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

A 'learning economy' is an economy where the ability to learn is crucial for the economic success of individuals, firms, regions and national economies. In this context, learning cannot be equated with just getting access to information. Learning refers to building new knowledge, competences, and skills in all parts of each economy. If we argue that the concept of 'learning economy' describes precisely the situation of economies and the challenges they face, then we do support our former argument of the impact of knowledge creation and diffusion as main elements of NIS.

Impact of knowledge within the scope of national innovation systems

A successful process of development is possible, if the economy is able to successfully use technology. If technology is defined as knowledge used in the production, then we have to understand what kind of knowledge is important to gain mastery over it.

Lundvall and Johnson ((1994: 27) introduce a taxonomy of knowledge bringing forward the argument that '[t]hese categories refer to the possibilities to carry through transactions with economically relevant knowledge and to combine pieces of knowledge in new ways.' As information, in line with the learning economy, becomes more complex and more abundant, know-how and skills to select and use information become also more important. This kind of knowledge plays a key role in almost all activities of the economic sphere, because for being successful it is necessary to interpret and assess emerging complex information and patterns and to act appropriately due to these insights. The increasing complexity of the knowledge-base results in the formation of industrial networks as an important expression of modern economies. Therefore, know-who becomes more important, as a general trend towards a more complex knowledge-base requires a growing access to many different sources of knowledge. Know-who involves information about who knows what and who knows what to do. It also refers to the social capability to cooperate and communicate with each other. Compared to these two types of knowledge, know-what and know-why are less socially embedded. Know-what refers to knowledge about facts and is comparable to information. Know-why is defined as the knowledge about understanding and explaining natural and social phenomena. Having access to this kind of knowledge supports advances in technology and 'reduce[s] the frequency of errors in procedures of trial and error' (Lundvall 1996: 5).

As argued before, the aim is to get access to knowledge and to gain mastery over it, because just to acquire foreign technology is not enough to compete successfully in a globalizing world. To master and absorb knowledge is dependent on the type of knowledge. Know-what and know-why are easily codifiable and transferable. They are comparable to information. Both types of knowledge are codified knowledge, that '[...] covers all codifiable items such as engineering blueprints and designs and the underlying generic scientific knowledge plus management manuals and handbooks describing system features, performance requirements, material specifications and quality assurance criteria and the organizational methods and routines which are used to implement them' (Ernst & Lundvall 1997: 18). In contrast, know-how and know-who are primarily rooted in practical experience and social interaction. Specific know-how can be learned through apprenticeship relationships; learning results from cooperation with more experienced colleagues. Equally, Know-who is tacit and socially embedded knowledge which cannot be easily transmitted or sold in the market, as tacit knowledge is anchored in the competences of individuals or organizations. This kind of knowledge represents the firm-specific competitive advantage. It is learned in social practice and some of it in specialized education environments. Accordingly, know-how and know-who are important elements of the social capability of the economy. Finally, as social capability is defined as factor constituting a country's ability to import and engage in technological progress, and as these two types of knowledge are recognized as important elements of social capability, we have to draw the conclusion that for a successful process of development tacit knowledge is fundamental. As tacit knowledge is socially embedded and depends on social interactions and networks, countries have to strengthen their linkages and interactions between the actors of this process in order to strengthen their social and technological capabilities.

Therefore, for a transition country know-how and know-who are the most important types of knowledge, as it is necessary for them to develop capabilities that are needed to use, adapt and further develop imported technology. This becomes even more important, when thinking of the historical role of firms in socialist countries. It was not part of their duties to independently gain access and master knowledge in order to effectively change products or production processes. But if we identify firms as the main location for accumulating technological capabilities and as crucial for the competitiveness of the whole economy, then skills are needed that help firms to understand new technology and its requirements (know-how) and to develop relationships to specialized groups, both at home and abroad (know-who), as we will see lateron on the basis of an empirical example.

Impact of learning processes

Knowledge used in the production is defined as technology; new knowledge or a combination of knowledge is defined as innovation. A change of knowledge occurs through different types of learning processes. Knowledge can change more or less as a normal outcome of production itself as 'learning-by-producing'. Individuals and organizations renew their competencies through everyday experiences, which influence the perceptions affecting the direction of innovative efforts and 'produce knowledge and insights forming crucial inputs to the process of innovation' (Lundvall 1992a: 9). But, remembering and perpetuation of existing knowledge is insufficient to achieve competitive capability; a constantly increasing stock of knowledge in terms of learning is needed.

Strong social interaction is important for the social and technological capability of an economy. On this account, we will distinguish between different types of learning dependent on their account of social interaction. As a first type of learning, learning as simple, individual and isolated imprinting of immediate experiences on the memory is not an important form of learning with regard to competence building. As this way of learning cannot be influenced, it is not appropriate for developing know-how and know-who. Second, there is learning by repetition, in which knowledge, i.e. normally information, can be acquired without understanding it. Therefore, it does not facilitate skills that help to use, adapt and further develop new technologies. Third, learning can be done by feedback that involves more interaction. A gradual improvement of an activity results from a positive or negative reaction through others. Forth, there is systematic and organized searching for new knowledge. This is characteristic for modern economies, as these have established universities, research institutes and R&D departments. Searching for new knowledge occurs in two ways. First, 'the search activities organised in close connection with production and influenced by the commodity logic of the enterprise sector' (Johnson 1992: 32) are one form of searching, that is extremely significant, as the producers themselves know best, what kind of new product or process is necessary for an optimal production process. Private firms are the center of this form of searching, a situation, that was hardly given in socialist economies. This has to change during the transition process in order to become competitive in a globalizing market. Second, there is 'the less profit-oriented basic (re)search activities of universities and similar organisations' (Johnson 1992: 32), i.e. 'learning-by-exploring'. Knowledge creation in socialist countries relied exclusively on this type of searching.

The stock of knowledge can decrease as well. On the one hand, knowledge just disappears without serving a purpose for technological progress in form of 'low-end forgetting'. On the other hand, forgetting can be a prerequisite for the development of new knowledge. Old habits of thoughts, routines or structures in all parts of the economy have to be changed before technical change will be able to move along new trajectories. The closing-down of activities has to be identified as a normal and integrated part of economic development, within which skills, competences and knowledge are forgotten and lost. Creative forgetting is a process, which advances technological progress. An economy has to support strong institutions in order to guarantee a certain amount of creative destruction of knowledge in order to free the way for new, innovative knowledge. Figure 3 sums up the arguments by giving a simple picture of the relations between learning, forgetting, knowledge and innovation.

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