Transcript STRUCTURAL REFORMS & NATIONAL SYSTEMS OF INNOVATION …

National Systems of Innovation: the
Connections between Neo-schumpeterians
and ECLA literatures
José E Cassiolato
UFRJ
Globelics - Lisbon 27/05/2004
Chris Freeman on development and NSI:

Long waves and economic development, paper presented
at the Conference on New Technologies and
Development, University of Campinas, Brazil, 1982.

National systems of innovation: city state, national,
continental and sub-national , 1998.
National Systems of Innovation
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The NSI literature:
– importance of national policy frameworks in economic development
(Friedrich List)
– importance of institutions
– economy as a social process (Marx)
– focus: production based on human creativity (the Other canon).

It has evolved from two basic ideas, supported from empirical studies
of innovation
– 1 - firm-level studies of inter-dependence between producers and
users of technology, emphasizing sustained user-producer interactions in
technology creation, facilitated by industrial specialization and common
cultural and policy environments.
– 2 – Chris Freeman: Japanese post-war industrial and innovative
performance.
NSI
ECLA
Reinert, E. and Daastøl, A. (2000) The Other Canon: The History of Renaissance Economics.
in: Reinert, Erik S. (Editor), Evolutionary Economics and Income Inequality, Edward Elgar, 2000.

Mainstream canon
– wealth originates from material sources: from nature, i.e. land,
physical labour and capital.
– Accumulation of these assets takes place through trade and war.
– This accumulation is static, i.e. more of the same.
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The other canon
– wealth originates from immaterial sources: from culture; i.e.
Man’s creativity and morality.
– Accumulation of assets takes place through innovations
cumulatively changing Man’s stock of knowledge and of his tools
(technology).
– Accumulation is dynamic, i.e. more of something new and
qualitatively different.

Mainstream canon
– focus of analysis is barter, consumption and accumulation (Man
the Trader and Consumer).
– fundamentally atomistic and mechanical in its analytical approach
( the Aristotelian idea of the complete independence of politics
from all other aspects of social life)
– unit of analysis is the atomistic unit (in economics: the individual).
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The other canon
– focus of analysis is on production and innovation, productivity
being the pineal gland bringing together mind and matter (Man the
Creative Producer).
– fundamentally holistic, organic and synthetical (from synthesis) in
its approach (Plato’s Republic)
– units of analysis includes both individuals and their institutions in
time and space.
NSI, the New Techno-economic Paradigm and
Institutional Change

The structural adaptation of the economy will be a slow and painful
process if left to itself in a period of radical change

Many of the economic and technical advantages that the new technoeconomic paradigm make possible depend on extensive structural
change and institutional and social innovations

There is usually more resistance to institutional change than to
technical change and that this may lead to a postponement of important
institutional and organisational innovations

Freeman and Perez 1988; Lundvall, 1992
What institutional change?

Colonialism served to eviscerate existing institutions in the affected countries, which is
almost all of the developing world . It tried to graft on the existing cultures, foreign
institutions and ideas, but in a process of imposition. In which control and authority lay
outside and not within, it is not surprising that the graft did not hold. What was left in its
place was a void – the old was destroyed, but not really viable had been created in its
stead. Worse still, in all too many countries, they were left without the human capital
required to create an alternative, let alone to adapt to the rapid changes that marked the
latter half of the twentieth century…

The colonial mentality has evolved. While no one today speaks, like Kipling, of the
‘white mans burden,’ I have too often sensed a paternalism that is but a close cousin
…no one would claim that the playing field – in international trade negotiations, debt
restructuring or any of the multitude of other arenas in which the developed and
developing countries interact – is a level one. Economic power relations play
out with potentially no less disastrous consequences for developing
countries

Stiglitz (2000)
Institutional Development:
Best Practice or Local Development?

A ‘best practice’ might work well in some countries but fail miserably when
recommended in other contexts. In questions of institutional development, it is
very difficult to know a priori just how general is a ‘best practice’. Robert Cole
studied the diffusion in industry of quality circles and Japanese-style quality
methods. The process of local adaptation was so extensive and creative that it
amounted to a local reinvention of ‘global best practice’ ... The significance of
this point of view is that contrary to the simplistic use of the term by many
economists, there is, in principle, no such thing as diffusion of best practices,
practices that evolve in the course of their diffusion. Contrary to popular
wisdom, there are times when it pays to reinvent the wheel
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Stiglitz (2000)
Development and Technical Change - The
General Paradox

In the last 50 years
– Economic development has not been typically thought
of in terms of technical change by development
economists,
– Economic historians have always emphasised the role
of technological change in the growth of developed
countries (Landes 1969 and Rosenberg 1976),
NSI and development: the co-evolution of
micro, meso and macroeconomic forces

At micro level: learning strategy of each individual firm and its
success along such front; innovation at firm level.

At the meso level: the competitive and technological regime in
which each particular industry operates; innovation systems and
industrial organisation.

At the macro level: organisations, regulatory systems, institutions
that affect innovation strategies and public policies applied in the
field of science and technology, policies that affect innovation
strategies, the world system and institutions.
NSI and development: internal
and external forces

Systemic relationships work worldwide
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The Power dimension
Long waves and economic development, paper presented at
the Conference on New Technologies and Development,
University of Campinas, Brazil, 1982.

Innovation at centre stage
– Innovation as a social, localised process
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Diffusion of IT paradigm.
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Macro X micro: long waves.
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Development perceived as
– Structural change
– Endogeinising technical change
National Systems of Innovation: City State,
National, Continental and SubNational


Countries and sub-continents making the fastest
progress have actually varied enormously
throughout history (from the Italian city-states to
present day USA).
Problems in the theory of innovation systems notably
– the complementarity (or lack of it) between various
sub-systems of society: science, technology,
economy, politics and culture, and
– the complementarity between national and subnational systems.
National Systems of Innovation: City State,
National, Continental and SubNational

"Catch-up" is not
– a spontaneous process associated with late-coming (no stages of
economic growth!!!),
– inevitable outcome of market forces in a liberal economy.
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Literature on "national systems of innovation”:
– Need to come to terms with problems of social capability for
technical change

Uneven development is a much more accurate
characterisation of growth than convergence.
Underlying the system of innovation approach
is



a resurgence of the interest in historical and national
development trajectories and in the role of technical
change in these trajectories;
a characterization of innovation and learning in a broader
context and as interactive processes with multiple
foundations;
an emphasis on the importance of and complementarity
between incremental and radical, technical and
organizational innovations, and their different internal and
external sources (to firms and national boundaries);
Underlying the system of innovation approach
is

a re-conceptualization of the firm as an organization embedded within
a broader socio-economic-political environment, reflecting historical
and cultural trajectories;
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a focus on the localized (and national) nature of the generation,
assimilation and diffusion of innovation, as opposed to the simplistic
idea of a supposed techno-globalism;

an observance of the systemic nature of innovation and the importance
of taking into account the productive, financial, social, institutional and
political spheres, as well as micro, meso and macro dimensions;

an emphasis on the importance of this concept for developing
countries.
Raul Presbisch

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Industrialisation (structural change) and the
incorporation of technical progress as most
powerful tools of a development process,
Underdevelopment:
– Not an anomaly or a simple state of backwardness
– A specific pattern of evolution and functioning of
certain societies and economies deserving also a
specific effort of theoretical reasoning

Technical progress is the determinant factor for the
dualisation process of the world economy.
Presbisch and the
Centre/Periphery concept
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structural heterogeineity
– sectors with high productivity co-exhist with
sectors where unemployment and subsistency
production prevails

productive specialization
– In primary-exporting sectors or manufacturing
sectors of low technological content;
Presbisch and the
Centre/Periphery concept

unequal development conditions:
– structural debility to get and sustain high accumulation
rates
• different levels of productivity
• persistent unemployment and
• trend towards trade dificits due to the deterioration of terms of
trade;

active government policies:
– due to the difficulty of maintaining sufficient levels of
capital accumulation
and investiment, Presbisch
proposes an active role of the State in the processes of
industrialization and development.
Some important post-Presbisch developments

Furtado
– Technical change as endogenous accumulation of
technological capabilities (and not KG imports)
– Regional and Local development (internal
heterogeneity)

Herrera
– Development based on the concept of basic needs housing, health, education and food - (the other canon)
– Role of S&T in development (as a structural
transformation process)
• Social participation in in S&T development
The ECLA Structuralist School

Strong Schumpeterian connotations since
innovation and technology diffusion
– occupy a central role for understanding
capitalist history, for explaining itrs successive
phases
– determine the historical process of
hierarchisation or dualisation of the world
economic system
Points of Convergence
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1 - Innovation (or technical progress) determines
the economic development of nations and hence
explains the differentiation between rich and poor
countries.

2 - Do not accept the neo-classical hipothesis of
comparative advantages under which capitalist
development would generate convergence in
growth rates and an egualitarian distrubution of
the fruits of technical progress.
Points of Convergence

3 - Technical progress concentrates in few
regions as international trade and capital
flows increases. Trade liberalisation would,
then, benefits only a few developed
countries and assimetries betrween rich and
poor countries tend to amplify as
globalisation unfolds.
Development and National Systems of innovation
In underdeveloped conditions:

Macro instability deeply affects microeconomic behaviour
– the financing and investment decision problems.
– the place and role in the hierarchy of nations

Greater disparities (in income distribution, patterns of consumption, and so on)
than what is found in advanced economies.

Higher degree of heterogeneity (intra and inter industry) than advanced
economies
Development and National Systems of innovation
In underdeveloped conditions:

More diversity in institutions and technologies than what should be
expected in advanced economies that are characterised by relatively
more homogeneous and stable patterns

Institutional differences (weak institutions)
– Strong institutions not a pre-condition of development but development
and institutions co-evolve
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Significant role of MNC investment
– MNC strategies not neutral but result from complex negotiations with
government
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The importance of local systems of innovation
Analysis of NSIs in developing countries:
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macro-micro dichotomy,
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institutional development, diversity

public intervention
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human resources,

social capabilities
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role of MNC subsidiaries,
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local systems of innovation (relationships between different subsystems).
Some building blocks of a NSI for
development
Given the weaknesses identified at the firm level (and in their network of linkages
with other firms and organisations), there are strong demands for:


a complex trade-off between "selective protection" and "competitive rivalry”
institutional support for the difficult transition (because it is not an automatic transition) from
production capability to technological capability.
Finance to afford long term investment is crucial, given its contributions to firms'
activities and to a macroeconomic environment conducive to innovative and
knowledge-generating activities. Backward countries, by definition, do not
have "functional financial structures" and settling this crucial issue is an
important precondition for the formation of a NSI.
Some building blocks of a NSI for
development

Need for large investment in education and social capital:
– literacy and basic education to develop learning capacity;
– higher education (with special attention to engineering and science
subjects), to create capacity to deliberate foster design and
improvements in production and innovation.
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Need for investing in the scientific infrastructure:
– scientific infrastructure can operate as a "focusing device" for
technological absorption; it also provides the necessary knowledge
to "focus search",
– a minimum amount of scientific resources is necessary for the
development of positive (and virtuous) feedback in the two-way
interactions between science and technology, especially with the
emergence of a knowledge-based economy.