficient, because of the absence of many of the services of insurance, credit and banking institutions which are part of the normal environment of an industrial economy.