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School of Public Policy

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Ivan Allen College of Liberal Arts

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Technology Policy and Assessment Center

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Bridging innovation system research and development studies: challenges and research opportunities

(Georgia Institute of Technology, 2009-10-08) Lundvall, Bengt-Åke ; Vang, Jan ; Joseph, K. J. ; Chaminade, Cristina

This paper links innovation system analysis to economic development. Both fields are young and interdisciplinary. The origins of research on innovation systems goes back to the early 1980s (Freeman 1982, Lundvall 1985, Freeman 1987) although it links to several predecessors such as Babbage (1832, 3rd edition), List (1941) or Marshall (1965). Development economics, on the other hand, took off in the 1940s (Rosenstein-Rodan 1943) but, since then, it has been going through so many dramatic changes that yet cannot be characterised as a ‘mature’ field. In the recent years, particularly in the framework of Globelics, there has been a renewed interest on applying the innovation system concept in developing countries. However, some critical questions remained unanswered: Is innovation system a useful concept for understanding and explaining what goes on in a developing country? Can it be used as a tool and a framework for agents and agencies in charge of designing public policy and business innovation strategies? The assumption behind this paper is that we can answer a conditional ‘yes’ to both of these questions and in the first part of this paper we try to specify the conditions and we do so in a dialogue with critiques developed within the community of evolutionary and development scholars. Another important question is how the approach fits into the historical and current trends in development economics. In the second part of the paper we give a brief assessment of how development economics has evolved and we draw some lessons for a research strategy. We will argue that the crisis of the first generation of development economics that was represented by scholars such as Nurkse, Myrdal, Hirschman, Singer and Sen has left a void in development economics that cannot be filled neither by mainstream neoclassical economics nor by ‘new growth theory’. We see the innovation system approach as a serious candidate to fill this void. The paper is structured as follows. In the next section we review the concept of innovation system (in dialogue with other alternative concepts like national learning systems), the different forms of studying innovation systems and the critical dimensions to consider when studying innovation systems, particularly in developing countries. Section 3 reviews the recent evolution of Development Economics, pointing out to the main weakness of this discipline, particularly when it comes to the analysis of the factors underlying under-development. Section 4 proposes and discusses how innovation system research can contribute to development economics and vice-versa. The paper concludes highlighting the main research gaps in innovation systems and development and proposes a future research agenda in this topic.
Innovation policies for development: towards a systemic experimentation based approach

(Georgia Institute of Technology, 2009-10-07) Chaminade, Cristina ; Lundvall, Bengt-Åke ; Vang-Lauridsen, Jan ; Joseph, K. J.

This paper sheds light on how to address, conceptualize and design innovation policies taking into account the specific characteristics of innovation systems in developing countries. The main purpose is to reflect on the policy implications of adopting the innovation system perspective to the particularities of developing countries. It is only recently that the concept of innovation has entered the development discourse and subsequently the agenda of policy-makers in developing countries and international aid organizations (UNCTAD 2007, UNIDO 2007, Farley et al. 2007). Implementing innovation policies in developing countries has proved to be a challenging task. Academics, development practitioners and policy-makers are still struggling with understanding how to conceptualize innovation in developing countries, identifying who are the beneficiaries of innovation processes and more generally conceptualizing innovation system policies in the South (Lundvall et al, 2006; Borras et al, 2008; Intarakumnerd and Chaminade, 2007). Furthermore, in designing innovation policies, policy makers often lack tools for identifying problems in the system and for selecting policies supporting innovation and competence building to tackle them. Innovation systems in developing countries are very heterogeneous. Each system is embedded in a unique socio-economic institutional context and, in this sense, it is not possible to identify innovation policies that could be applied to all developing countries. Neither is this the purpose of this paper. However, the growing literature of innovation systems in developing countries suggests that innovation systems in developing countries differ from the mature innovation systems that we might find in the developed economies. Substantial differences in components and relationships indicate that just imitating innovation policies practiced in developed countries is unlikely to deliver the expected results. The purpose of this paper is to point out to the main differences between (most) innovation systems in developing countries and (most) innovation systems in developed countries and discuss the implications that these differences have for the identification of problems and opportunities. There are different analytical frameworks for the identification of these problems. As opposed to the market-failure model proposed by the neoclassical analysis (Arrow, 1962) scholars in the system of innovation approach, propose to focus on systemic failures (Smith, 2000, Woolthuis et al, 2005, Chaminade and Edquist, 2006). In this paper we investigate how far this framework is useful for designing innovation policies in developing countries. The reminder of this paper is structured as follows: First, we explain why innovation policy is relevant in developing countries. Then, we introduce what is meant by systemic problems, and apply the concept to developing countries. One of our main conclusions is the need to combine the concept of systemic failures with a pragmatic experimental approach. The main features of such experimental approach are presented in the last section of the paper.
China's system and vision of innovation: analysis of the national medium- and long-term science and technology development plan (2006-2020)

(Georgia Institute of Technology, 2008-09) Gu, Shulin ; Liu, Ju ; Lundvall, Bengt-Åke ; Schwaag Serger, Sylvia

China has been characterised by extremely high rates of economic growth for the last several decades. This growth originates from a transformation of the institutional set up giving more room for regional initiative, private ownership and use of market mechanisms. Regional political resources have been aligned to globally oriented market resources and this alignment has established a very specific and unique mechanism of capital accumulation resulting in extremely high savings and investment rates. The downside of this growth model is its intensive exploitation of human and natural resources. While the rate of capital accumulation is extremely high (40-50% of GNP takes the form of gross savings and investment) non reproducible natural and social capital are suffering in the process of growth. Social and regional inequality has reached critical levels and so have ecological imbalances. The central leadership of China are aware of these problems and recent policy documents put strong emphasis on ‘harmonious development’ and ‘independent innovation’ (Gu and Lundvall 2006). In China the transformation of the national innovation system is now regarded as a major step toward a necessary renewal of the growth model. This paper presents a general framework for the analysis of national innovation system, a historical overview over the development of China’s production and innovation system and ends up with a discussion of the National Medium- and Long-term Science and Technology Development Plan (2006-2020). We conclude that the plan represents steps forward in important respects. This is true for the emphasis on need driven innovation policy with focus on energy and environment, the stronger role for enterprises as hosts of R&D-efforts and innovation, a more active role for public procurement and a more realistic understanding of the limits of science as source of innovation. But the plan has some weaknesses and needs to be complemented with other initiatives. There is exaggerated technology optimism and the need for institutional and organisational change at the level of the enterprise is underestimated. In some cases the policy instruments and tools seem to be inadequate when related to the very ambitious targets set by the plan. Especially problematic is the absence of an explicit analysis of the regional dimension and the need to upgrade working life in terms of skills and organisation. The fact that a knowledge based strategy, if left to itself, leads to further social and regional polarisation is not taken into account. Finally how the idea of ‘indigenous innovation’ will be implemented is crucial both for the success of the plan and for China’s relationships with the rest of the world.
Developmental university systems: empirical, analytical and normative perspectives

(Georgia Institute of Technology, 2008-09) Brundenius, Claes ; Lundvall, Bengt-Åke ; Sutz, Judith

It has become almost trivial to assert that in the knowledge society universities are important institutions. This consensus notwithstanding, questions like in what sense and for whom those institutions are important are far from receiving unanimous answers. Should the major function be to promote higher education in order to serve all sectors of society or should the emphasis be to engage in research and what are the relationships between the two types of activities? And what should a ‘third mission’ encompass: A broad interaction with society or just an interaction with the business sector aiming at promoting technical innovation in high technology. Debates are particularly entangled in developing countries, partly due to a strong presence of international advice alongside the positions held by local actors, partly due to the level of the challenges that such countries and their universities are facing. Both in the developed and the developing countries the main emphasis is now on how universities may serve industry through direct flows of information from on-going research. To illustrate, in a recent book with the title ‘How Universities Promote Economic Growth’ edited by World Bank Economists (Yusuf and Nabeshima 2007) the only dimension covered is the formation of university-industry links related to research. But it is obvious that universities contribute to economic growth and development through other mechanisms, not least through the flow of graduates into the labor market. It is also important to see how universities share functions and responsibilities with other institutions involved in knowledge production and knowledge diffusion. This implies that the most relevant level of analysis may be, not the single university, but the ‘university system’ seen as an integrated element in a broader national innovation system.
Innovation System Research: Where it came from and where it might go

(Georgia Institute of Technology, 2008) Lundvall, Bengt-Åke

When the first edition of Lundvall (1992) and of Nelson (1993), the concept ‘national innovation system’ was known only by a handful of scholars and policy makers. Over a period of 15 years there has been a rapid and wide diffusion of the concept. Giving ‘Google’ the text strings ‘national innovation system(s)’ and ‘national system(s) of innovation’ you end up with almost 1.000.000 references. Going through the references you find that most of them are recent and that many of them are related to innovation policy efforts at the national level while others refer to new contributions in social science. Using Google Scholar (May 2007) we find that more than 2000 scientific publications have referred respectively to the different editions of Lundvall (2002) and Nelson (1993). Economists, business economists, economic historians, sociologists, political scientists and especially economic geographers have utilized the concept to explain and understand phenomena related to innovation and competence building.1 In this paper we argue that during the process of diffusion there has been a distortion of the concept as compared to the original versions as developed by Christopher Freeman and the IKE-group in Aalborg. Often policy makers and scholars have applied a narrow understanding of the concept and this has gives rise to so-called ‘innovation paradoxes’ which leave significant elements of innovation-based economic performance unexplained. Such a bias is reflected in studies of innovation that focus on science-based innovation and on the formal technological infrastructure and in policies aiming almost exclusively at stimulating R&D efforts in high-technology sectors.
From Economics of Knowledge to the Learning Economy

(Georgia Institute of Technology, 2008) Lundvall, Bengt-Åke

This chapter is about the production, diffusion and use of knowledge seen in an economic perspective. Fundamental distinctions between tacit and explicit knowledge and between knowhow, know-why, know-what and know-who are related to distinctions between public/private and local/global knowledge. It is argued that the idea of the economy as being knowledge based in its current stage is misleading and that it is more enlightening to assume that we have moved into a learning economy where interactive learning is a key to economic performance of firms, regions and nations. This is one reason why a narrow economics perspective is insufficient. The most serious weakness of standard economics is that it abstracts from the fact that agents are more or less competent and that learning processes enhancing competence are fundamental for the economic performance of organisations and regions. When it comes to understand industrial dynamics in the learning economy it is necessary to bring in other disciplines than economics in the analysis.
China's Innovation System and the Move Towards Harmonious Growth and Endogenous Innovation

(Georgia Institute of Technology, 2008) Gu, Shulin ; Lundvall, Bengt-Åke

Observers around the world are impressed by the rapid growth of China’s economy, some with hope and others with fear. Some hope that China will offer the unique experience of successful economic growth and catch-up under the new WTO regime; some see the rise of China as a threat to the current world order and to the powers that currently dominate the world in terms of economy, technology and politics. While outside observers tend to focus on the success story of unprecedented growth policy documents and recent domestic debates in China have pointed to the need for a shift in the growth trajectory with stronger emphasis on ‘endogenous innovation’ and ‘harmonious development’. In this paper we make an attempt to capture the current characteristics of China’s production and innovation system; how they were shaped by history and what major challenges they raise for the future. In section 2 we present data on China’s post-war growth experience. We show how the shift in policy toward decentralization, privatization and openness around 1980 established an institutional setting that, together with other factors such as the presence of a wide ‘Chinese Diaspora’, has resulted in extremely high rates of capital accumulation especially in manufacturing. The section ends with pointing to some inherent contradictions in the current growth pattern. In section 3 we take a closer look at how the policy shift in the eighties affected the institutional framework shaping R&D activities in particular, and learning and innovation in general. The attempt to break down the barrier between the science and technology infrastructure on the one hand and the production sphere on the other was highly successful as compared to the development in the former Soviet Union. But the original intentions were not fully realized. Rather than establishing markets for science and technology, the reforms led knowledge producers to engage in mergers or forward vertical integration and they became to a large extent involved in production activities. Referring back to the analysis of the sustainability of the growth model and the unfinished reform of the innovation system Section 4 introduces the recent decision by China’s government to promote endogenous innovation and harmonious development. Applying the innovation system perspective we argue that these broadly defined objectives can be realized only through a strategic adjustment towards ‘innovation driven growth and learning based development’ and we discuss what important policy elements such a strategic adjustment needs to encompass. In section 5 we conclude that imperfections in the division of labour and in the interaction between users and producers of knowledge and innovation that was behind the reforms of the eighties remain central concerns. In order to raise the long-term efficiency of the massive accumulation of production capital it is necessary to promote the formation of social capital and to be more considerate when exploiting natural capital.
Forms of Knowledge, Modes of Innovation and Innovation Systems

(Georgia Institute of Technology, 2008) Berg Jensen, Morten ; Johnson, Björn ; Lorenz, Edward ; Lundvall, Bengt-Åke

Inspired by the concepts tacit and codified knowledge introduced by Polanyi, this paper makes a distinction between two modes of innovation. On the one hand there are innovation strategies (Science, Technology, and Innovation, STI-mode) that give main emphasis to promoting R&D and creating access to explicit codified knowledge. On the other hand there are innovation strategies (Doing, Using, and Interacting, DUImode) mainly based on learning by doing, using and interacting. We show that firms using mixed strategies that combine a strong version of the STI-mode with a strong version of the DUI-mode excel in product innovation. The distinctions made and the results obtained have important implications for innovation policy and for the analysis of innovation systems. They help to avoid biased approaches exaggerating the role of science-based innovation while also indicating limits for experience-based innovation strategies.
Modes of Innovation, Innovation Systems and Economic Development

(Georgia Institute of Technology, 2005) Lundvall, Bengt-Åke
The Socio-Economics of Knowledge and the Learning Economy

(Georgia Institute of Technology, 2004) Lundvall, Bengt-Åke