National Systems of Innovation: Toward a Theory of Innovation and Interactive Learning: 2 (Anthem Other Canon Economics, 2) - Hardcover

Hardcover

ISBN 10: 1843318822 ISBN 13: 9781843318828

Publisher: Anthem Press, 2010

Synopsis

‘National Systems of Innovation’ presents a new perspective on the dynamics of the national and the global economy. Its starting point is that the international competitiveness of nations is founded on innovation. This book is an invaluable reference document for all those working in economics.

About this title

About the Author

Bengt-Åke Lundvall graduated with an MA in Economics from the University of Gothenburg, Sweden. He is currently Professor at the Department of Business Studies at Aalborg University, Denmark and at Sciences-Po in Paris, France.

Excerpt. © Reprinted by permission. All rights reserved.

National Systems of Innovation

Toward a Theory of Innovation and Interactive Learning

By Bengt-Åke Lundvall

Wimbledon Publishing Company

Copyright © 2010 Bengt-Åke Lundvall
All rights reserved.

ISBN: 978-1-84331-882-8

Contents

List of Tables, xi, 
List of Figures, xiii, 
Preface, xv, 
1. Introduction, 1, 
Part I: Toward a New Approach to National Systems of Innovation, 21, 
2. Institutional Learning Björn Johnson, 23, 
3. User-Producer Relationships, National Systems of Innovation and Internationalisation Bengt-Åke Lundvall, 47, 
4. Approaching National Systems of Innovation from the Production and Linkage Structure Esben Sloth Andersen, 71, 
Part II: A Closer Look at National Systems of Innovation, 97, 
5. Work Organisation and the Innovation Design Dilemma Allan Næs Gjerding, 99, 
6. Innovation and the Development of Industrial Networks Lars Gelsing, 119, 
7. The Public Sector as a Pacer in National Systems of Innovation Birgitte Gregersen, 133, 
8. The Role of Finance in National Systems of Innovation Jesper Lindgaard Christensen, 151, 
9. Formal Scientific and Technical Institutions in the National System of Innovation Christopher Freeman, 173, 
Part III: Opening National Systems of Innovation: Specialisation, Multinational Corporations and Integration, 193, 
10. Export Specialisation, Structural Competitiveness and National Systems of Innovation Bent Dalum, 195, 
11. The Home Market Hypothesis Re-examined: The Impact of Domestic User-Producer Interaction on Export Specialisation Jan Fagerberg, 219, 
12. Integration, Innovation and Evolution Esben Sloth Andersen and Asger Brændgaard, 233, 
13. National Systems of Innovation, Foreign Direct Investment and the Operations of Multinational Enterprises François Chesnais, 259, 
14. Public Policy in the Learning Society Bent Dalum, Björn Johnson and Bengt-Åke Lundvall, 293, 
15. Post Script: Innovation System Research – Where It Came From and Where It Might Go Bengt-Åke Lundvall, 317, 
Notes, 351, 
References, 367, 

CHAPTER 1

INTRODUCTION

Bengt-Åke Lundvall

1.1. Introduction

Theories in the social sciences may be regarded as 'focusing devices'. Any specific theory brings forward and exposes some aspects of the real world, leaving others in obscurity. That is why a long lasting hegemony of one single theoretical tradition is damaging both in terms of understanding and policy-making. In the field of economics, the dominating neo-classical paradigm puts its analytical focus upon concepts such as scarcity, allocation, and exchange, in a static context. Even if these concepts reflect important phenomena in the real world, they only bring forward some aspects of the economic system. One aim of this book is to demonstrate the need for an alternative, and supplementary, focusing device which puts interactive learning and innovation at the centre of analysis.

Through more than a decade, a group of economists at Aalborg University, the IKE-group, has worked together studying industrial development and international competitiveness from such a perspective. This book presents results from this work in relation to one specific subject; national systems of innovation.

Our choice of perspective and subject is based upon two sets of assumptions.

First, it is assumed that the most fundamental resource in the modern economy is knowledge and, accordingly, that the most important process is learning. The fact that knowledge differs in crucial respects from other resources in the economy makes standard economics less relevant and motivates efforts to develop an alternative paradigm.

Second, it is assumed that learning is predominantly an interactive and, therefore, a socially embedded process which cannot be understood without taking into consideration its institutional and cultural context. Specifically, it is assumed that the historical establishment and development of the modern nation state was a necessary prerequisite for the acceleration of the process of learning which propelled the process of industrialisation, in the last centuries. Finally, it is recognised that the traditional role of nation states in supporting learning processes is now challenged by the process of internationalisation and globalisation.

These ideas are reflected in the overall structure of the book which is divided into three main parts. The first part presents the theoretical framework, the second part analyses the most important elements of the system of innovation and the third part is devoted to the opening of national systems through internationalisation and globalisation. This introductory chapter presents basic definitions, theoretical starting points, a road map for the book as a whole and, finally, references to other attempts to analyse national systems of innovation.

1.2. National Systems of Innovation

1.2.1. A First Definition

According to Boulding (1985), the broadest possible definition of a system is 'anything that is not chaos'. Somewhat more specifically, a system is constituted by a number of elements and by the relationships between these elements. It follows that a system of innovation is constituted by elements and relationships which interact in the production, diffusion and use of new, and economically useful, knowledge and that a national system encompasses elements and relationships, either located within or rooted inside the borders of a nation state.

Using the terminology of Boulding, it is obvious that the national system of innovation is a social system. A central activity in the system of innovation is learning, and learning is a social activity, which involves interaction between people. It is also a dynamic system, characterised both by positive feedback and by reproduction. Often, the elements of the system of innovation either reinforce each other in promoting processes of learning and innovation or, conversely, combine into constellations blocking such processes. Cumulative causation, and virtuous and vicious circles, are characteristics of systems and sub-systems of innovation. Another important aspect of the innovation system relates to the reproduction of the knowledge of individuals or collective agents (through remembering).

1.2.2. Nation States and National Systems

The concept, national systems of innovation, presumes the existence of nation states and this phenomenon has two dimensions; the national-cultural and the étatist-political. The ideal, abstract, nation state is one where the two dimensions coincide, i.e. where all individuals belonging to a nation – defined by cultural, ethnical and linguistic characteristics – are gathered in one single geographical space controlled by one central state authority (without foreign nationalities).

It is difficult to find any nation states, in this strict sense, in the real world. Countries differ both in the degree of cultural homogeneity and in the degree of political centralisation. In some cases it is not even clear where to locate the borders of a 'national' system of innovation. This might be true both for 'multinational' states as Belgium, Canada and Switzerland and for single-national but federal states such as Germany. At the extreme, a country might be solely constituted by a joint foreign policy with little in common in terms of it's institutional set up and culture. In such cases, the concept of a 'national' system of innovation would be of little relevance.

Most of the contributors to this book have their roots in a minority of small countries which may be characterised as culturally homogeneous and socio-economically coherent systems (Sweden, Denmark and Norway). This gives a certain bias to our world outlook (it should do so, according to our basic understanding where theoretical conceptualisation is assumed to be culturally bounded). On the other hand, it may be argued, it is quite useful, analytically, to use concepts which are archetypes rather than 'averages'. In order to bring out sharply the limits and consequences of globalisation and regionalisation, it is useful, at least as a starting point, to assume countries to be homogeneous in political and cultural terms.

1.2.3. National Systems, Globalisation and Regionalisation

Readers might ask, why we focus on the national level, in an era where many analysts point to an accelerating process of internationalisation and globalisation, characterised by multinational firms, loosening their relations to their home-country and entering into alliances with foreign firms. This process might actually be most advanced when it comes to the production of new knowledge and innovations in science-based technologies such as bio-technology, pharmaceuticals and electronics.

At the same time, a growing number of social scientists – often inspired by new sets of ideas labeled 'flexible specialisation', 'networking' and 'post-fordism' – have argued that regional production systems, industrial districts and technological districts are becoming increasingly important. Some authors analyse these two tendencies as interconnected and mutually reinforcing (Storper, 1991a, Camagni, 1990 and also Porter, 1990). They assume that globalisation, and international specialisation have their roots in the strengthening of specialised technological districts and regional networks.

Both globalisation and regionalisation, might be interpreted as processes which weaken the coherence and importance of national systems. In this book, we do not deny the validity of these trends. Actually we think that they make it even more pertinent to understand the role and workings of national systems of innovation, both historically, and in the present era.

First, we believe that national systems still play an important role in supporting and directing processes of innovation and learning. The uncertainties involved in innovation and the importance of learning imply that the process calls for a complex communication between the parties involved. This will especially be the case when the knowledge exchanged is tacit and difficult to codify. When the parties involved originate in the same national environment – sharing its norms and culturally based system of interpretation – interactive learning and innovation will be easier to develop.

On the other hand, it must be recognised that important elements of the process of innovation tend to become transnational and global rather than national – and here the trend will be most important in science-based areas where the communication is easier to formalise and codify. Some of the big corporations are weakening their ties to their home-base country and begin to spread their innovative activities and to 'source' different national systems of innovation. These changes are important and they challenge the traditional role of national systems of innovation, but they do not make it less important to understand how national systems work.

When an old institutional order is threatened, and a new one is beginning to develop, it becomes critically important to understand the basic mechanisms of the old order. Without such an understanding the costs of transformation might become unnecessarily high. More specifically, the process of far-reaching European integration may run into serious problems if it does not take into account the complex interaction between institutions and economic structure in promoting innovation at the national level.

Behind the analysis lies also, as mentioned, the hypothesis that the modern nation states in the Western world – not necessarily the new states in the former colonies – have worked as 'engines of growth'. They were constituted and shaped in their present form in a period characterised by a rapid economic transformation, including the massive movement of labour from agriculture to industrial production. Their social institutions and state policies have supported such a transformation and new institutions aiming directly at economic wealth creation through innovation have been established in the course of the last century and become integral parts of national systems of production.

From what has been said, it is obvious that national systems of innovation are open and heterogeneous systems. Processes of innovation transcend national borders and sometimes they are local rather than national. Actually, this has always been the case for most national systems. The rapid industrialisation and modernisation of European countries, starting more than 100 years ago, was closely connected with an opening up of the national economies in terms of foreign trade, capital import and import of foreign ideas and experts, and already at that time the international specialisation was often reflected in a regional specialisation within the countries.

1.2.4. Public Policy and National Systems of Innovation

As pointed out at the very beginning of this introduction, one main purpose of this book is to contribute to a theoretical understanding of interactive learning and innovation. But the concept 'national systems of innovation' may also be useful when it comes to inspire public policies at the national and the international level.

First, in order to determine what governments should do in order to promote innovation, it is useful to know the specific systemic context in which a national government intervenes. Otherwise, government policies might either reproduce weaknesses of the national system or introduce mechanisms incompatible with the basic logic of the system.

Second, in the increasingly serious international conflicts about which countries are paying for (the US) and, respectively, appropriating benefits from Japan) the investment in science and development of new technology, it is important to understand how different and very diverse national systems work. This is a point made by experts close to the GATT-negotiations (Ostry 1990).

Third, in a world characterised by a radical shift in techno-economic foundations, the ability of national systems to cope, successfully, with change and to exploit new technical opportunities seem to be quite divergent (Freeman and Perez, 1988). Learning from the experience of foreign systems, in this respect, might be facilitated if the workings of the respective national systems as a whole are properly understood. Strategies based on naive copying may be avoided and institutional learning across national borders might be stimulated (See also chapter 14). Not least, the present development in Eastern Europe points to a strong need to develop a realistic understanding of the workings of the 'real market economies' in relation to innovation.

Actually, the concept, national systems of innovation, has already entered the vocabulary of policy-makers at the national and the international level. An ambitious effort to understand the importance of technology for economic change, was launched by OECD in 1988, as the Technology/Economy programme (TEP). When the outcome of this programme was summed up in Montreal, in 1991, the concept, national systems of innovation, was given a prominent place in the conclusions.

It was pointed out that the assignment of proper roles for, respectively, government and the private sector in enhancing technological capabilities should build upon a better understanding of national systems of innovation. Also, it was concluded that the growing international conflicts regarding the global sharing of burdens and benefits emanating from the development and use of new technology might be kept within reasonable limits only if the parties get a better understanding of the diversity of NSI's (OECD – Canada, 1991). The fact that the concept has already entered the everyday vocabulary of policy-makers makes it even more important to give the NSI-concept an analytical basis.

1.2.5. Performance of National Systems of Innovation

In order to design policies relevant for national system of innovation, it is necessary to agree upon which should be the 'desiderata' of the system (Kornai, 1971, 214 f). From the standpoint of general equilibrium theory, the main performance dimension refers to the more or less efficient allocation of scarce and given resources. A more dynamic version would point to the adaptability of the system. A Keynesian perspective would emphasise the degree of utilisation of existing resources and especially of the labour force.

At this general level, we would like to propose that the most relevant performance indicators of national system of innovation should reflect the efficiency and effectiveness in producing, diffusing and exploiting economically useful knowledge. Such indicators are not well developed today. One of the classical measures for comparing different national systems is R&D- expenditure as a proportion of GDP. There are two obvious problems with this indicator. First, it reflects only an input effort and does not say anything about what comes out of the effort. Second, R&D-expenditure is only one kind of relevant input to the process of innovation – learning in connection with routine activities may be more important than R&D.

The output measures used are more recently developed and include patents (Pavitt and Patel, 1988), the proportion of new products in sales (Kristensen and Lundvall, 1991) and the proportion of hi-tech products in foreign trade (Dalum et al., 1988). Each one of these indicators has its own specific weaknesses and it is wise to combine them in order to get a more satisfactory picture of the performance of a national system. A common weakness is that these measures do not take into account the diffusion of process technology and in order to get a more complete picture, indicators for diffusion should be taken into account (Edquist and Jakobsson, 1988).

(Continues...)

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Edition details

• Publisher: Anthem Press
• Publication date: 2010
• Language: English
• ISBN 10: 1843318822
• ISBN 13: 9781843318828
• Binding: Hardcover
• Number of pages: 404
• Editor: Lundvall Bengt-Åke