1. Conceptual Framework of National Innovation Systems
A. “National Innovation Systems”
(Summary) A national innovation system pertains to the network of private and public institutions, located within or rooted inside the borders of a nation state, whose interactions create, store and transfer the knowledge, skills and artefacts which define new technologies. As a system, it determines the rate and direction of technological learning in a country and provides the framework within which governments form and implement policies to influence the innovation process. As economic activities become more and more knowledge-intensive, analysis of national innovation systems (NIS) is increasingly becoming a key component in the drive towards economic development. Analysis of NIS focuses on knowledge flows and involves tracing the links and relationships among industry, government and academia in the development of science and technology. Innovation is the result of a complex interaction between various actors and institutions in NIS. Technical change does not occur in a perfectly linear sequence, but through feedback loops within this system. There are many channels through which knowledge can flow between institutions. Among them are: 1) interactions among enterprises i.e. technical collaboration among enterprises as well as their more informal interaction; 2) interactions among enterprises, universities and public research laboratories as seen through the support provided by industry to the academe and other research institutes for their basic research and the ability of the industry to access this knowledge ; 3) diffusion of knowledge and technology to firms through adoption of new technologies, equipments and machinery developed elsewhere; and 4) movement of personnel and the knowledge they carry with them i.e. tacit knowledge. There are various analytical approaches to NIS which includes the following: 1) innovation surveys which question firms on their sources of knowledge relevant to innovation; 2) cluster interactions which look at the vertical and horizontal relationships and interactions in successful clusters of industries (which usually evolve around key technologies, shared knowledge or skills or producer-supplier relationships); and 3) international knowledge flows which recognizes the impact of the globalization of industry and internationalization of production, research and other firm activities on innovation. For policy makers, an understanding of the NIS can help identify leverage points for enhancing innovative performance and overall competitiveness. It can assist in pinpointing mismatches within the system, both among institutions and in relation to government policies, which can thwart technology development and innovation. It also directs the attention of policy makers to possible systemic failures which may impede the innovative performance of industry. New types of policies are needed to address systemic failures, particularly policies directed to networking and improving firm absorptive capacities
(Reaction) As highlighted by the NIS approach, innovation is a product of the flow of knowledge in a complex system of interacting and interdependent elements i.e. institutions, enterprises and people. As such, there cannot be generic prescriptions in improving a nation’s innovation performance since innovation is the product of the nation’s specific context and therefore, requires a thorough examination of this context and the relationships in it (to diagnose flaws or weaknesses or bottlenecks in the system) before effective solutions can be formulated.
B. “National Innovation Systems: Overview and Country Cases”
(Summary) NIS ha a great potential both as a source of understanding of the roots and primary causes of the gulf in economic development, as well as a powerful conceptual framework that can produce policies and institutions capable of bridging that gulf. The NIS approach arose from the needs of policy makers and students of innovation to account for differential rates of technological innovation and economic development experienced by industrialized countries, which the linear model of science and technology ‘push' could not account for. It has been pointed out that innovation is a gradual and cumulative process which is not linear “but involves continuous interactivity between suppliers, clients, universities, productivity centers, standard setting bodies, banks and other critical social and economic actors” and is therefore situated within a larger system that both enables and draws on the innovative process. The NIS approach focuses on the structure and knowledge flow in this system. It is useful framework in cataloging and analyzing innovation as it appears within national systems, identifying best-practices, and advocating policies. As argued by experts, successful economic and industrial development is intimately linked to a nation’s capacity to acquire, absorb and disseminate modern technologies. As such, developing countries can use the NIS approach to formulate “technology catch-up” strategies. Contrary to neo-classical economics, the NIS approach shifts the focus from allocation to innovation and from making choices to learning. This is why in the NIS context, it is important for firms to gain a thorough understanding of how and why a technology works over mere physical acquisition in order to have comprehensive command of a particular technology. Enhancing this ability to learn and implement technologies and associated practices (i.e. absorptive capacity) is therefore a priority area for developing countries in the NIS perspective as it “generates opportunities of learning that usually go far beyond production capability and is one of the bases for the development of the technological capability.” A developing country must also acquire foreign technologies in view of using, diffusing (throughout the country) and improving these technologies (which should ultimately lead to development of new technologies). Since “an economy’s absorptive capacity depends heavily upon the level of education and training”, it is also imperative for developing countries to invest in its human capital.
(Reaction) An important aspect of the NIS approach is the way it situates the innovation process in the larger social, political, cultural and economic context of a nation. Innovation is not a purely “technical” undertaking. Its success or failure does not just depend on technical knowledge but also on the nature and structure of the system where it is taking place. In other words, the political-economic system is as much a determinant of innovation performance as the level of technical knowledge and expertise is.
2. The Roles of Academe, Defense Industries and Research Organizations
A. “Universities in National Innovation Systems”
(Summary) Universities, which now combine the functions of education and research, play important roles in the national innovation systems of modern industrial and industrializing states (especially, the so-called of “knowledge-based” economies). They act as sources of: 1) fundamental knowledge; 2) trained “knowledge workers”; 3) ideas flowing from both basic and more applied research activities; and 4) occasionally, industrially relevant technologies. The economically important "outputs" of university research include: 1) scientific and technological information (which can increase the efficiency of applied R&D in industry by guiding research towards more fruitful departures); 2) equipment and instrumentation (used by firms in their production processes or their research); 3) skills or human capital (embodied in students and faculty members); 4) networks of scientific and technological capabilities (which facilitate the diffusion of new knowledge); and 5) prototypes for new products and processes. It is therefore of prime importance to develop strong linkages between universities and the various institution in the NIS to improve national innovative and competitive performance. It is also crucial for governments to realize that universities can be instruments for knowledge-based economic development and change and thus, increase in the rate of transfer of academic research advances to industry and application of these research advances by domestic firms must be sought as part of broader efforts to improve national economic performance. However, it is equally important to realize that although universities fulfill broadly similar functions in the innovation systems of most industrial and industrializing economies, the importance of their role varies considerably, and is influenced by the structure of domestic industry, the size and structure of other publicly funded research performers, and numerous factors. Furthermore, there are also significant differences in the relationship between university and different sector of the industry in terms of the impact academic research on industrial innovation. For instance, university research affect industrial innovation in the biomedical sector, especially biotechnology and pharmaceuticals, more significantly and directly than other sectors, where advances in academic research may need to incorporated into the applied sciences (such as chemical engineering, electrical engineering and material sciences) first before they can be applied. It is therefore important for governments to adopt a more systematic approach in analyzing and facilitating interaction between universities and the industry rather than simply emulating policies from other nations which may not be applicable in their own context.
(Reaction) By virtue of their traditional role as centers of learning and higher education, universities already play a vital role in any nation’s NIS. But beyond this, universities can (and perhaps, must) become primary actors in a nation’s NIS and take a more active role in driving innovation (rather than being passive producers and transferor of knowledge).
B. “Conceptualizing the Role of Defense Industries in National Systems of Innovation”
(Summary) “A national system of innovation can be defined as 'the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies'”. This definition assumes the national boundary and highlights the systems approach of NIS, its emphasis on institution and its inclusive treatment of innovation as including technology transfer and diffusion. The strength of the NSI approach lies in: 1) the weight it gives to institutions and their interactions; 2) its focus on interactive processes and feedback loops; and 3) its utility in analyzing technology policy by drawing attention to the systemic features of the innovation process and their variation across countries. The main weaknesses of the NIS approach are its being both too broad and insufficiently theorized. Consistent to the principle of the NIS approach that innovation systems vary according to particular features of their institutional settings, the importance of the defense industry as a source of innovation vary across countries where in some countries the role played by the military as funder and customer for new technology have been negligible while in other countries, where military R&D has dominated government spending for R&D, the defense sector and its constituent institutions have been a central site for innovation. In the latter group of countries, the defense industry is characterized by the interlocking and self-reinforcing interests of the military, the defense contractors, and members of Congress, who all have reasons to support high levels of government spending on new weapons development. The institutions and their practices, plus the fact that the defense industry has been highly functional for its constituent members, made it remarkably robust. It has been noted that the defense industry in these countries have produced technological innovations and that over time many of these innovations have found their way into civilian products. In particular, large-scale military spending, either for R&D or procurement or both, in the U.S. benefited civilian technology like aircraft design, space technology, nuclear power, and solid-state electronics through cross-subsidization. Management and accounting innovations can also trace to developments within the U.S. defense sector, especially the techniques for managing large-scale, complex programs. It is also important to note that analysis of the role of the defense industry in innovation systems fits well in national boundary inherent in the NIS approach since security is the state's primary justification for military R&D programs and therefore, it makes sense for the state to ensure self-sufficiency and security of supply. As such, many countries have protected their defense industries against foreign competition whenever possible, even when the result was higher costs or less advanced equipment.
(Reaction) The U.S. experience on how investments in its defense industry lead to technological innovations that had important civilian applications provides a good opportunity to examine and learn the dynamics that enabled it.
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