Structural adjustment programs designed to improve industrial performance and economic growth in developing countries during the '70s and '80s, have generally proved disappointing. Little is known of what factors affect the speed and quality of firm responses during liberalization, and how they impact regional prosperity. In this dissertation I focus on one set of factors related to "place": the role that local firm interactions and the local economic environment in general, play in shaping the opportunities available to firms to restructure successfully. My central question is as follows: How may liberalization affect how proximity actually contributes to technological innovation, and how in turn, it impacts regional employment and income? To improve our understanding of the microdeterminants of regional industrial restructuring successes and failures, I propose to study two regions with similar agroprocessing sectors that appear to be restructuring along different paths. Preliminary evidence suggests that in one (Rancagua) there is greater cooperation between processors and the primary sector than in the other (Mendoza). Agroindustrial supply chains make ideal cases in which to study regional responses to liberalization because they are typically region-specific, because they include manufacturing activities of different capital- and labor-intensity, because of the depth of their demand-pull into the local agricultural sector, and because of their significant output and employment contributions to the local economy.