TOWARDS THE FUTURE OF

INNOVATION SYSTEMS RESEARCH:

AN AGENDA

Soremekun, A.J, Ajao, B.F., Jegede, O.O. Egbetokun, A.ANational Centre for Technology ManagementObafemi Awolowo UniversityIle-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 scientificTraining

Limited, Difficulty intechnology absorption, Lowlevels of scientific training

Main Knowledge Sources

Localized Foreign

Nature of InnovativeOutput

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 domesticdemand for new high-tech products

Large but unstructured markets, low purchasing power giving rise to weak domestic demand fortechnological 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)

CompetenceWhat you know

CapabilityWhat 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 inlow income countries, while theycontribute 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), researchinstitutes)

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