In this paper we discuss the question of what factors in development policy create specific forms of policy capacity and under what circumstances developmentoriented complementarities or mismatches between the public and private sectors emerge. We argue that specific forms of policy capacity emerge from three interlinked policy choices, each fundamentally evolutionary in nature: policy choices on understanding the nature and sources of technical change and innovation; on the ways of financing economic growth, in particular technical change; and on the nature of public management to deliver and implement both previous sets of policy choices. Thus, policy capacity is not so much a continuum of abilities (from less to more), but rather a variety of modes of making policy that originate from co-evolutionary processes in capitalist development. To illustrate, we briefly reflect upon how the East Asian developmental states of the 1960s-1980s and Eastern European transition policies since the 1990s led to almost opposite institutional systems for financing, designing and managing development strategies, and how this led, through co-evolutionary processes, to different forms of policy capacity.
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