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LOOKING AT NATIONALSYSTEMS OF INNOVATION FROMTHE SOUTHRodrigo Arocena & Judith Sutz

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To cite this article: Rodrigo Arocena & Judith Sutz (2000): LOOKING AT NATIONALSYSTEMS OF INNOVATION FROM THE SOUTH, Industry and Innovation, 7:1, 55-75

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Industry and Innovation, Volume 7, Number 1, 55–75, June 2000

LOOKING AT NATIONAL SYSTEMS OF

INNOVATION FROM THE SOUTH1

RODRIGO AROCENA AND JUDITH SUTZ

The concept of National Systems of Innovation (NSIs) appeared in the late 1980s andquickly rose to a central position both in academic work and in policy discussions(Freeman 1987; Freeman and Lundvall 1988; Lundvall 1988). The concept of NSI wasbased on empirical work performed in the advanced industrialized countries, i.e. inthe North. However, its applicability is not con�ned to those countries. In fact theNSI approach can be useful for studying the speci�cs of innovation processes andpolicies in the South, as well, and can draw attention to similarities and differencesfrom those in the North. But for that the NSI approach needs to be complementedby a Southern perspective. It is necessary to think with a ‘‘Southern head’’ aboutwhat has been produced in the North concerning the NSI concept; Southern headsare also needed for adapting such intellectual tools when the situation and possiblefutures of a peripheral country are studied.

With a view to contributing to such a discussion, this paper is organized as follows.We start by brie�y recalling some of the main themes of the concept of NSI, andstress some questions that the concept poses. Next we deal with NSIs from a Southernperspective—more precisely, from a Latin American perspective—stressing thosefeatures of the concept that better illustrate such a perspective. Then we describe afew of the main contextual differences between Latin America and the developedcountries in terms of the NSI conceptualization. We go on to give an abbreviatedaccount of recent empirical �ndings on the ‘‘really existing innovation’’ in LatinAmerica and, drawing on those elements, we discuss some speci�c characteristics ofLatin American NSIs. Then we describe some approaches devised to construct apicture that helps understanding the innovation dynamics and perspectives in a smallLatin American country, Uruguay. Finally, we offer some concluding remarks as towhat can be learned in the South from systems of innovation in the North.

Those issues are relevant because of the fundamental role that innovation and NSIsplay everywhere nowadays. In fact, statements such as the following are widelyaccepted. Innovation is a key factor for competitiveness, at both the business and thecountry level. Innovation implies processes of change undertaken by �rms that areaffected by a broad set of economic, political, social, cultural, scienti�c and techno-logical issues. Many of these issues are direct outcomes of the purposeful action of

1 Paper presented to the DRUID Conference on National Innovation Systems, Industrial Dynamics and Innovation

Policy, Rebild, Denmark, 9–12 June 1999. We acknowledge the comments made by many colleagues, particularlyFranco Malerba, Jorge Niosi, Dieter Ernst and two anonymous referees. We also thank the conference organizers,

Esben Sloth Andersen and Bengt-Ake Lundvall, for their kind invitation to participate.

1366-2716 print/1469-8390 online/00/010055-21 © 2000 Taylor & Francis Ltd

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56 INDUSTRY AND INNOVATION

organizations, public and private (including �rms themselves); some of them areunintended outcomes of organizations not directed primarily towards innovationproblems; some, moreover, are related to the natural endowment and the history ofnations. It is in the general framework or ‘‘climate’’ generated by these issues that�rms decide and undertake innovative activities; framework or climate is bothinternational and national in scope. Even if globalization heavily affects many—if notall—of these issues and the overall climate for innovation at country level, there isalways room for ‘‘national in�uences’’ that can take the form of public policies—atmacro, meso or micro level—and can also be the outcome of distributed initiativescoming from the most diverse social actors. Consequently, it is important to analyseand understand how national in�uences on innovation operate nowadays and couldpossibly affect future outcomes. For such reasons, a conceptual framework allowingfor innovation descriptions, interpretations and actions is needed; the notion ofNational Systems of Innovation—in any of its many de�nitions—provides such aconceptual framework. Moreover, the concept establishes a positive feedback loop:to strengthen the National System of Innovation is equivalent to improving theinnovative climate and, for that reason, the feasibility of innovations.

Once the political importance of the concept has been recognized, consensus andagreements begin to weaken. What exactly does it mean to strengthen the NationalSystem of Innovation? And even before that, what is to be taken into account whendescribing its main features and when trying to understand its dynamics? Especiallyin the 1990s a body of important academic work has been produced analysing thistype of question; as is only to be expected, many points of view are presented, someof which con�ict with each other.2

From a policy making point of view, on the other hand, one of the most importantexercises derived from the NSI conceptualization consists of international compar-isons: What kind of innovation policies are my neighbours, partners, rivals or ‘‘models’’devising and implementing? Which of these policies could possibly be applied athome, and at what cost?

Issues as those mentioned in the last three paragraphs require an elaboration thattakes into account the speci�cs of peripheral regions. In that sense, ‘‘innovation fromthe South’’ can be envisaged as a research programme, strongly connected with therethinking of development problems in the age of globalization, having as a researchagenda a ‘‘broad spectrum’’ of general and speci�c questions, and with a researchmethodology of its own to be able to tackle such an agenda. This article seeks tomake a contribution to the de�nition of such a research programme.

2 The NSI concept is in a relatively early stage of its ‘‘life cycle’’. Charles Edquist wrote in 1997: ‘‘Systems ofinnovation is a new approach to the study of innovations in the economy that has emerged during the last

decade’’ (Edquist 1997: 1). At this early stage, the search for rigorous and precise de�nitions coexists with room

for exploring connections even if sometimes these are more often derived intuitively than from tested theories ofcausation. An example of this type of exploration is the �nal remark Morris Teubal made in his article on the

‘‘Innovation System of Israel’’. Referring to the Palestinian question in relation to some of the weaknesses andfailures of the Israeli situation regarding innovation, Teubal wrote: ‘‘The mechanisms are subtle, but as with a lot of

those insinuated in this chapter, they do not seem to be less real’’ (Teubal 1993: 497).

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LOOKING AT NSIS FROM THE SOUTH 57

A SOUTHERN PERSPECTIVE

To organize the perspective on Innovation Systems from the South, we start by askingif the NSI concept refers to existing situations or if it characterizes an ideal and notyet materialized con�guration. When Chris Freeman proposed the term ‘‘NationalSystem of Innovation’’ in 1987, he certainly had in mind a very speci�c situation,namely that of Japan. One of the reasons was the importance given to innovation ina strongly nationalistic strategy. But more distinctive than this seems to have been the‘‘system’’ part of the NSI; many different things in different parts of the economy andthe society at large appear to behave in accordance with the needs of other parts, asif many positive feedback loops were operating in a more or less synchronized way.An outstanding example of this is Freeman’s description of Japanese education: theremarkable fact that so many engineers in Japan had formal basic science background,the practical training and frequent upgrading in industry of these very same engineers,and the concern with giving every worker some understanding of the relationshipbetween various operations in the �rm had as a result that ‘‘the ‘system’ approach isinculcated at all levels of the work force and not only at top management’’ (Freeman1987: 46).

Seen from a totally different standpoint, a second main branch of the NSI conceptual-ization is in a similar manner built upon empirical observation. This is the case of theuser–producer interaction approach to innovation, coming from the Nordic countries.3

In an early work, Lundvall (1985: 3) develops the idea that an innovation is ‘‘theresult of collisions between technical opportunity and user needs’’: the relationshipsbetween those who know about technical opportunities and those who supposedlyknow what they need are at the very centre of the dynamics of innovation; theimprovement of the user–producer relationships giving rise to many of the forms ofthe key social process associated with innovation, that is, learning.4 The idea of asystem of innovation in this work is associated with the institutions5 that intervene inthe learning process. These include of course universities but also specialized researchorganizations, science-based industries and other professional units engaged in produc-tion of tangible goods. Here, the national part of the NSI concept came from the veryde�nition of innovation as the outcome of user–producer interactions: ‘‘If the culturalenvironment of a user is very different from that of the producer, it will be costly toestablish a channel of information and to develop common codes. Not only willdifferent national languages impair the communications, differences in culture willbe re�ected in different interpretations of identical signals’’ (Lundvall 1985: 47). The

3 The opening chapter of the 1988 book edited by Freeman and Lundvall, Small Countries Facing TechnologicalRevolution, under the explicit title of Small National Systems of Innovation Facing Technological Revolution,

discusses the Nordic countries’ situation in terms of various systems, particularly those of producing, learning,searching and innovating.

4 Learning has become a key concept, to such an extent as to characterize the key dynamics of present times

(Lundvall and Borras 1997).5 We are fully aware of the distinction between institutions and organizations, as formulated by North (1990) and

stressed by Edquist (1997) in the search for a common language regarding systems of innovation. Nevertheless, asboth Freeman and Lundvall talked about institutions (even if in the organization sense of the term) we follow that

pattern.

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58 INDUSTRY AND INNOVATION

importance of users in the innovation process has also been advanced by otherscholars.6

Four main aspects of the NSI concept

What are the most salient remarks that a ‘‘Southern head’’ worried about innovationcan formulate in response to the above theorization?

(a) The �rst is that NSI is an ‘‘ex-post’’ concept, that is, a concept built upon empiricalstudies that happen to show some similar patterns.7 This is not trivial for a LatinAmerican researcher on innovation problems, because in Latin America NSI is an‘‘ex-ante’’ concept, in the sense that very few patterns of the socio-economicbehaviour regarding innovation at national level can be viewed as working in asystem-like manner. This is not to say that innovation—technical innovation—isnot present in the region.8 The problem is that the micro-innovative strengthsthat really exist remain isolated and encapsulated, creating important dif�cultiesfor a further process of articulation and aggregation that could be synthesized ina NSI and create the impact a NSI is supposed to have on the competitiveness ofnational economies.

(b) Secondly, it is worth noting that the NSI concept carries a normative weight.This is perhaps not a universally shared opinion. For instance, Edquist (1997: 20)writes: ‘‘. . . the notion of optimality is absent from the systems of innovationapproaches. Hence comparisons between an existing system and an ideal systemare not possible.’’ In fact, to postulate the possibility of an optimal design for NSIswould imply the dismissal of diversity, one of the main characteristic features ofthe NSI approach. Now, to discard the ‘‘ideal system’’ does not mean that theconcept has no reference to what is ‘‘good’’ or what is ‘‘bad’’. Lundvall stressesthe fact that the extreme difference in competencies between users and producerslies behind unsatisfactory innovations or the slow path of innovation adoption,particularly regarding the modernization of mature industries, like textiles andclothing. This is not a given fact of nature: he refers approvingly to the way MITIdirected its efforts to modernize these sectors ‘‘as an attempt to compensate forthe weak channels of information between producers and science based indus-tries, and to break the inertia built into the traditional user–producer relation-ships’’ (Lundvall, 1985: 37, emphasis in the original). A National System of

6 The work of von Hippel is particularly interesting in this regard. Two of his conclusions or ‘‘syntheses’’ are

particularly valuable: the conceptualization of innovation as a distributed process and the systemic nature of thatdistributed process. ‘‘All of the elements in the examples I have just described can be seen as components in a

distributed innovation process that clearly interact in a system-like manner’’ (von Hippel 1988: 121).7 A good example of empirical evidence that supports the idea of National Systems of Innovation comes, not

surprisingly, from Europe. In the second edition of the Directory edited by the Commission of the EuropeanCommunities (1986), more than 400 pages written in small type provided an account of the most diverse type of

incentives, instruments, mechanisms and policies devoted to the fostering of innovation and the creation and use

of knowledge for innovation in the EC countries.8 We are entitled to use a broad scope to consider innovation, given that in an international comparative study

Nelson and Rosenberg agree to characterize innovation as ‘‘the processes by which �rms master and get intopractice product design and manufacturing processes that are new to them, if not to the universe and even to the

nation’’ (Nelson and Rosenberg 1993: 4).

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LOOKING AT NSIS FROM THE SOUTH 59

Innovation that takes into account user–producer knowledge asymmetry willprobably be more effective in the promotion of useful innovations than one thatdoes not pay attention to this type of problem: it seems then that the NSIsconcept carries indeed some normative weight. Acknowledging that there aresome general ‘‘good ways’’ and some ways that appear to be ‘‘better’’ than othersregarding NSIs is important from a Latin American perspective: to avoid copyingor just following the latest policy fashion some points of reference must beidenti�ed, something like a normative guidance, that at least in part will be quitespeci�c. This is not to say that there is ‘‘a’’ model for NSIs in Latin America (orelsewhere); it rather underlies a less emphasized feature of the concept that is,however, quite important; namely its normative weight.

(c) A third point quali�es this normative weight. The idea is that the NSI concept is‘‘relational’’: almost all the literature on the subject stresses the utmost importanceof the connections between different types of collective actors. Thirty years ago,an Argentinian physicist, Jorge Sabato, proposed an illustration for a ‘‘virtuouscircle’’ able to put science and technology at the service of development: the‘‘Sabato triangle’’ of entrepreneurs, government and academia. At that time, Sabatosaid that no matter how strong each isolated organization was, what was muchmore important was the strength of the connections between them: in fact thetriangle exists at all only if the connections are there. This type of ‘‘relational’’conceptualization is widely adopted nowadays by innovation scholars, but this iseasier said than done: in Latin America, it is a relatively common task to createorganizations to foster innovation, but it is quite dif�cult to make them operateas bridges between people. That is why it is worthwhile to underscore therelational nature of the NSI concept.

(d) A last remark is related to the debate about ‘‘creationism’’ or ‘‘spontaneousevolution’’ as paths of development for NSIs. It seems rather obvious that thereis not a single answer for this debate; it is easy to �nd more ‘‘creationist’’and more ‘‘evolutionary’’ patterns for systems of innovation when comparisonsbetween countries, between productive sectors, and even between differentperiods within the same country are made. The important point is that, given thestate of development reached by each National System of Innovation, the futurestate and dynamic of the system can be at least partially in�uenced by purposefulaction. That is, the NSI is a policy subject. This does not mean that the wholeshape of the system can be purposefully designed, nor does it mean that whateverpolicy or policy measure devised can be successfully implemented. Recognizingthat the NSI concept is a political concept and that the reality it describes can besubmitted to deliberate policy efforts towards change with a reasonable hope ofachieving what is intended is not a trivial matter, particularly in Latin America,where science, technology and innovation have never occupied a high positionon the political agenda.

Summing up, when the NSI concept is looked at from the South, four aspects areseen as essential for working with this approach: it originated in the central countriesas an ex-post concept, while in the periphery it is basically an ex-ante concept; itcarries a normative weight; and is ‘‘relational’’, and �nally it can be an object of policy.

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60 INDUSTRY AND INNOVATION

SYSTEMS AND INDUSTRIALIZATION

The NSI concept covers industrial innovation—both technical and organizational.This is one of the reasons why we perceive such a wide distance between LatinAmerica and the developed countries in the accuracy with which the concept givesan account of reality. If we instead focus our attention upon agricultural or agro-industrial innovation, this distance clearly shortens. If the ‘‘systems of innovation’’concept had been invented several decades ago, it could have been fully applied tothe agrarian or agro-industrial sectors of many countries, both in the developed andin the underdeveloped world.

On agrarian systems of innovation

Two remarkably ‘‘developed’’ cases are those of the United States and of Denmark. Inthe United States early public policy involvement in agricultural research, develop-ment, innovation and extensionism has been considered paradigmatic from a develop-ment point of view (Evenson and Westphal 1995). In the chapter on the US NationalInnovation System of Nelson’s book National Innovation Systems (Mowery andRosenberg 1993), even if the focus is directed towards technical advance in industry,a short analysis of the agricultural sector is presented. Two reasons explain this‘‘deviation’’ from the main focus: the rather unique role played at the time by thestate and the insistence on a user–producer perspective organized around theextensionist philosophy.

The case of the US early agricultural policy has been also analysed from a politicalscience perspective that deserves attention, given the kind of issues it stresses.Skocpol (1985: 13–14) argues, after underlining the point that by the period afterWorld War I ‘‘the U.S. Department of Agriculture was an island of state strength in anocean of weakness’’, that the formulation of state policies were not only the outcomeof powerful farm interest groups but also the result of ‘‘unique resources of administra-tive capacity, prior public planning, and practical governmental experience availableto federal agricultural experts at the dawn of the New Deal’’. State will and statecapacities combined for the development of system-like initiatives to harness know-ledge and innovation to economic growth in a particular sector.

If this emphasis on public policy initiative is perhaps too strong, the case ofDenmark counterbalances it. Some analyses of the Danish National System of Innova-tion (Andersen and Lundvall 1988; Edquist and Lundvall 1993) include a thoughtfulconsideration of its agrarian system. Even studies not directed towards innovationissues gave a fascinating picture of the ‘‘collective action’’ which generated the originalrelationship between material production and knowledge production in the Danishagro-industrial sector in the late nineteenth century.9

Now, turning to Latin America, we can �nd many examples of articulated relation-ships between research, experimentation, extensionism and production in the agro-nomic sector that �t well with actual de�nitions of NSIs. Uruguay is a clear case of

9 ‘‘It was the farmers themselves who oversaw the development of an agricultural research system, and made sure

that funds were available for the dissemination of research results’’ (Jamison 1982: 284).

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LOOKING AT NSIS FROM THE SOUTH 61

this, and from early on in this century; nowadays, the Uruguayan ‘‘innovationinstitutional map’’, that is, the set of organizations that include in a way or anothergoal related with innovation, is clearly much more dense when observed from theagrarian side than when this is done from the industrial side, even if the degree ofinnovativeness of the ‘‘agrarian system’’ is not particularly high.

Industrialization and knowledge in Latin America

The question is then: why, during the process of industrialization, has the gapbetween the present developed nations and Latin America in terms of NSIs begun towiden? To put it in a nutshell, the answer is related to knowledge. The agronomicsector needs knowledge suited to local conditions, and recognizes, �rst, that there isa need, and second, that local scienti�c and technological efforts must be undertakento �t this need. The industrial sector—in Latin America—has not exhibited this typeof understanding. This is in part due to a general trend in developing countries: ‘‘Ingeneral, it has been assumed that industries in developing countries can acquire newtechnology fairly easy. For while the problems of transferring agricultural technologiesamong countries has been widely recognised, the dif�culties of transferring industrialtechnology have not’’ (Bell and Pavitt 1995: 69). More generally, knowledge was notan important factor of economic growth in Latin America. We now turn to a briefhistorical characterization of that process.

In the decades following 1850 Latin America was incorporated as a ‘‘periphery’’ tothe international economy which had its ‘‘centre’’ in the industrialized countries, thusstarting a period of outward growth based on the exports of primary products. Theruling elite cared more about imitating the European elite way of life than of fosteringthe technological basis of economic growth. Since then a relevant proportion of theeconomic surplus has been dedicated to conspicuous consumption and relatedimports. And it is hard to �nd traces of the technological nationalism that was typicalof the Japanese elite at the same time (Odagiri and Goto 1993). In Latin America thiswas also a golden age for foreign capital. It was easier to buy modern productivemethods abroad than to promote endogenous generation of technical knowledge; inthe long run this was perhaps the main drawback of the period of outward growth(Bethel 1991: 3). The of�cial culture has, historically, marginalized science, exceptbiomedicine and some other branches of biological sciences, and practically ignoredtechnology; the ‘‘wedding of science and useful arts’’ that characterized the SecondIndustrial Revolution was scarcely noted in this continent.

Nevertheless, the fast growth of some Latin American countries around the turn ofthe century opened some opportunities for an incipient industrialization, speciallywhen it was fostered by the rising consumption capacity of the middle classes. Thiswas the situation in some regions where European immigration was very important,as in the basin of the R õ o de la Plata and San Paulo. This immigration promoted theindustrial innovation and the industrializing ideology on which economic progresswas based when the world crisis of the 1930s led Latin America into a period ofinward growth fostered by the Industrialization by Import Substitution (IIS). This wasthe main period of development in Latin American contemporary history: roughlybetween 1940 and 1980

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62 INDUSTRY AND INNOVATION

despite the inef�ciencies and distortions generated by forced industrialisation, investmentand growth rates rose, the public sector initiated a vast expansion of basic educationand standards of health improved substantially. Both these latter changes may well havebeen related to urbanisation as much as to the creation of an industrial working class.None the less, this was not only the period of greatest structural change in the LatinAmerican economy, but also one of sustained and relative stable growth and socialimprovement. In marked contrast, the 1900–1940 and 1980–1995 periods are ones oflower economic growth and much greater instability (Astorga and FitzGerald 1998: 20).

The state was a main actor of the IIS; its economic and social role expandedquickly. Also, the democratization processes somehow weakened the control of thepublic organisms by small elites; the industrial working class and its trade unionsgrew, and at �rst the in�uence of foreign enterprises diminished. But the strongtraditional elite fought against the IIS policies and a cultural disregard of technologyprevailed. Consequently, although the states protected national industries, protection-ism was not selective nor oriented to ‘‘learning’’; generally speaking the states did notback �rmly the upgrading of technological capacities and industrial activities in orderto reach the level that is needed for the production of means of production. Theresult was ‘‘the truncated industrialisation of Latin America’’, as it is described in afundamental but widely ignored book (Fajnzylber 1983).

It must be stressed that during the IIS period, technological innovation probablytook place throughout the continent in a wider scale than after 1980 (Katz 1994).But, as suggested by the former considerations, it was highly informal and of anincremental or minor type. In Latin America, technological innovation has beenundervalued by dominant cultural patterns, scarcely studied by mainstream develop-ment economists, and almost ignored by public policies; thus, it was and still is aphenomenon of ‘‘interstitial’’ nature. When we use this word we are thinking of thecharacterization due to Michael Mann (1986: 15–16) of the interstitial emergence ofnew processes between the ‘‘pores’’ of institutionalized networks of social interaction.

Something similar happened with endogenous generation of scienti�c and techno-logical knowledge. Technical change consisted overwhelmingly of imports of capitalgoods; as Celso Furtado stressed 30 years ago, the ‘‘peripheral condition’’ wasfundamentally related to the ‘‘technological dependence’’ from the ‘‘centre’’. It still is.

The East Asian experiences regarding knowledge, learning and innovation couldnot be more contrasting from the one just depicted. These experiences are wellknown (Johnson 1982; Amsden 1989; Hou and Gee 1993; Kim 1997). Less known ishow were they presented, particularly by �nancial international institutions, as amodel for Latin American development: without a word about knowledge andeducation, the transmitted recipe was the total opening of the economy, the reductionof public intervention and the massive foreign investment (Fajnzylber 1983: 80).However, the East Asian policies—especially the way of coming to grips with theknowledge produced wherever, the emphasis on the most ample reach of educationat all levels, the constant raising of R&D spending and the institutional setting topursue technology upgrading and innovation were thoroughly studied by LatinAmerican scholars. One of the important points of comparisons referred to theindustrial protection issue: in the words of Fajnzylber, while the Latin Americanprotection was a ‘‘frivolous’’ one, the East Asian policies were ‘‘a careful, selective

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LOOKING AT NSIS FROM THE SOUTH 63

and lucid protection directed to the national industry process of learning’’ (Fajnzylber1983: 116, our translation).

Looking back to the main period of growth from the point of view of Sabato’striangle of entrepreneurs, government and academia, we may conclude that only the‘‘segment’’ State–Industrial Sector really existed, with those connected with academiabeing mainly virtual. In some sense, the interactions between state and industrialentrepreneurs were ‘‘systemic’’, and undoubtedly they had a ‘‘national’’ focus. Thestate was seen as the main actor involved in national development, and developmentwas equated with industrialization; a public infrastructure was built and nationalprivate industry was highly protected; in such context entrepreneurs carried on theIIS, incorporated new technology mainly by buying machinery abroad and asked formore protection from the state. The relationship between the state and the industrialsector was important, but it was not focused on innovation.

So at most we can think of ‘‘National Systems of Industrial Growth’’. Strictlyspeaking, during the fast industrialization period, in Latin America NSIs were not built.

THE ‘‘REALLY EXISTENT’’ INDUSTRIAL INNOVATION IN LATIN AMERICA

Given the above made assertion, NSIs in Latin America can be seen as a generalconceptual reference for studying related problems and/or as a unifying notion forpolicy-makers.

But innovation—formal, informal and even interstitial—is part of the reality in thecontinent. What can we say about it? Since the middle of the 1990s, industrialinnovation in several Latin American countries has been studied through innovationindustrial surveys.10 Argentina, Chile, Colombia, Mexico and Venezuela completedthese surveys between 1995 and 1998; in Uruguay a similar exercise took place tenyears earlier, in 1988.11 These surveys did not follow a previously agreed uponmethodology but nevertheless, and partly because OECD Frascatti and Oslo Manualshave been a common reference, a fairly accurate set of comparisons can be establishedfrom their results.12

Some tentative conclusions regarding innovation in Latin America, based mainly onthose surveys, can be summarized as follows:

(i) national spending in innovation is quite low;(ii) innovative �rms are characterized by performing indoors R&D;(iii) industrial innovation is highly informal, but(iv) not necessarily of a low level of complexity;(v) innovative �rms have a comparatively important number of quali�ed technicians;

10 A detailed comparative analysis of these surveys has been made in Sutz (1998); the national surveys werepresented in the II Latin American Workshop on Innovation Indicators, organized by the Latin American Network

on Science and Technology Indicators, RICYT, Caraballeda, October 1998.

11 It is worth stressing that case studies about technological and innovation capacities in Latin Americanmanufacturing sectors are long since known, the pioneering works of Jorge Katz in the 1970s and the 1980s

being good examples.12 The similarity in samples design as well as whole common sets of questions in the questionnaires allow

reasonable generalizations of some important results.

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64 INDUSTRY AND INNOVATION

(vi) �rms need quali�ed personnel to be able to innovate;(vii) the lack of quali�ed personnel in small enterprises is not compensated by

external advice.

Let us justify these assertions.

(i) The R&D spending in Latin America is consistently low when compared withthe OCDE as well as with the Asian NICs (Table 1). The numbers are diverse,but one thing is clear: none of these countries has achieved the level recom-mended 30 years ago by UNESCO to developing countries as a minimumthreshold of R&D spending: 1% of GDP.

(ii) A second question has to do with the criteria that were used to pick up theinnovative �rms within each country sample. They are also diverse, but in allthe surveys the core of this question has been addressed through the internalR&D activities. The Colombian analysis concludes that for the innovative �rmsin their sample ‘‘the implementation of R&D projects is the most importantelement in the innovative process’’ (Duran et al. 1998: 89). This is a fairlycommon pattern and that is why analysing how Latin American industrial �rmsperform R&D becomes a central element for the study of the really existinginnovation.

(iii) The main conclusion we get from the surveys is that industrial innovation inLatin America is still highly informal. That is, even if a fair proportion of industrial�rms perform both product and process innovation, R&D activities are notclearly and formally articulated with the enterprise strategy. We can use twoindicators to support the above statement. The �rst is the difference between�rms declaring innovative activities and �rms reporting formal R&D departmentsor laboratories; the second one is the percentage of �rms that report doing R&Dand also know how much they spend on those activities (Table 2). As forspending, in Argentina about 25% of �rms were able to declare the amount of

TABLE 1: GROSS DOMESTIC EXPENDITURE ON R&D AS PER CENT OF GDP, 1995

Argentina Brazil Chile Colombia Mexico Venezuela Uruguay

0.37 0.88 0.78 0.62 0.35 0.35 (1993) 0.15 (1994)

Source: UNESCO (1998) World Science Report, p. 64.

TABLE 2: FIRMS WITH INNOVATIVE ACTIVITIES AND FIRMS WITH FORMAL R&DLABORATORIES AS A PERCENTAGE OF THE ENTIRE FIRMS IN EACH SAMPLE

Argentina Colombia Mexico Venezuela Uruguay

Innovative activities 72.6 79.5 63.4 60.0 63.6Formal R&D labs 18.0 23.5 21.7 15.8 17.8

Source: INDEC, Argentina (1998); Dto. Nal. de Planeacion, Colombia (1988); Conacyt,Mexico (1998); CONICIT, Venezuela (1998); Argenti et al., Uruguay (1988).

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money devoted to R&D, in Mexico 28.6%, in Venezuela 8%; in Uruguay, tenyears earlier, more than 60% of the �rms did not know how much they spenton R&D or they declared a negligible level of spending.

(iv) The proportion of professionals in R&D is consistently higher than in other �rmactivities. The Mexican analysis shows that innovative �rms were able to engageprofessionals in R&D activities even when not having formal R&D structures; inUruguay, the proportion of professionals in formal and in informal R&D activitieswas practically identical. This quali�es the informal bias of Latin Americanindustrial R&D: informality cannot be equated with low levels of complexity.

(v) The correlation between innovativeness of �rms and quali�ed personnel is quiteclear in all the surveys. In the Colombian case, for instance, ‘‘the most strikingrelationship (between variables) indicates that the more quali�ed the staff themore innovative the �rms’’. Moreover, ‘‘the only indicators related to level ofinnovativeness, besides size, are the number of quali�ed personnel and theirsalaries’’ (Duran et al. 1998: 57). In Uruguay the analysis gave a similar outcome:the statistical correlation between level of innovativeness and number of engin-eers was highly signi�cant.

(vi) That �rms need quali�ed personnel to be able to innovate may not seem a veryunexpected result, but nevertheless it is surprising how accurately this fact canbe revealed by empirical �ndings. Table 3 clearly shows that from 50 employeesupward there is a sharp drop in the average number of high level technical staffwhen passing from the �rst level to the second level of innovativeness, whilefor the smallest �rms this drop is very small. This suggests that there is indeeda minimal threshold under which innovation is almost not attainable.13

(vii) That trend points to a dif�cult situation for Latin American small enterprises inthe globalized, knowledge-based and innovation driven economy. But perhaps

TABLE 3: AVERAGE NUMBER OF PROFESSIONAL AND POST-

GRADUATE STAFF IN COLOMBIAN INDUSTRY, BY LEVEL OF

INNOVATIVENESS AND NUMBER OF EMPLOYEES OF FIRMS

First levela Second level

20–49 1.1 0.850–99 4.4 1.6

100–199 8.6 3.5> 200 42.5 14.9

Source: Departamento Nacional de Planeacion, Colombia (1998).aFirst level means that the �rms obtained internationalinnovations and second level means that they obtained nationalinnovation.

13 The Uruguayan survey analysis allowed the estimation of the number of enterprises that were below that

threshold: 22.5% of the �rms of more than 100 employees did not have any engineers (in 1988); 50.3% of the�rms between 50 and 99 employees were in that situation and the same was true for 73.8% of the �rms between

20 and 49 employees (Argenti et al. 1988).

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66 INDUSTRY AND INNOVATION

this is a premature conclusion: there are technical advice and research capabili-ties outside firms that could be mobilized to overcome the innovative weaknessof such �rms. The data from innovation surveys suggest that this is hardly thecase, for in most countries the utilization of external technical advice by small�rms is well below 30%. On the other hand, case studies on university–enterpriserelationships show that the bulk of these relationships are established betweenuniversity trained employees and faculty colleagues (Hein et al. 1996); even toknow what to ask and how to ask it, some level of training is necessary. It ismore than possible, then, that the small �rms asking for advice detected in thesurveys are not precisely the ones that need to compensate their technicalweakness through external help.

The assertions outlined above are the main conclusions that can be establishedwhen comparing the ‘‘innovation part’’ of industrial innovation surveys in LatinAmerica. Nevertheless, there is one more aspect that can be compared, namely, the‘‘innovation system part’’ of the surveys. This part gathers information about theorganizations with which �rms interact in the innovation process and will be brie�yaddressed in the next section.

NSIS IN THE INDUSTRIAL INNOVATION SURVEYS: CONCEPTUAL APPROACH

AND EMPIRICAL EVIDENCE

The world outside �rms receives a lot of attention in all Latin American industrialinnovation surveys. Many organizations are part of this world: other �rms, be theysuppliers, clients or competitors; scienti�c and technological organizations; researchuniversities and other public or private research institutes; technical and businessconsulting �rms; public programmes devoted to fostering innovation at the �rm level.The way these organizations enter the scene is through their relationships with �rms.Quite a diverse set of possible relationships is considered: origin of innovative ideas,sources of information for innovation, realization of innovative projects, �nancialsupport for innovation, development of joint innovative projects. We can clearlyrecognize here the ‘‘relational’’ �avour of the systems of innovation concept. If weagree that these systems include the set of organizations that can possibly get involvedin innovation driven interactions with �rms, the surveys do indeed re�ect such acharacterization. However, the ‘‘national’’ quali�cation of these sets is not explicitlystated in the surveys: only the Mexican one analyses the differentiation betweennational and foreign for all the organizations under consideration.

The main empirical �ndings may be summarized as follows:

(i) The ideas for innovation as well as the concrete implementation of innovationsare considered by the �rms mainly as an internal affair.

(ii) From outside, the less important organizations are universities and publicresearch centres. In Colombia, universities are viewed as an origin for ideas oninnovation by the 13.4% of the �rms surveyed while the �gure for public researchcentres is 7.4%. In Mexico, innovation agreements were scarcely established withuniversities (6% of total) and public research centres (4.9%); nevertheless, these

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LOOKING AT NSIS FROM THE SOUTH 67

organizations constituted the most ‘‘national’’ of all the alternatives, in thefollowing sense: 90% of all the universities and public research centres thatentered into innovation agreements with �rms were Mexican, in contrast toclients, which were foreign in 40% of cases, or enterprises of the same group,which were foreign in 50% of cases. In Venezuela, 43% of �rms declared havingexternal technical relationships; from these, only 3.5% have been establishedwith universities and 4.5% with public institutions. In Argentina only 6% ofall �rms in the survey declare having contracts with universities and publicinstitutes.

(iii) If we include the acquisition of capital goods for innovation from other �rms asan ‘‘external relationship’’, it appears to be the strongest for all countries. This isalso valid regarding the future: augmenting the investment in machinery andequipment was by far the most frequent answer to the question about futureplans in innovation. In all cases machinery and equipment for innovation wereoverwhelmingly foreign.

Low spending on R&D, low reliance on local knowledge institutions, high relianceon foreign embodied science and technology, and, on the other side, outstandingimportance of recent foreign direct investment by multinational corporations: hownational then are National Systems of Innovation in Latin America?

In an inspiring paper, Niosi and Bellon (1996: 144) analyse the internationalizationof innovation. They argue that: ‘‘Most international �ows of technology take placeamong developed countries, re�ecting the smaller technical gap that exists betweenthem as compared with the wider gulf that divides industrial and underdevelopednations.’’ Although the increasing research co-operation includes scientists located inunderdeveloped countries, the prevailing research agenda shows that such co-opera-tion is fundamentally integrated to the knowledge generation processes located inthe industrialized nations. So perhaps the basic trend is the ‘‘triadization’’ of innovation.This characterization has also been put forward by Patel and Pavitt (1999), based onthe fact that less than 1% of the foreign innovative activities of the world’s biggestcompanies are located outside the ‘‘triad’’. Considering ‘‘open national innovationsystems’’, Niosi and Bellon (1996: 156) assert: ‘‘Present trend toward ‘inter-nationalisation with specialisation’ seem more likely than sheer globalisation’’, a trendthat allows only a partial convergence of NSIs. From this point of view, the LatinAmerican NSIs are moulded by an insertion in the international economy thatspecializes in the ‘‘natural resources’’ based production, with comparatively little andmostly imported ‘‘technological-added value’’. Several aspects previously consideredare related with such an international specialization that fosters the emergence ofwhat could be called ‘‘neo-peripheral’’ NSIs.

CONSTRUCTING A PICTURE OF NSIS BY COMBINING DIFFERENT

APPROACHES

At �rst sight, the evidence presented in the preceding section does not speak ofsystems and less so of NSIs. Nevertheless, caution is necessary. Surveys alone give a

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68 INDUSTRY AND INNOVATION

much too general view to build a thorough picture of national situations regardinginnovation, so national case studies are indispensable. Now as previously noted,surveys can be compared even if they do not include exactly the same questions, butit is more dif�cult to make comparative analysis with case studies, if they are notbased on a previously agreed upon methodology, because often the main issues underconsideration and even some basic de�nitions are not the same.

Speci�cally, when analysing the question if NSIs really exist in given countries, it isnecessary to decide what exactly will be studied in order to obtain suf�cientlyaccurate answers. The idea is to focus the attention on different issues, each one ableto shed light on an important aspect related to innovation, be it in the present or ina prospective view, and then try to combine what is seen from those different pointsof view in a global picture of the innovation landscape.

National Systems of Innovation are ‘‘endlessly in the making’’. Two factors arealways broadening their scope in the midst of the dynamics of the system: varietyand interdependency. That means that new actors, new functions and new inter-relations are always appearing and changing. When some actors, some functions andsome interdependencies are missing, the co-evolution of them, which is at the verycentre of the dynamics of transformation, gets blocked. The combination of differentapproaches points, �rst, to the identi�cation of the variety of the system; the systemiccharacter of the ensemble of innovation related processes can be thus estimatedby the degree of interdependency between the aspects brought about by suchcombination.

We are sketching a type of NSI analysis that starts by de�ning, in the case or casesunder consideration, which elements should be speci�cally studied in order toconstruct with them a global picture. In the following an example is presented.

The innovation landscape in Uruguay

In order to study the case of a small peripheral country where innovation hasnever been important, attention was focused on collective opinions, strategies andinteractions between actors who were considered especially relevant to assess theactual role of innovation, its possible futures, its more or less systemic nature, and itsconnections with development policies.14 Five basic approaches were chosen: (i) theinnovation strategies of selected productive sectors; (ii) the relationships between�rms and universities or research institutions and the overall picture of the R&Dsystem; (iii) the ‘‘innovation institutional map’’; (iv) the innovative circuits approach;and �nally (v) the collective visions approach. The �rst three approaches are wellknown, and we shall comment on them only very brie�y.

(i) The thorough understanding of the innovation strategies of selected productivesectors gives precious information at a meso-level. Particularly important in this

14 Two research projects were related with this aim: ‘‘Systemic Competitiveness and Innovation in Uruguay’’,sponsored by the Volkswagen Foundation and with the academic partnership of the German Development

Institute, Berlin, and ‘‘Globalisation and Localised Innovation’’, sponsored by the Ministry of Science andTechnology of Brazil and the Organisation of American States, in partnership with academic teams from Brazil

and Argentina (Arocena and Sutz 1998, 1999; Sutz 1998, 1999; Arocena 1999).

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LOOKING AT NSIS FROM THE SOUTH 69

respect are the ‘‘high-tech’’ sectors, like electronics, software and biotechnology.In the case of electronics, for instance, where a direct exports strategy has beenvery dif�cult to implement, an ‘‘internal market’’ strategy related to the solvingproblems needs of different exporting �rms was put forward, based on the goodcapabilities of the Uruguay electronic �rms to give creative answers to thoseneeds.

(ii) The relations between �rms and knowledge production institutions is a keyaspect of the innovative landscape. Moreover, the educational/skill/researchsituation is fundamental to understand the dynamics of such relations and itspossible evolution. ‘‘Research relations’’ between �rms and university teams havebeen only recently fostered by university policies: it is not surprising then thatthe bulk of the demand for such policies came from the agronomic sector, whichhas the strongest tradition of relationships with private productive sectors. Theengineering faculty, that exhibits a good record of relationships with stateenterprises and ministries—particularly electric power, telecommunication andtransportation and public construction—is entering slowly into systematicresearch interactions with private �rms.15 The Uruguayan research system pre-sents several worrying problems, many of them issued from the low level ofspending. One of the consequences, derived from low salaries and poor researchinfrastructure, is the migration trend of the best trained—the ‘‘brain drain’’phenomenon—that recent research has shown not to have diminished duringthe 1990s, quite the contrary, in all Latin America (Massey et al. 1998).

(iii) Through the third approach, the whole set of public and private institutionsrelated in one way or another with innovation is identi�ed and some of itscharacteristics are studied. In this way, an ‘‘institutional map’’ for innovation isconstructed. A key question concerning each institution is the ensemble ofnational institutions with which it maintains some type of working relations: inUruguay, the only public university was the institution most frequently mentionedin this respect. The vast majority of the institutions were mentioned only by twoor three other institutions, showing a low degree of connectivity for the wholemap, or, in other words, a rather isolated institutional setting.

(iv) Inspired by the user–producer interaction conceptualization, the ‘‘innovativecircuits’’ approach consists of the identi�cation and analysis of situations inwhich: (1) pressing problems of production were solved by the encounter ofactors having the problem with ‘‘knowledge’’ actors, be they faculty teams,public laboratories or high-tech �rms, and (2) the learning process led to researchon related problems, in a sort of growing spiral. These situations, studied at themicro level, are very instructive concerning the reasons why these type ofencounters take place, the type of dif�culties that appear once the dialoguesbegan, the ways in which they were mastered and, particularly, how the diffusionprocesses of the related innovations occur—if they occur at all.

15 Regarding the educational/skill/research situation, Uruguay is a country with a relatively high proportion of its

corresponding age group going into third level education (29.4%), while countries like Mexico and Brazil onlyhas 16.1 and 11.7%, respectively, in the same situation; nevertheless this �gure is not at all high when compared

with South Korea, which has a corresponding �gure of 60.3% (L’Etat du Monde 2000).

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The diffusion process is central to this approach, for the very idea of aninnovative circuit is associated with the spread out of the innovation to other�rms or even other productive sectors; it is also associated with the upgradingof the capabilities to solve problems, for example by using the accumulatedknowledge derived from the obtained innovation to go further in more sophisti-cated technological directions. An interesting innovative circuit detected inUruguay was developed around the foot and mouth disease, relating cattleproducers and a biotechnology laboratory; others have developed around prob-lems solved through automation, microelectronics and molecular biology. Barriersto the diffusion of many of these innovations were seen as a major problem. Onthe other hand, there are suf�cient success stories of industrial technical innova-tion (related to problems that are ‘‘country speci�c’’, in the same sense asagrarian problems) to support the idea that an innovation policy makes sense.

(v) The collective visions approach was based on a national opinion survey and aDelfos type prospective exercise. The survey posed several questions concerningresearch, innovation, competitiveness and the future of the country. For example:does research stimulate economic growth, damage the environment, improvethe quality of life, promote unemployment, contribute to the export capacity ofthe country, foster dependence from abroad? Answers were related to severalfeatures of the respondents: age, socio-economic level, education, ideologicalself-identi�cation, etc. A huge amount of information was collected. In order tobe very brief, we shall point out only two particularly interesting results. Onethat surprised experts was that a majority believes that research widens thedependency of the country from abroad; analysing age, educational level, orplace of residence, we arrived at the following conclusion. Those persons whoare only slightly acquainted with the small but important research effort that hasbeen carried on in Uruguay since the end of the dictatorship, in 1985, answerthe question thinking primarily of ‘‘foreign science’’, and so they assume that itwidens the dependence of the country. On the contrary, more informed peoplethink in terms of ‘‘national science’’ and so have a different opinion. People werealso asked to choose between three ‘‘policy alternatives’’. These were: (1)Uruguay can and must do research with public funds, because bene�ts will begreater than costs; (2) Uruguay can do successful research but must not do it,because costs will be greater; (3) Uruguay cannot do successful research; 55%of the population chose the �rst alternative. Combining these results with otherinformation, and remembering that national research has been historically amarginal activity in the country, with a small contribution to the quality of life,we may conclude that there exists a strong social basis for the promotion ofscience and technology—provided it is carried on in a way that does not neglectsome main concerns of the citizenry.

The Delfos exercise considered the opinions, on several subjects, of 60persons: high public of�cials, relevant politicians of the main political parties,entrepreneurs, trade unionists, economists and other academicians and inter-national experts. Some kind of collective opinion emerged that stressed that thissmall peripheral country can and should point to a new model of development,

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LOOKING AT NSIS FROM THE SOUTH 71

based on quite speci�c innovation activities. We can compare the opinions ofthe whole citizenry, stemming from the survey, with those of the ‘‘elite’’ studiedin the Delfos exercise. To give only one example: the former have a betteropinion than the latter concerning the national capacities for innovation ingeneral, for ‘‘doing new things’’. A closer consideration of this issue suggeststhat the main problems are not related with the capacities for technologicalinnovation—which are supposed to be quite good—but with the capacities forinstitutional innovation, particularly in the realm of education.

Combining these different approaches we see that there is fairly good technicalcapacity and ingenuity for solving pressing and speci�c production problems. Ordinarypeople, rather than being hostile to research, think that the country should make aneffort in that direction. Weak institutional settings isolate and discourage innovationinitiatives. While there is only weak support for improving the country’s innovativeclimate from the elite, there is also weak demand from the productive sector forendogenously generated knowledge and innovation.

NSIS IN THE SOUTH: SOME LESSONS THAT CAN BE LEARNED FROM THE

NORTH

The innovation surveys analysis and the case study presented in this paper suggestthat, in general, Latin American NSIs are weak indeed. The reasons that they are weakcannot be limited to failures within the components of the system: the social andeconomic value historically assigned to endogenously generated knowledge andinnovation are explanations at least as powerful. The question is then: value assignedby whom? As the Uruguayan case shows, there is not a unanimous ‘‘social subject’’that speaks for the whole society: common people, technicians, elite, governmentof�cers, have different perceptions on the matter. It seems that in the developedcountries, the picture we get of rather strong NSIs is the outcome of a widespreadsocial consensus on the economic and political importance of the nation relatedcapacities. The complex sets of organizations, relationships and beliefs that the termNSI tries to capture have a macro policy expression, the innovation policies. Thesepolices provide for the integration of ‘‘weak actors’’, like small and medium enterprises,into a more active innovative climate, thus expanding the social consensus. This isnot to say that there are no con�icts: universities resent the push towards a moreentrepreneurial spirit and workers discuss how to share the social costs of the joblessgrowth issued from actual technical progress. But there is still a strong consensusabout the importance of knowledge and innovation both for the identity and for thefuture of the nation.

In this sense, to the four ‘‘Southern headed’’ remarks made at the beginningregarding the NSI conceptualization—that is, its ex-post, normative and relationalcharacter, and the fact that it is subject to purposeful action—must be added a�fth; its consensual nature regarding the social legitimization of knowledge andinnovation national efforts. This is not at all the case in Latin America, where ‘‘toadapt and to learn by using’’ and ‘‘to develop endogenous technology’’ are more oftenthan not presented as contradictory rather than complementary, as they really are.

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72 INDUSTRY AND INNOVATION

This false dichotomy is not without consequences, for it undermines the consensusaround the necessity to seriously perform scienti�c and technological research atnational level.

These remarks can be seen as ‘‘distances’’ between the Southern and the developedsituation in terms of their NSIs. In the �rst place, those distances warn againstimporting ‘‘turn-key’’ institutions and policies. The evolution of NSIs in developedcountries shows plenty of examples of successful copying and ‘‘importing’’ institu-tions. That is not always the case when ‘‘Northern’’ institutions are copied in theSouth: since the tacit assumptions about the framework in which the institutionsmust operate are seldom true, the copy often generates an institution with the samename but with different real functions, or with no function at all. It is not surprising,then, that importing generates a quite inef�cient array of institutions.

But those ‘‘distances’’ also suggest some lessons that can be learned from the North;perhaps the most promising are related to the ‘‘purposeful action’’ issue. They can besummarized as follows:

(i) innovation policies are indeed a tool in the shaping of NSIs;

(ii) innovation policies are articulating devices;

(iii) success is dependent on taking into account an actor’s perspective whendesigning interventions, that is, having in mind the interests, needs and possibili-ties of the different actors of the innovation interplay.

These orientations for innovative actions, if applied in a systematic way, and with dueattention to the speci�c problems and strengths of each ‘‘Southern’’ country, wouldbe surely more effective than the extended practice, so common in Latin America, ofcopying the form regardless of the speci�c problems at stake and the real context inwhich they appear.

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