Innovation System Research and Policy: Where it came from and where it should go


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Innovation System Research and Policy:

Where it came from and where it should go


Bengt-Åke Lundvall,

Department of Business Studies,

Aalborg University

School of Economics and Management

Tsinghua University

Second version of draft paper for Kistep Forum on Innovation

Seoul, December 1, 2006

Innovation System Research and Policy:

Where it came from and where it should go1

1. Introduction

Today it is possible to follow the diffusion of new concepts in time and space by using search machines. Giving ‘Googles’ 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.

In this paper we demonstrate 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. The distortion gives rise to so-called ‘innovation paradoxes’ which leave significant elements of innovation based economic performance unexplained. It is reflected in studies of innovation that focus only on science-based innovation and on the formal technological infrastructure and in policy aiming almost exclusively at stimulating R&D-efforts in high technology sectors.2

Without a broad definition of the national innovation systems based upon an understanding of individual, organizational and inter-organizational learning it is impossible to establish the link from innovation to economic growth. A double focus is needed where attention is given also to institutions that support competence building such as institutions regulating labor markets, education activities and work organization. This is especially important in the current era of a globalizing learning economy (Lundvall and Johnson 1994; Lundvall and Borràs 1998; Archibugi and Lundvall 2001). In this new context it is necessary to broaden innovation policy so that it stimulates both science- and experience-based learning.3

Section 2 takes a brief look at how the NSI-concept originated and developed.4 Section 3 defines analytical challenges. Section 4 presents basic principles for the design of innovation policy in ‘the globalising learning economy. The paper ends with the concluding section 5. This last section lists some tentative ideas on how the framework presented relates to the current situation of the Republic of Korea .

2. A concept with roots far back in history

2.1 Milestones in the development of the innovation system concept

Basic ideas behind the concept ’national systems of innovation’ go back to Friedrich List (List 1841). His concept ’national systems of production’ took into account a wide set of national institutions including those engaged in education and training as well as infrastructures such as networks for transportation of people and commodities (Freeman 1995). The first written contribution that used the concept ‘national system of innovation’ is, to the best of my knowledge, an unpublished paper by Christopher Freeman from 1982 that he worked out for the OECD expert group on Science, Technology and Competitiveness (Freeman 1982, p. 18).5

In the beginning of the eighties the idea of a national system of innovation was immanent in the work of several economists working on innovation research. Richard R. Nelson together with other US-scholars had compared technology policy and institutions in the high technology field in the US with such patterns in Japan and Europe (Nelson 1984). SPRU at Sussex University pursued several studies comparing industrial development in Germany and the UK covering for instance differences in the management of innovation, work practices and engineering education.

The idea of a national system of innovation was immanent also in the research program pursued by the IKE-group at Aalborg University.6 In several working papers and publications from the first half of the eighties we referred to ’the innovative capability of the national system of production’. The handier ’innovation system’ appears first time in Lundvall (1985) but without the adjective national. Again, it was Chris Freeman who brought the modern version of the full concept ‘national innovation system’ into the literature. He did so 1987 in his book on innovation and innovation policy in Japan (Freeman 1987).

When Freeman collaborated with Nelson and Lundvall in the IFIAS-project on technical change and economic theory the outcome was a book (Dosi et al, eds. 1988) with a section with several chapters on ’national systems of innovation’ (Freeman 1988; Lundvall 1988; Nelson 1988). After followed three major edited volumes on the subject (Lundvall 1992; Nelson 1993; Edquist 1997).7

2.2 Innovation system as a synthesis of innovation research

The innovation system concept may be used as a practical tool for designing innovation policy. But it might also be seen as a synthesis of analytical results produced by scholars working on innovation. In this section we give a brief review of the history of innovation research with focus on how different scholars have contributed to the modern understanding of innovation systems.

Innovation research starting with Adam Smith

The idea that innovation matters for economic development is present in the work of the classical economists. Innovation plays an important role in the Introduction to Adam Smith’s classical work on the Wealth of Nations. It is especially interesting to note that he identifies and distinguishes two different modes of innovation (see Box 1 above). The first mode is experience-based and I will refer to it as the DUI-mode – learning by doing, using and interacting. The other mode refers to science based search processes and I will refer to it as the STI-mode – science is seen as the first step toward technology and innovation. We will argue that this distinction is fundamental when it comes to analyze modern innovation systems and also when it comes to design management strategy as well as public policy.8

Box 1:

Adam Smith (1776: p. 8) on the DUI-mode of learning:

A great part of the machines made use of in those manufactures in which labour is most subdivided, were originally the inventions of common workmen, who, being each of them employed in some very simple operation, naturally turned their thoughts towards finding out easier and readier methods of performing it. Whoever has been much accustomed to visit such manufactures, must frequently have been shown very pretty machines, which were the inventions of such workmen, in order to facilitate and quicken their own particular part of the work. In the first fire-engines, a boy was constantly employed to open and shut alternately the communication between the boiler and the cylinder, according as the piston either ascended or descended. One of those boys, who loved to play with his companions, observed that, by tying a string from the handle of the valve which opened this communication, to another part of the machine, the valve would open and shut without his assistance, and leave him at liberty to divert himself with his play-fellows. One of the greatest improvements that has been made upon this machine, since it was first invented, was in this manner the discovery of a boy who wanted to save his own labour.

Adam Smith (1776: p. 9) on the STI-mode of learning:

All the improvements in machinery, however, have by no means been the inventions of those who had occasion to use the machines. Many improvements have been made by the ingenuity of the makers of the machines, when to make them became the business of a peculiar trade; and some by that of those who are called philosophers or men of speculation, whose trade it is not to do any thing, but to observe every thing; and who, upon that account, are often capable of combining together the powers of the most distant and dissimilar objects.*38 In the progress of society, philosophy or speculation becomes, like every other employment, the principal or sole trade and occupation of a particular class of citizens. Like every other employment too, it is subdivided into a great number of different branches, each of which affords occupation to a peculiar tribe or class of philosophers; and this subdivision of employment in philosophy, as well as in every other business, improves dexterity, and saves time. Each individual becomes more expert in his own peculiar branch, more work is done upon the whole, and the quantity of science is considerably increased by it.

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