Macro-economics of
Innovation II
Nelson and Rosenberg (1993)
Archibugi et al. (1999)
National Innovation System 1
• Institutions and mechanism supporting
technical innovation.
• Actor network:
• Enterprises, Universities/research
institutes, Government (policies and
regulations), Suppliers, Customers and
Competitors.
National Innovation System 2
• The slow down in the growth of advanced
countries since the 1970s.
• The rise of Japan, South Korea and Taiwan
as competitors.
• Techno-nationalism: belief that the
technological capabilities of a nation’s firms
are a key source of their competitive strength
and that these capabilities are in a sense
national, and can be built by national action.
• Source: Nelson and Rosenberg (1993)
NIS 3
• Freeman, Lundvall and Nelson early users of
the concept NIS.
• Now applied at the regional and technological
levels also.
• “Technological systems” of Carlsson: systems
can be specific to particular technology fields
or sectors. Sectors and technologies have
their own dynamic.
NIS 4
• ‘Nationhood matters and has a pervasive
influence’ (Nelson).
• Sectors and technological systems within a
nation have a powerful shaping of influence
on the structure and dynamic of NIS, while
national contexts have important influences
on sectoral conditioning and performance.
• Prior institutional endowments of a NIS may
help of hinder innovation activity and
performance within particular sectors of a
national economy (Archibugi et al, 1999).
NIS Concepts 1
• NIS as ‘the network of institutions in the
public and private sectors whose activities
and interactions initiate, import, modify and
diffuse new technologies’ (Freeman).
• Lundvall: NIS includes ‘organizational and
institutions involved in searching and
exploring - such as R&D departments,
technological institutions and universities’
(narrow definition).
NIS Concepts 2
• Lundvall: Includes ‘all parts and aspects of
economic structure and the institutional setup affecting learning as well as searching and
exploring - the production system, the
marketing system and the system of finance
present themselves as sub-systems in which
learning takes place (broad definition).
• Innovation: Some focus on technological
innovations (Carlsson & Stankiewicz) and
some others include institutional, social and
educational innovations (Lunvall, Freeman).
NIS Concepts 3
• Nelson and Rosenberg: Innovation
encompasses ‘the processes by which firms
master and get into practice product designs
and manufacturing processes that are new to
them, if not to the universe or even to the
nation’.
• Being a leader vs. Follower is blurred.
• The first in the market need not derive the
largest returns on innovation.
• Innovation is linked to economic performance
and so broader.
NIS Concepts 4
• System: Boulding’s definition of a system is
‘anything not in chaos’. A system is
constituted by a number of elements and by
the relationship between these elements. In
NIS no references to systems theory.
• National: Two dimensions (national - cultural
and Étatist - political). The two controlled by a
central authority is an utopian concept.
• Systems of innovation that sectoral as well as
different geographical levels (Archibugi et al).
NIS Commonalities
• Core characteristics:
• Innovation and learning, Holistic and interdisciplinary nature,
• Inclusion of historical perspective, Differences
between systems and non-optimality,
• Inter-dependence and non-linearity, Inclusion
of product and organizational innovations,
• Central role of institutions, Conceptually
diffuse nature,
• Conceptual constructs, but not theory
(Edquist).
SI and Learning
• Learning a key element in connectivity.
• Learning at all levels: from the individual
through to the firm and organization, on to
inter-firm and inter-organizational learning,
institutional learning, cross-institutional
learning and on through to the whole system the learning economy.
• However, the notion that what is learnt will be
exactly the same for each individual, firm,
organization and institution is not correct
(Archibugi et al.)
SI - Weaknesses 1
• Learning and interaction is vital, but little
discussion on the nature of flows and
linkages between different actors.
• Growth can result from within the individual
actor/element or from increased flows
between them. Similarly all the growth in a
system may stay inside it or flow out
depending on the openness of the system.
Alteration of these two dimensions can
change the growth characteristics and
dynamics radically (Archibugi et al.)
SI - Weaknesses 2
• SI is a ‘top-down’ view of firms’ innovation
activity.
• SI tend to consider individual firms as simply
reacting to changes that are occurring within
the wider system - or within the more specific
network or institutional level.
• SI does not account for individual firms/actor
influencing the system
• (Archibugi et al.)
SI and Globalization 1
• Key Questions:
• If the globalization of technological innovation
is occurring, will it lead to the eventual
dissolution of NIS?
• Will national systems of innovation converge
towards more similar structures due to the
forces of globalization?
• Is globalization eroding importance of
innovation policies at the national level?
• Source: Archibugi et al (1999)
SI and Globalization 2
• Globalization facilitates transmission of bestpractice techniques across countries. But, it is
not an automatic process.
• Increased flow of goods and services enable
firms to acquire complementary inputs
required for converting basic knowledge into
products. However, firms should have
‘absorptive capacity’. At the national/regional
level a critical mass or institutional or
technological infrastructure is necessary to
harness external knowledge.
SI and Globalization 3
• Location-specific advantages continue to be
important as is evidenced by the firms’
decisions relating to foreign direct investment.
• International distribution of production and of
technological capabilities is becoming more
sectorally differentiated. International division
of labour shows that each is country is
focusing on a smaller number of selected
industries and relying on trade for others.
• (Archibugi et al, 1999)
Technical advance: processes
and institutions 1
• In the modern era most technologies are
associated with various fields of science that
illustrate them and provide invaluable
understanding and techniques to advance
technology. However, innovation remains a
trial and error.
• New science gives rise to new technologies
(a view). But, the link between science and
technology is more complex. (Nelson and
Rosenberg)
Technical advance: processes
and institutions 2
• Electrical equipment industry is a result of
development of theoretical and experimental physics
in the 19th century. The emergence of electricity as a
new source of power resulted in a wide range of new
products such as incandescent light, telephone,
gramophone, which have their origin in scientific
research that began with Faraday’s demonstration of
electromagnetic induction in 1831.
• On the other hand, the industries producing chemical
products or using chemical reactions in
manufacturing other products (tanning & dying)
existed long before the rise of modern science.
(Nelson and Rosenberg)
Technical advance: processes
and institutions 3
• A systemic body of scientific knowledge about chemistry grew in
the mid 19th century. In 1860s, Kekule managed to break the
modular structure of benzene, a major significance for
thousands of aromatics, including dyes and drugs, for all of
organic chemistry.
• The rise of scientific understanding supporting aircraft design
reflects a similar story.
• Therefore, new technologies have given rise to new sciences is
equally true.
• Limits of science and learning-by-doing (design and incremental
innovations (Nelson and Rosenberg)
Technical advance: processes
and institutions 4
• Institutions:
• Firms and industrial research laboratories since the beginning of
World War I.
• Modern university research (basic research) and national
research institutions (applied research). Max Planck Institutes
(basic research) and Fraunhofer Laboratories (applied research)
in Germany.
• Inter-industry differences in technological advancement.
• Technological communities and NIS. (Nelson and Rosenberg)