Innovation System
Dr. Shahram Yazdani
Shahid Beheshti University of Medical Sciences
School of Medical Education
Strategic Policy Sessions: 06
Industrial vs. Knowledge-Base
Economies

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Dr. Shahram Yazdani
Since the beginning of the 1970s, the most
advanced economies in the world have been
undergoing structural change, turning them
from industrialized economies based on labor,
tangible capital and material resources into
economies based more and more on the
creation, diffusion and exploitation of new
knowledge.
One of the fundamental characteristics of this
shift is the structural intensification of research
activities.
Knowledge as a Strategic Asset
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Dr. Shahram Yazdani
In the emerging ‘knowledge-based economy’,
also called ‘learning’ economy, economic
growth depends more directly on investment in
knowledge, which increases productive
capacity, than on traditional factors of
production (Lundvall and Johnson, 1994).
In other words, knowledge raises the returns on
and the accumulation of other types of
investment (Nelson and Romer, 1996).
Definitions of Knowledge-Based Economy
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APEC: a KBE is an economy in which the
production, distribution and use of knowledge are
the main drivers of growth, wealth and
employment across all industries.
OECD: where investment in knowledge is defined
as public and private spending on higher
education, expenditure in R&D and investment in
software.
Dr. Shahram Yazdani
Timing of Adoption

It often takes a long time for Technology
to move from lab. to commercial value:
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Freon refrigerants - 1 year
Zipper - 27 years
Mechanical cotton picker - 53 years
Fluorescent lamp - 79 years
Dr. Shahram Yazdani
Shortening of cycles of late innovations:
Spread of successive technologies in the US automobile industry
Percentage of output incorporating the innovation
Dr. Shahram Yazdani
The Geographic Outspreading of Technologies as
They Mature
Dr. Shahram Yazdani
The Importance of Systems

Dr. Shahram Yazdani
Despite similarly large investments in R&D
by various industrialized and semiindustrialized countries starting in the 1950’s
and 60’s “evidence accumulated that the rate
of technical change and of economic growth
depended more on efficient diffusion than on
being first in the world with radical
innovations and as much on social
innovations as on technical innovations”
(Freeman, 1995).
Tacit vs. Codified knowledge
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Codified scientific and technological
information, are disembodied knowledge (in
articles, blueprints, patents, software and
databases), a so-called “nonrival public good”
Tacit knowledge (skills, competencies, routines)
is acquired through experience (learning,
producing, researching) and consists of the
accumulation of human skills and techniques.
Dr. Shahram Yazdani
Propositional and Prescriptive Knowledge
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Dr. Shahram Yazdani
Knowledge that catalogues natural
phenomena and regularities (“knowledge
of what”), which is called propositional
knowledge.
Knowledge that prescribes certain actions
that constitute the manipulation of natural
phenomena for human material needs
(“production”) and which is called
prescriptive knowledge.
Discovery vs. Invention
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Dr. Shahram Yazdani
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When an addition is made to the base of
propositional knowledge, it is typically
called discovery.
When an addition is made to the base of
prescriptive knowledge, it is typically
called invention.
When prescriptive knowledge is carried
out, it is termed production.
In prescriptive knowledge, there is always
a tacit component.
Technology

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Technology is the know-how on how to apply
scientific knowledge. As such it belongs to a
larger group of activities which embrace the
creation and use of artifacts, crafts and items of
knowledge as well as various forms of social
organization (Grupp, 1998).
It is important to distinguish between
technological change and scientific advance.
Dr. Shahram Yazdani
Science and Technology
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Dr. Shahram Yazdani
Science includes processes of knowledge
creation and diffusion.
Technology on the other hand focuses on
the application or usage of the created
knowledge.
The research process is of major
importance for building and using
knowledge for the materialization of
innovations.
Basic Research

Basic research or fundamental research
refers to experimental or theoretical work
geared ‘primarily’ to the acquisition of new
knowledge about the basic origin of
phenomena and observable events
without targeting a particular application
of use.
Dr. Shahram Yazdani
Applied Research
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Dr. Shahram Yazdani
Applied research is biased towards
specific and practical purposes or
objectives.
It also includes a new knowledge
generation process but always in regard
of the practical application. The results of
applied research are intended to be valid
for a limited range of products of
processes.
Experimental Development

Experimental development is systematic
work structured on existing knowledge
which is directed towards production of
new materials, products, equipment or the
installation of new processes, systems or
services.
Dr. Shahram Yazdani
Academic vs. Industrial Research
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Dr. Shahram Yazdani
The largest part of academic research is
concentrated in basic research, although
applied research efforts are also
undertaken to a considerable extent in
many academic departments
Industrial research and development is
mainly concerned with the design and
development of artifacts, directed at the
more practical application.
Academic vs. Industrial Research
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Dr. Shahram Yazdani
Over the years, this distinction has become
more and more obsolete. Applied R&D activities
are also performed by academic researchers,
while industry is involved in basic research to a
greater extent.
Furthermore, there is a strong interaction
between academic and industrial research,
reinforcing each other's capacity to solve
complex problems.
Definition of Innovation

Innovation is the ability to manage
knowledge creatively in response to
market-articulated demands and other
social needs.
Dr. Shahram Yazdani
Definition of Innovation

Innovation results from complex
interactions between research, design,
production and marketing that take place
in a web of interactive learning within and
among firms and other knowledge
organisations.
Dr. Shahram Yazdani
Definition of Innovation

“New combinations“ of previously not
connected ideas, knowledge,
technologies or markets.
Dr. Shahram Yazdani
Innovation as a matching engine
Dr. Shahram Yazdani
The Innovation Process
Basic
Research
Discovery
Propositional
Knowledge
Dr. Shahram Yazdani
The Innovation Process
Basic
Research
Discovery
Propositional
Knowledge
Applied
Research
Invention
Prescriptive
Knowledge
(Technology)
Dr. Shahram Yazdani
The Innovation Process
Basic
Research
Discovery
Propositional
Knowledge
Applied
Research
Invention
Prescriptive
Knowledge
(Technology)
Design &
Development
Patenting
Product &
Process
Dr. Shahram Yazdani
The Innovation Process
Basic
Research
Discovery
Propositional
Knowledge
Applied
Research
Invention
Prescriptive
Knowledge
(Technology)
Design &
Development
Patenting
Product &
Process
Dr. Shahram Yazdani
Marketing
Usage &
Application
The Definition

Dr. Shahram Yazdani
The phrase “system of innovation” is
used for describing the many
interactions among many
participating institutions,
organisations and firms, most of
which “formally” operate
independently of each other.
The Goal of an Innovation System

The goal of an innovation system is to
develop, diffuse and utilize innovations.
Dr. Shahram Yazdani
Elements of Innovation System
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Policy Bodies
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Regulatory Bodies
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Ethics bodies,
Registration, and patent offices
Research and Development Institutes
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Dr. Shahram Yazdani
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Central policy and financing agencies
Relevant Parliamentary or Governmental Committees
Government agencies for technology diffusion and incubation
Economic development agencies in government
Government Research institutes
Private non-profit Research Organizations
Corporate R&Ds
R&D Performing Firms
Business Enterprises
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Large local corporations
SMEs
Business associations
Elements of Innovation System
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Education and Training institutions
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Non-financial Support Organizations
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Public Technology Transfer Agencies
Public Innovation Advisory Agencies
Science and Technology Parks
Technology Incubators
Financial Support Organizations
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Universities
Technical Colleges
Primary and secondary schools
Commercial Banks
Venture capitalists
Organized Civil Society
Dr. Shahram Yazdani
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Labour unions, especially those dealing with technical change
NGOs delivering technical services Policy advisory bodies interested in
technical change
Professional and Academic Societies
Types of systems of innovation
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Over the nearly two decades since the
emergence of the national innovation
systems paradigm, a number of other
system level analyses have emerged.
The different systems frameworks can be
defined as follows:
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Dr. Shahram Yazdani
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National innovation systems
Regional innovation systems
Clusters
Sectoral innovation systems
Technological systems of innovation
Definition of NIS (Freeman, 1987)

“The network of institutions in the publicand private-sectors whose activities and
interactions initiate, import, modify and
diffuse new technologies”
Dr. Shahram Yazdani
Definition of NIS (Lundvall, 1992)

“The elements and relationships which
interact in the production, diffusion and
use of new, and economically useful
knowledge... and are either located within
or rooted inside the borders of a nation
state”
Dr. Shahram Yazdani
Key objectives of an innovation policy:
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Building an innovation culture
Enhancing technology diffusion
Promoting networking and clustering
Leveraging research and development
Responding to globalization
Dr. Shahram Yazdani
Functions of NIS (Galli and Teubal
1997)

Hard functions
1.
2.

R&D activities (public) and
the supply of scientific and technical services to third
parties (business sector and public administration).
Soft functions:
1.
2.
3.
4.
5.
diffusion of information, knowledge and technology;
Policy making;
design and implementation of institutions concerning
patents, laws, standards, etc.;
diffusion of scientific culture, and
professional coordination.
Dr. Shahram Yazdani
Functions of NIS (Rickne, 2000)
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Dr. Shahram Yazdani
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to create human capital;
to create and diffuse technological opportunities;
to create and diffuse products;
to incubate in order to provide facilities, equipment, and
administrative support,
to facilitate regulation for technologies, materials, and products that
may enlarge the market and enhance market access;
to legitimize technology and firms;
to create markets and diffuse market knowledge;
to enhance networking;
to direct technology, market, and partner research;
to facilitate financing; and
to create a labor market that [can be utilized].
Functions of NIS (Johnson 2001)
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Dr. Shahram Yazdani
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Supply incentives for companies to engage in innovative
work
Supply resources (capital + competence)
Guide the direction of search (influence the direction in
which actors deploy resources)
Recognize the potential for growth (identifying
technological possibilities and economic viability)
Facilitate the exchange of information and knowledge
Stimulate / create markets
Reduce social uncertainty (i.e. uncertainty about how
others will act and react)
Counteract the resistance to change that may arise in
society when an innovation is introduced (provide
legitimacy for the innovation)
Silicon Valley

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Dr. Shahram Yazdani
In sixty years, the 50 mile strip from San
Francisco-Berkeley to San Jose, California has
grown to over 7,000 electronics and software
companies with a market value of $ 450 billion.
Its 300,000 top scientists include some onethird born abroad.
A dozen new firms (and dozens of new
millionaires through IPOs) are created each
week.
Hubs of Technological Innovation
Dr. Shahram Yazdani
Analysis of the foci of various systems
of innovation frameworks
More
specific
Innovation
Clusters
Regional
Innovation
System
Place
National
Innovation
System
Sectoral
Innovation
System
Dr. Shahram Yazdani
Technological
Systems of
Innovation
Less
specific
Less specific
More specific
System Actors / Agent
Definition of Clusters
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
Dr. Shahram Yazdani
a concentration of competing,
collaborating and interdependent
companies and institutions which are
connected by a system of market and
non-market links.
customers, suppliers, competitors and
other supporting institutions such as
universities, colleges, research bodies,
financial institutions and the utilities
Analysis of the foci of various systems
of innovation frameworks
More
specific
Innovation
Clusters
Regional
Innovation
System
Place
National
Innovation
System
Sectoral
Innovation
System
Dr. Shahram Yazdani
Technological
Systems of
Innovation
Less
specific
Less specific
More specific
System Actors / Agent
Definition of regional innovation
system

A set of interacting private and public
interests, formal institutions and other
organizations that function according to
organizational and institutional
arrangements and relationships
conducive to the generation, use and
dissemination of knowledge.
Dr. Shahram Yazdani
Definition of regional innovation
system

Dr. Shahram Yazdani
This set of actors produce pervasive and
systemic effects that encourage firms
within the region to develop specific forms
of capital that is derived from social
relations, norms, values and interaction
within the community in order to reinforce
regional innovative capability and
competitiveness.
Analysis of the foci of various systems
of innovation frameworks
More
specific
Innovation
Clusters
Regional
Innovation
System
Place
National
Innovation
System
Sectoral
Innovation
System
Dr. Shahram Yazdani
Technological
Systems of
Innovation
Less
specific
Less specific
More specific
System Actors / Agent
Technology-specific Innovation System

This concept implies that there are many
technology specific innovation systems
within a country and that each
technological system is unique in its ability
to develop and diffuse new
technology.
Dr. Shahram Yazdani
(Jacobsson and Johnson 2000)
Boundary relations between National, Sectoral, and
Technology Specific Innovation Systems
National Innovation System
Dr. Shahram Yazdani
Boundary relations between National, Sectoral, and
Technology Specific Innovation Systems
National Innovation System
Sectoral
Innovation
System
Sectoral
Innovation
System
Sectoral
Innovation
System
Sectoral
Innovation
System
Sectoral
Innovation
System
Dr. Shahram Yazdani
Boundary relations between National, Sectoral, and
Technology Specific Innovation Systems
National Innovation System
Sectoral
Innovation
System
Sectoral
Technology Specific Innovation System
Sectoral
Innovation
Innovation
System
System
Sectoral
Innovation
System
Technology Specific
Innovation System
Sectoral
Innovation
System
Dr. Shahram Yazdani
Dynamics of technology specific
innovation systems

In the case of technology specific
innovation systems, the number of actors,
networks and relevant institutions is much
smaller than in a NSI, which reduces the
complexity.
Dr. Shahram Yazdani
The Changing Scientific Roots of
Innovation
Dr. Shahram Yazdani
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

Larger OECD economies. These NISs are doing
relatively better on innovation than in diffusion.
Scale effect might be present in explaining a
relatively high performance on innovation.
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

France, Germany, Italy, Japan, Korea,
Taiwan, UK, US
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

They are small open economies with a high degree of
specialization, and are much more concentrated on high tech
manufactures. Moreover they are doing very well in both
innovation, diffusion and intangible accumulation.
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

Finland, Ireland, Netherlands, Singapore,
Sweden, Switzerland
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

Economies tend to be very specialized in quite
different types of production, ranging from low to high
tech, and their services sectors play a very significant
role in their international specialization.
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

Denmark, Belgium, Luxembourg, Hong
Kong
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

Economies characterized by good natural resources endowments
(grazing land, oil and other minerals,...) and which display an
international specialization reflecting that fact. When comparing
with other developed NISs, these systems tend not to perform very
well both on innovation and diffusion.
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

Australia, New Zealand, Norway, Austria,
Canada, Spain
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

Hungary, Czech Republic, Malaysia, Malta,
Slovenia, Slovak Republic, Estonia, Greece,
Lithuania, Latvia, Poland, Portugal, Ukraine
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

Argentina, Brazil, Bulgaria, Chile, China, Columbia,
Cyprus, Egypt, India, Indonesia, Mexico, Peru,
Philippines, Russia, South Africa, Romania, Thailand,
Turkey, Venezuela
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani
Larger Developed
NISs
Developed
NISs
High Tech Smaller
NISs
Services Oriented
NISs
NISs
Natural Resources
Based NISs
Catching Up
NISs
Structuring NISs
Developing
NISs
Emerging NISs
Unformed NISs
Dr. Shahram Yazdani

Algeria, Bangladesh, Congo, Ethiopia, Iran,
Kenya, Sudan, Myanmar, Nigeria, Pakistan,
Tanzania, Viet Nam, Colombia,
Basic
Research
Applied
Research
Product Design &
The Activity
Development
Manufacturing
Dr. Shahram Yazdani
Propositional Prescriptive
Knowledge Knowledge
Basic
Research
Applied
Research
Engineering
Prototype
Pre-production
The Outcome
Prototype
Product Design &
The Activity
Development
Product
Manufacturing
Dr. Shahram Yazdani
Business Plan
Propositional Prescriptive
Knowledge Knowledge
Basic
Research
Applied
Research
Engineering
Prototype
New Firm
Pre-production
The Outcome
Prototype
Product Design &
The Activity
Development
Mature
SME
The Firm
Large Company
Product
Manufacturing
Dr. Shahram Yazdani
Researcher
Inventor
Entrepreneur
Business Plan
Propositional Prescriptive
Knowledge Knowledge
Basic
Research
Applied
Research
Engineering
Prototype
The Role
New Firm
Pre-production
The Outcome
Prototype
Product Design &
The Activity
Development
Businessman
Mature
SME
The Firm
Large Company
Product
Manufacturing
Dr. Shahram Yazdani
Thank You !
Any Question ?