The applicability of the concept of national innovation systems to transition economies.

SUMMARY

This article aims at gaining a deeper insight into the structure of National Innovation Systems (NIS) in transition economies, which may allow for developing policy recommendations that help to stimulate more systemic and effective NIS in these countries. A great part of the existing studies focusing on NIS in less developed and transition countries argue that the specific nature of the NIS and related problems in less successful countries in terms of technological development and economic performance are different from developed countries. Therefore, we have to identify approaches on analyzing innovation systems that do work in transition economies. The following questions will be answered: Why is the NIS important for the economic development of a country? What are the approaches of NIS that are applicable to the specific situation of transition countries? Refering to the fact that a process-based approach is appropriate to describe and analyze the innovation systems of countries in transition: What are the most important types of knowledge and learning processes for these countries?

KEYWORDS

national innovation systems; transition processes; economic development; knowledge and learning processes

INTRODUCTION

Since its initial implementation by Freeman (1987), Lundvall (1992b) and Nelson (1993a), the National Systems of Innovation (NIS) approach has been developed and evolved continuously emphasizing its importance for the development of economies. Most of the literature concentrates on analyzing the NIS in developed economies, but for a short period of time more and more studies focus on the NIS in less developed and transition economies. Examples for such studies are publications by Arocena and Sutz (2000), Gu (1999), Intarakumnerd et al. (2002), Inzelt (2004) and Radosevic (2002, 2004). All of them argue that the specific nature of the NIS and related problems in less successful countries in terms of technological development and economic performance are different from developed countries. But do approaches on analyzing systems of innovation work or do not work in transition economies? This paper aims at gaining a deeper insight into the structure and impact of NIS in transition economies, which may allow for developing policy recommendations that help to stimulate more systemic and effective NIS in these countries.

The paper is organized as follows. Section 2 illustrates the necessity of implementing the concept of NIS in transition countries by comparing the applicability of two fundamental approaches to analyze systems of innovation. Section 3 examines the process-based approach on NIS based on a general reflection of the impact of knowledge and learning as essential determinants serving the overall function of innovation systems. Section 4 presents conclusions and recommendations for further research.

NATIONAL INNOVATION SYSTEMS IN THE CONTEXT OF TRANSITION COUNTRIES

What are possible approaches to describe and analyze economic development and the differences in economic success between countries? In item 2.1 one of these approaches is introduced, which is generally used to answer the question, why economic growth rates differ across countries and, due to this, why technological gaps exist. The concept of National Innovation Systems (NIS) is classified into it in order to identify its advantages for analyzing and explaining economic development. In item 2.2 the possibilities of applying the concept of NIS to the conditions and requirements of transition economies is dicussed briefly. As we will see, for countries not belonging to the group of highly industrialized countries, the NIS approach must be fitted to their special characteristics and requirements.

TECHNOLOGICAL GAPS AND NATIONAL INNOVATION SYSTEMS

Empirical comparisons among countries show that strong distinctions with respect to the economic performances exist; (1) countries can be assigned either to the group of 'leaders' or to the group of 'followers', who have the opportunity to catch up. The literature on technology-gaps seems to be very useful for explaining differences in growth rates. The main difference between the neoclassical inspired and this literature is how technology is understood. While traditional neoclassical theory does not see technology as a source of cross-country differences in GDP per capita, '[t]he technology-gap theorists [...] see technological differences as the prime cause for differences [...] across countries' (Fagerberg (1994: 1155). Gerschenkron (1962) and others see technology and knowledge respectively as embedded in the organizational structure of a country. Due to this, technology could not be seen as a public good; technology transfer is therefore more difficult and costly. Technological change is consequently not a question of replacing outdated technology with a more modern one, but to continually transform technological, economic and institutional structures.

The literature on 'postwar following and catching up' points out, that comparisons among different countries show strong distinctions with respect to the productivity growth rates, which tend to vary inversely with productivity levels. Abramovitz (1986) introduces the catch-up hypothesis for explaining this coherence and argues that differences among countries in their productivity levels create a strong capability for future convergence of these levels. The catch-up hypothesis argues that being backward in terms of the level of productivity offers a potential for rapid progress. The larger the technological and therefore the productivity gap between leader and follower, the stronger the follower's potential of productivity growth. The catch-up process of followers is self-limiting; the possibility of making large leaps by replacing outdated with best-practice technology becomes smaller as the follower catches up.

The criticism on this hypothesis especially targets the definition of technological backwardness as only being determined by the economic factors of a country. But social characteristics explain a substantial part of a country's failure to achieve a similar high level of productivity as an economically advanced country. Hindering social characteristics can reduce the full technological leap that a country is able to make envisaged by the catch-up hypothesis. Following this line of thoughts, Gerschenkron (1962) points out that the gap may be difficult to close by the following country. First, he argues that in backward countries there will normally be a great part of society that resists change. Second, latecomers face larger requirements for capital and other advanced factors; catching up requires a great amount of efforts and institution building by the follower. Therefore, the idea of 'social capability' suitable for absorbing more advanced technologies was introduced, which influences the catch-up process of a country. The term is defined as 'to designate those factors constituting a country's ability to import or engage in technological or organizational progress' (Fagerberg (1994: 1156). Abramovitz (1986) identifies technical competence, and political, commercial, industrial, and financial institutions as the main factors of social capability. Furthermore, he introduces the term 'technological congruence': For countries that differ much from the leading country in terms of economic factors it may be difficult to apply the technology of the leader country, as technologies are shaped by the environment they have been developed in. This idea reemerges as a result of the considerations concerning the recently developed concept of NIS. The development process occurs at the national level. Country-specific factors influence this process and therefore technological change and give technologies of different countries their specific national orientation. Lundvall (1992b) and Nelson (1993a) among others, are using the term 'National Innovation Systems', as countries can be seen as separate systems that have their own dynamics.