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TOWARDS THE FUTURE OF
INNOVATION SYSTEMS RESEARCH:
AN AGENDA
Soremekun, A.J, Ajao, B.F., Jegede, O.O. Egbetokun, A.A
National Centre for Technology Management
Obafemi Awolowo University
Ile-Ife, Nigeria.
Paper accepted for 12th GLOBELICS Conference, Addis Ababa, Ethiopia
Theme: Partnerships for Innovation-based Development
October 28th-31st, 2014
Background
• “If I look back to…the first mention of innovation systems in the literature and
then just plot using Google Scholar the number of articles that use innovation
systems in the title, what you can see is…this is a declining industry. We had a
point where it diffused…there was a rapid ascension as it gained acceptance
but now it‘s no longer a promising line of research.”
(Maryann Feldman)*.
• “Our goal is to convince you that [the innovation systems approach] is not only
promising but it remains exciting and useful…I think that it drives us or pulls
us…towards a history-rich and context-rich research”
(Martin Kenney)*.
*35th DRUID Celebration Conference Debate on the motion ‗Let it be resolved that this conference believes that the
systems of innovation approach is no longer a promising line of research.‘ Videos and slides available at
http://www.druid.dk/streaming/ds2013/june19/player.html#course=BE101&unit=1&video=4&language=en-US
Systems of Innovation Literature
Count of articles with innovation system in title, 1982-2013 Data: Google Scholar as of 02 July 2014, 1400 GMT
Innovation systems
• Since Christopher Freeman (1982), the
systemic view of innovation has gained
prominence in the literature.
• Innovation system: A focusing device which enables the
analyses and understanding of the innovation process
(taking into account learning and interaction among
economic agents) with the aim of finding out which
institutional configurations best support strong dynamic
economic performance (Lundvall et al, 2009).
Innovation System in Developing Countries
• This study takes cognizance of the uniqueness and
specificities of the learning and capability accumulation
processes in developing countries.
• In most of these countries, institutions are weak and
systemic interactions are largely absent or, when present,
rather weak.
• The innovation process faces huge constraints and its outputs
are far away from the global frontier set by the developed
world (Hadjimanolis, 2000; Oyelaran-Oyeyinka, 2006; Niosi,
2010).
• Hence, the conditions under which innovation occurs in
developing countries is different from developed countries.
Developed Context Developing Context
Learning Active Passive
S&T Capabilities Boundless, Ease in technology
absorption, High levels of scientific
Training
Limited, Difficulty in
technology absorption, Low
levels of scientific training
Main Knowledge
Sources
Localized Foreign
Nature of Innovative
Output
Formal and active, Leaders, Radical and
Creative, High Investments
Mostly informal and passive,
Followers, Incremental and
Imitative, Low investments
Industrial and
Innovation Policy
Strong intellectual property laws Weak intellectual property laws
Economic/Business
Environment
Structured markets, high purchasing
power giving rise to strong domestic
demand for new high-tech products
Large but unstructured markets,
low purchasing power giving rise
to weak domestic demand for
technological innovation
Innovation Systems Literature
• RESEARCH GAPS
1. Multidimensional view of innovation
• Prevalence of non-technological innovation in developing countries.
Nigeria (2010):
• Rate of Marketing and Organisational Innovation was over 60% (in contrast to only
about 30% in the EU-27 countries).
• Rate of innovation in goods and services was between 40 and 50
• About 59% of firms had process innovation
(Nigerian Innovation Survey and the Eurostat online database)
• The learning and capacity building processes unique to developing
economies are yet to be fully integrated in innovation studies, hence
the absence of some relevant innovation indicators (Sutz, 2012).
• The ‘high tech’‖ approach to innovation which has framed much thinking
and policy advice on the subject of innovation is strongly misleading when
it comes to understanding the relationship between innovation and
development. Fagerberg et al (2010, p. 865).
2. Competencies versus capabilities
• Given that developing country firms can evolve from being
mere imitators to innovators through technological
capability building, it is important that a clear distinction
between capabilities and competencies be established in the
literature.
– Not doing this reduces the chances of understanding the process by
which firms in developing countries develop capabilities
• We advocate a perception of competencies as enablers of
learning and capabilities as the outcome of the learning
process which define the firm‘s performance (von
Tunzelmann, 2009)
Competence
What you know
Capability
What you are able to do with what
you know
3. Formal versus informal linkages
Are all productive/effective interactions expected to be formal?
Distinguishing between formal and informal interactions and
recognising them as two distinct sources of networks will be useful
to the understanding of the emergence and evolution of innovation
systems in developing countries.
Informal
interaction
is usually ‘off the record’ (Ajao and Jegede, 2014) and
represents an important source of networks in
developing countries.
Formal
interaction
involves a collaboration agreement such as is concretized
in contractual documents such as MoUs, technical
agreements, JVs or joint R&D agreements (Tether, 2002).
4. The Informal Sector
• The focus on the interaction process among firms, government
and knowledge institutions has led to the marginalization of the
interactions among non-firm and non-regulated institutions
MSMEs account for over 60% of GDP
and over 70% of total employment in
low income countries, while they
contribute about 70% of GDP and
95% of total employment in Middle
Income countries (NBS, 2010).
• Innovation in the informal sector helps in an understanding of the
role innovation plays in inclusive development
Proportion of Non Agricultural
Employment in the informal
sector
North Africa 48%
Latin America 51%
Asia 65%
Sub-Saharan
Africa
72%
ILO (2002)
5. Overly aggregated view
• The sources of heterogeneity among of the innovation system
appears to receive little recognition in the literature. This
heterogeneity of actors is a key determinant of aggregate
dynamics.
Actors within each element
If knowledge about micro-level heterogeneity is so little, how then can
explanations of aggregate performance be accurate?
Education and Research
(tertiary institutions of learning
(universities, polytechnics,
colleges of education), research
institutes)
Industrial Production
(manufacturing sector, service
sector)
Finance
(commercial banks,
development banks, VCs)
Government (policy
formulation, regulation,
administration)
6. Role of private institutions in overcoming
innovation constraints
• Private institutions: Arrangement outside the formal institutional
structure, created by a set of economic actors for achieving a common
aim.
• Firms establish networks and learn interactively through membership
in these private institutions, and are also able to make up for resource
constraints.
• Although private institutions are helpful in overcoming innovation
obstacles in developing countries (Oyelaran-Oyeyinka, 2007), a lot still
needs to be understood about the set of interactions within them and
their dynamics over time.
• Private institutions (industry associations) in Nigeria
– Manufacturers Association of Nigeria (MAN)
– Cable Manufacturers Association of Nigeria (CAMAN)
– Independent Petroleum Marketers Association of Nigeria (IPMAN)
– The Computer and Allied Product Distribution Association of Nigeria (CAPDAN)
Collective Action
• The situation where the achievement of a desired
outcome requires the efforts of multiple actors.
• Obstacles to innovative actions in developing
countries and how they are overcome will be much
better understood by framing innovation as a
collective action phenomenon
• In this context, social capital is fundamental, and
self-organization (in the face of a weak macroeconomic
environment) is a crucial determinant of success
(Ostrom, 1995).
Concluding Thoughts
• There are depths in Innovation Systems research
which are yet to be explored. This is still a fruitful
line of research.
• In Innovation Systems research, it is important to
take note of the specific conditions and
environment under which innovation occurs.
• For innovation systems theory to remain relevant in
the near future there has to be a shift from systems
to networks (of actors within and across elements).
THANK YOU FOR YOUR ATTENTION

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Innovation Systems in Developing Countries

  • 1. TOWARDS THE FUTURE OF INNOVATION SYSTEMS RESEARCH: AN AGENDA Soremekun, A.J, Ajao, B.F., Jegede, O.O. Egbetokun, A.A National Centre for Technology Management Obafemi Awolowo University Ile-Ife, Nigeria. Paper accepted for 12th GLOBELICS Conference, Addis Ababa, Ethiopia Theme: Partnerships for Innovation-based Development October 28th-31st, 2014
  • 2. Background • “If I look back to…the first mention of innovation systems in the literature and then just plot using Google Scholar the number of articles that use innovation systems in the title, what you can see is…this is a declining industry. We had a point where it diffused…there was a rapid ascension as it gained acceptance but now it‘s no longer a promising line of research.” (Maryann Feldman)*. • “Our goal is to convince you that [the innovation systems approach] is not only promising but it remains exciting and useful…I think that it drives us or pulls us…towards a history-rich and context-rich research” (Martin Kenney)*. *35th DRUID Celebration Conference Debate on the motion ‗Let it be resolved that this conference believes that the systems of innovation approach is no longer a promising line of research.‘ Videos and slides available at http://www.druid.dk/streaming/ds2013/june19/player.html#course=BE101&unit=1&video=4&language=en-US
  • 3. Systems of Innovation Literature Count of articles with innovation system in title, 1982-2013 Data: Google Scholar as of 02 July 2014, 1400 GMT
  • 4. Innovation systems • Since Christopher Freeman (1982), the systemic view of innovation has gained prominence in the literature. • Innovation system: A focusing device which enables the analyses and understanding of the innovation process (taking into account learning and interaction among economic agents) with the aim of finding out which institutional configurations best support strong dynamic economic performance (Lundvall et al, 2009).
  • 5. Innovation System in Developing Countries • This study takes cognizance of the uniqueness and specificities of the learning and capability accumulation processes in developing countries. • In most of these countries, institutions are weak and systemic interactions are largely absent or, when present, rather weak. • The innovation process faces huge constraints and its outputs are far away from the global frontier set by the developed world (Hadjimanolis, 2000; Oyelaran-Oyeyinka, 2006; Niosi, 2010). • Hence, the conditions under which innovation occurs in developing countries is different from developed countries.
  • 6. Developed Context Developing Context Learning Active Passive S&T Capabilities Boundless, Ease in technology absorption, High levels of scientific Training Limited, Difficulty in technology absorption, Low levels of scientific training Main Knowledge Sources Localized Foreign Nature of Innovative Output Formal and active, Leaders, Radical and Creative, High Investments Mostly informal and passive, Followers, Incremental and Imitative, Low investments Industrial and Innovation Policy Strong intellectual property laws Weak intellectual property laws Economic/Business Environment Structured markets, high purchasing power giving rise to strong domestic demand for new high-tech products Large but unstructured markets, low purchasing power giving rise to weak domestic demand for technological innovation
  • 8. 1. Multidimensional view of innovation • Prevalence of non-technological innovation in developing countries. Nigeria (2010): • Rate of Marketing and Organisational Innovation was over 60% (in contrast to only about 30% in the EU-27 countries). • Rate of innovation in goods and services was between 40 and 50 • About 59% of firms had process innovation (Nigerian Innovation Survey and the Eurostat online database) • The learning and capacity building processes unique to developing economies are yet to be fully integrated in innovation studies, hence the absence of some relevant innovation indicators (Sutz, 2012). • The ‘high tech’‖ approach to innovation which has framed much thinking and policy advice on the subject of innovation is strongly misleading when it comes to understanding the relationship between innovation and development. Fagerberg et al (2010, p. 865).
  • 9. 2. Competencies versus capabilities • Given that developing country firms can evolve from being mere imitators to innovators through technological capability building, it is important that a clear distinction between capabilities and competencies be established in the literature. – Not doing this reduces the chances of understanding the process by which firms in developing countries develop capabilities • We advocate a perception of competencies as enablers of learning and capabilities as the outcome of the learning process which define the firm‘s performance (von Tunzelmann, 2009) Competence What you know Capability What you are able to do with what you know
  • 10. 3. Formal versus informal linkages Are all productive/effective interactions expected to be formal? Distinguishing between formal and informal interactions and recognising them as two distinct sources of networks will be useful to the understanding of the emergence and evolution of innovation systems in developing countries. Informal interaction is usually ‘off the record’ (Ajao and Jegede, 2014) and represents an important source of networks in developing countries. Formal interaction involves a collaboration agreement such as is concretized in contractual documents such as MoUs, technical agreements, JVs or joint R&D agreements (Tether, 2002).
  • 11. 4. The Informal Sector • The focus on the interaction process among firms, government and knowledge institutions has led to the marginalization of the interactions among non-firm and non-regulated institutions MSMEs account for over 60% of GDP and over 70% of total employment in low income countries, while they contribute about 70% of GDP and 95% of total employment in Middle Income countries (NBS, 2010). • Innovation in the informal sector helps in an understanding of the role innovation plays in inclusive development Proportion of Non Agricultural Employment in the informal sector North Africa 48% Latin America 51% Asia 65% Sub-Saharan Africa 72% ILO (2002)
  • 12. 5. Overly aggregated view • The sources of heterogeneity among of the innovation system appears to receive little recognition in the literature. This heterogeneity of actors is a key determinant of aggregate dynamics. Actors within each element If knowledge about micro-level heterogeneity is so little, how then can explanations of aggregate performance be accurate? Education and Research (tertiary institutions of learning (universities, polytechnics, colleges of education), research institutes) Industrial Production (manufacturing sector, service sector) Finance (commercial banks, development banks, VCs) Government (policy formulation, regulation, administration)
  • 13. 6. Role of private institutions in overcoming innovation constraints • Private institutions: Arrangement outside the formal institutional structure, created by a set of economic actors for achieving a common aim. • Firms establish networks and learn interactively through membership in these private institutions, and are also able to make up for resource constraints. • Although private institutions are helpful in overcoming innovation obstacles in developing countries (Oyelaran-Oyeyinka, 2007), a lot still needs to be understood about the set of interactions within them and their dynamics over time. • Private institutions (industry associations) in Nigeria – Manufacturers Association of Nigeria (MAN) – Cable Manufacturers Association of Nigeria (CAMAN) – Independent Petroleum Marketers Association of Nigeria (IPMAN) – The Computer and Allied Product Distribution Association of Nigeria (CAPDAN)
  • 14. Collective Action • The situation where the achievement of a desired outcome requires the efforts of multiple actors. • Obstacles to innovative actions in developing countries and how they are overcome will be much better understood by framing innovation as a collective action phenomenon • In this context, social capital is fundamental, and self-organization (in the face of a weak macroeconomic environment) is a crucial determinant of success (Ostrom, 1995).
  • 15. Concluding Thoughts • There are depths in Innovation Systems research which are yet to be explored. This is still a fruitful line of research. • In Innovation Systems research, it is important to take note of the specific conditions and environment under which innovation occurs. • For innovation systems theory to remain relevant in the near future there has to be a shift from systems to networks (of actors within and across elements).
  • 16. THANK YOU FOR YOUR ATTENTION