NATIONAL SYSTEMS OF
INNOVATION AND
ENTREPRENEURSHIP
INNOVATION IN ITS WIDER CONTEXT
As far back as 1943 Joseph Schumpeter (Schumpeterian theory) emphasized that:
the fundamental impulse that sets and keeps the capitalist engine in
motion comes from the new consumers’ goods, the new methods of
production or transportation, the new markets, the new forces of
industrial organization that capitalist enterprise creates.
INNOVATION IN ITS WIDER CONTEXT
Marshall (cited in Dicken, 1998: 20) recognized a number of characteristics that
influenced innovation:
● the institutional set-up;
● the relationship between the entrepreneurs and financiers;
● society’s perception of new developments;
● the openness to science and technology;
● networks between scientific and academic communities and business circles;
● the productive forces and financial institutions;
● the growing liberal–individualist economic paradigm;
● the role played by the state in accommodating and promoting capitalistic changes and
preparing the framework for the development of capitalism.
THE ROLE OF THE STATE AND NATIONAL
‘SYSTEMS’ OF INNOVATION
To support our understanding of the process of innovation within the capitalist enterprise,
we must also grasp a basic understanding of the way the economy inter- relates with
global and regional economies on local and national levels.
Not only do national economies tend to be dominated by a form of economic organization, it
is also the case that the relationship between state and business differs radically from one
national space to the other. Such interrelationships in society generate a business
environment with a unique business value system, attitude and ethic.
WHY FIRMS DEPEND ON THE STATE FOR SO MUCH
1. The ‘public’ nature of knowledge that underpins innovation.
2. The uncertainty that often hinders the process of innovation.
3. The need for certain kinds of complementary assets.
4. The need for cooperation and governance, resulting from the nature of certain
technologies.
5. Politics
HOW NATIONAL STATES CAN FACILITATE INNOVATION
It underlines a firm’s relationship with the
buyers, factor conditions (e.g. labor,
capital, raw materials), related and
supporting industries (e.g. technology
providers, input providers, etc.) and other
institutions that help facilitate strategic
orientation and innovative capabilities.
These will determine, to a great extent, the
firm’s opportunities – notwithstanding the
fact that its inner strengths, i.e. its
strategy-making capabilities and structural
features, will clearly affect this potential.
The past decade has seen an increase in R&D
offshoring partly for low labor costs and
partly to access new knowledge.
Economic crises cause companies to reduce
their investment, including investment in
innovation where returns are uncertain and
long-term. However, the reduction in
investment has not been uniform across
companies and a few even increased their
innovation expenditures, such as Toyota and
Volkswagen.
The right business environment is key to
innovation
Schumpeter preached technology as the engine of growth but also noted that to invest
in technology there had to be spare resources and long time-horizons. So the business
environment must give the right signals to the business units for them to invest in such
operations.
Waves of innovation and growth
A pie chart is like a pie cut into
slices. It helps us see how parts
make up a whole. Pie charts are
great for showing how things
compare.
Fostering innovation in ‘late-industrialiZing’
countries
We have already noted that there is no guarantee for continued technological leadership.
The geography of innovation has shown regional, national or local variations in time.
When innovation is considered, the focus of entrepreneurs and businesses was initially on
imitative production (so-called ‘reverse engineering’) in relatively unsophisticated
industries.
When the business environment became conducive to business activity, after initial capital
accumulation in key industries, then an upward move was observed along the ladder of
industrialization.
Entrepreneurship
Entrepreneurship is all about stepping into the unknown and breaking away
from the familiar.
The reasonable man (woman) adapts himself (herself) to the world. The
unreasonable one persists in trying to adapt the world to himself (herself).
Therefore, all progress depends on unreasonable men (and women).
~George Bernard Shaw
Entrepreneurship is the pursuit of opportunity beyond the resources you
currently control.
~Stevenson, 1983, 1985, 1990
ENTREPRENEURSHIP AND INNOVATION
The role of an entrepreneur is central to innovation management.
The main traits associated with entrepreneurship, such as growth, flexibility and
creativity, are also desirable traits for innovation. Theorists and practitioners alike
recognize that these constructs are close relatives or two sides of the same coin.
Entrepreneurs were the economic agents who transformed demand into supply for
profits.
Entrepreneurship as influencing growth in the economy. It is something that disrupts the
market equilibrium, or ‘circular flow’. Its essence is ‘innovation’.
Technological entrepreneurship
To develop technological entrepreneurship is insufficient recognition
of the overlaps and linkages between these four areas:
1. Science and technology.
2. Small and medium-sized enterprise.
3. Innovation.
4. Entrepreneurship.