Histrory and Development of the National Innovation Systems (NIS) Conceptual Approach

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Paper to be presented at the DRUID Tenth Anniversary Summer Conference 2005 on

DYNAMICS OF INDUSTRY AND INNOVATION:ORGANIZATIONS, NETWORKS AND SYSTEMS

Copenhagen, Denmark, June 27-29, 2005

HISTRORY AND DEVELOPMENT OF THE NATIONAL INNOVATIONSYSTEMS (NIS) CONCEPTUAL APPROACH

Naubahar SharifDepartment of Science and Technology Studies

Cornell UniversityE-mail: [email protected]

2005

AbstractThe NIS conceptual approach has fared astonishingly well in its short history. It now framesdiscussions of innovation policy in supra-national organizations from the OECD to the EU,

and within national governments from Sweden to South Korea. What is the origin of thisconcept? How and why has it come to be so widely used and acclaimed? What has given itsuch power in discussions of science and technology policy? In this paper, I present findingsfrom my primary research in which I trace important events in the history and development ofthe NIS conceptual approach.

Keywords:


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HISTORY AND DEVELOPMENT OF THENATIONAL INNOVATION SYSTEMS (NIS) CONCEPTUAL APPROACH

1. Introduction

The NIS conceptual approach has fared astonishingly well in its short history. Itnow frames discussions of innovation policy in supra-national organizations fromthe OECD to the EU, and within national governments from Sweden to SouthKorea. What is the origin of this concept? How and why has it come to be sowidely used and acclaimed? What has given it such power in discussions ofscience and technology policy? In this paper, I present findings from my primaryresearch in which I trace important events in the history and development of theNIS conceptual approach. In doing so, I contribute to the new literature in scienceand technology studies (S&TS), connected to economics and business-relatedconcepts, ideas, and models (see, for example, Mirowski and Sklivas 1991;

Yonay 1994; Evans 1997; Callon 1998; MacKenzie 2001; Mirowski and Sent2002).What follows in this paper is, first, a discussion of the analytical apparatus

I utilize in my analysis of the historical development of the NIS approach. I thenprovide a brief history of the field of innovation studies from which the NISconceptual approach arose. I map the basic contours of the field of innovationstudies and describe the place of the NIS conceptual approach within that field.Next, I examine the emergence and development of the NIS conceptualapproach itself, showing how in its development it is an appropriate subject foranalysis under the social construction of technology (SCOT) program.

The innovation systems conceptual program features key missing pieces

that explain the concepts development through various controversies among itspractitioners. The practitioners seldom (and always tangentially) articulate thesemissing pieces in the innovation systems literature, leaving the controversies tofloat above the mainstream academic and policy debates. I organize my historyof the NIS conceptual approach around seven themes, clarifying thesecontroversies and explicating the missing pieces in order to situate thedevelopment of the NIS conceptual approach more accurately and to understandbetter how the conceptual approach operates and acquires its power today. Thissection forms the backbone of the paper and is based primarily on my interviewswith central proponents of the NIS concept.

The final section presents concluding remarks based on the narrative.

2. Theoretical Framework: Old Tropes and New

While there is a growing body of literature on the economic, policy, andtheoretical aspects of innovations in general and the NIS conceptual approach inparticularsee, for example, Fagerberg, Mowery, and Nelson, 2005, Nelson2000, Lundvall 1988, Freeman 1995, Nelson 1993, Lundvall 1992to the best of


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my knowledge there is no material that discusses the development, history, andsocial construction of the concept from an S&TS or constructivist standpoint.Moreover, key debates among leading practitioners in the field have not beenanalyzed from an S&TS perspective.1 In this paper, I employ analytical tools fromS&TS to study these neglected aspects of the emergence and history of the NIS

conceptual approach.Traditionally, disciplines of science and technology appear to accumulateknowledge progressively, building one fact upon another, adding gradually to anever-increasing mountain of knowledge. This is the normal progressive model ofscience and technology from which black-boxes, or knowledge (facts aboutnature) and material artifacts, emerge.2 Beyond work in the S&TS field and tosome extent the history of technology, relatively little attention has been paid tothe historical process through which knowledge and artifacts become goodfactsor successful technologies; such understanding about knowledge production isoften dismissed by scholars external to the sociology of science and technologyas inconsequential or unimportant. Once a piece of scientific knowledge or

tangible artifact becomes black-boxed, it acquires an air of inexorability, as if itwere the only possible solution to the set of problems to which it is applied. Theattainment of this status tends, however, to obscure the history behind thescientific or technological black box in question. As a corrective to such adevelopment, in this paper I make the NIS conceptual approach an object ofanalysis. I analyze the hidden history of the NIS conceptual approach by bringinginto the foreground the basis of its success. Although I am able to treat someaspects of the NIS concepts history independently, other aspects benefit frommy being able to map them onto the SCOT model. The SCOT model, in thiscase, functions as a heuristic device in historicizing the concept. I appeal, inparticular, to three stages of the SCOT model: interpretive flexibility, closure andstabilization, and the wider context.

The NIS concept grew out of a very specific set of sociologicalcircumstances. It was not the only solution to a pressing set of problems at thetime of its genesis (researchers were trying to understand competitiveness at thecountry level), and these circumstances are not always given the full attentionthey deserve in the innovation systems literature. By revealing these missingpieces and connecting them to the context of the NIS concepts emergence, Itrace how consensus behind the NIS concept developed as a result of a reactionto the prevailing orthodoxy in economics, the wider geopolitical context, andstrategic links between the academic and policy worlds. My analysis helps to

1 My usage of the term debate functions differently from the common usage of the term in S&TSanalyses. I do not use the term to refer to antagonistic groups pitted against and intellectuallypatronizing one another. Rather, my usage of the term debate or controversy in this paper moreaccurately refers to disagreementsentirely amicableabout ambiguities or uncertainties thatpractitioners of the NIS concept struggle with in regards to the usage or meaning of the NISconceptual approach.2 In this context, science and technology studies (S&TS) appropriates the engineers term blackbox, a term describing a predictable input-output device, something the inner workings of whichneed not be known for it to be used.


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explain the promulgation of varying interpretations of the concept on the part ofdifferent actors in the innovation systems literature.

I borrow from S&TS studies of controversies and rhetoric as well as thesociology of technology (in particular the SCOT model) to show how the NISconceptual approach developed. The focus on the NIS concept is a departure

from customary objects of analysis in the sociology of science and technology,which have hitherto been dominated mainly by scientific knowledge and materialartifacts. While the NIS concept is not a material technology in the same way thatBakelite, bicycles, and nuclear missiles are, it is still a conceptual approach,impinging on human consciousness and behavior, and therefore valuable foranalysis.

3. Background to the Field of Innovation Studies

The conceptual approach of a national innovation system emerged as one of

the dominant strands of research from the field of innovation studies.

3

Althoughthe idea of innovation as an activity is not new, the study of innovations began toemerge as a separate field, differentiating itself from economics, in the 1960s.

It is commonly assumed that the study of innovations as a discrete body ofstudy emerged mostly from within existing disciplines, particularly economics(see, for example, Castellacci et al. 2005, Fagerberg 2005) over the last four anda half decades. While this is true for the most part, a complementary but longer-term perspective is offered by Reinert (1999, 2003). Reinert argues thatinnovation-systems thinking did not emerge from the classical theory ofmainstream economics, which descended in a canonical sequence from thePhysiocrats via Adam Smith and David Ricardo to the neo-classical traditionbeginning with Stanley Jevons, Carl Menger, and Leon Walras. Rather there wasalso an alternative or other canon in economic theory, which he labels theRenaissance Canon, which ran parallel to classical/neo-classical mainstreameconomics. This second Renaissance Canon belongs to the domain ofappreciative theorizing (in Nelson and Winters parlancesee Nelson andWinter 1982) and the central argument contained in this tradition is thatknowledge is the central agent of human change.4 The Renaissance Canon,argues Reinert, can be tracked to Francis Bacon (mid-sixteenth - earlyseventeenth century), Antonio Serra (early seventeenth century), Friedrich List(early nineteenth century), and most recently to Joseph Schumpeter (late-nineteenth - mid-twentieth century). It is from this canon of economic theory that

3 Although the field of innovation studies is sometimes referred to as the economics ofinnovation, I prefer the label innovation studies. It is more appropriate because of the heterodoxdisciplines that are involved with, and can contribute to, the study of the phenomenon ofinnovation and the innovation systems concept.4 In their seminal 1982 workAn Evolutionary Theory of Economic Change, Richard Nelson andSidney Winter used the term appreciative theorizing in contrast to formal theory. Whereas thelatter is logical and mathematical, the former is closer to empirical observation, to which it isassumed to provide both guidance and interpretation.


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innovation studies and the study of innovation systems can trace itscontemporary roots.

In its present form, however, innovation studies has largely been inspiredby the works of Joseph A. Schumpeter and other research traditions outside theeconomics mainstream, such as institutional economics, development

economics, and, most notably, evolutionary economics. Nelson and Winter (1977and 1982) deserve mention in the area of evolutionary economics. They sharethe Schumpeterian focus on capitalism as an engine of change in Nelson andWinter 1982, and they also introduce a more elaborate theoretical perspective onhow firms behave. Nelson and Winter criticize the assumptions underpinning theneoclassical theory of the firm (the idea that firms have perfect knowledge aboutthe best technology available at any given time and are rational actors withrespect to new technologies). A firms actions, they argue, are guided byroutines, which are reproduced through practice as a function of the firmsorganizational memory. Routines usually differ across firms; some preferinnovation whereas others prefer imitation. A central concern of innovation

studies has been to explain technological growth in an economy more effectively.Such a concern can be traced back to the Harrod-Domar Model of growthdeveloped in mainstream neoclassical economics in the early 1940s, whichsought to extend John Maynard Keyness theory of demand-determinedequilibrium into a theory of growth. In the popular term of the day, the Harrod-Domar growth model was at a knife-edge in that its equilibrium path wasunstable. Any deviation from the path of steady-state growth would result in amove further away from that path, causing macroeconomic instability. Thisconclusion was contested by Robert Solow, among others (including TrevorSwan and later James Meade), and the work of Solow and Swan resulted in theNeoclassical growth model.5 The Neoclassical growth model explained growthby allowing for flexible technology, whereas Harrod-Domars model did not.6 TheNeoclassical model, however, imposes many restrictive assumptions. Theseassumptions include instantaneously stable macroeconomic equilibrium and afactor price adjustment mechanism that assumes that factors are paid accordingto their marginal productivity. In particular, modifications are required regardingtechnical progress to make it comply with the empirical data. The spirit of thesemodifications contradicted at least two of the stylized facts of industrializedeconomies laid out by Nicholas Kaldor (1961)namely, that the capital/labor andoutput/labor ratios have been rising over time and that the real wage has beenrising over the course of development.

By adding technical progress to neoclassical growth models, theNeoclassical growth model could explain steadily increasing standards of living.This finding in turn led to an entire body of empirical literature, known as growth

5 The model differs from Keynesian growth models in that the latter has investment as a functionof financial conditions and savings which are derived from investment via the income multiplier. Inthe Neoclassical model, not only are all Keynesian financial factors omitted, but the direction ofcausality between savings and investment is reversed.6 In his 1956 paper, Solow states that the bulk of this paper is devoted to a model of long-rungrowth which accepts all the Harrod-Domar assumptions except that of fixed [factor] proportions(Solow 1956: 66).


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accounting, which purported to address the empirical validity of the modifiedNeoclassical growth model in which technical progress is assumed. The growthaccounting literature asked the simple question: given the history of outputgrowth, how much of it was due to the growth of capital and labor inputs, andhow much to technical progress? Output growth, labor growth, and capital growth

are observable, but technical progress is notit has to be estimated. Empiricalgrowth accounting began with the famous studies of Moses Abramovitz (1956,1962) and Robert Solow (1957). Their procedure for calculating technicalprogress was to deduce the growth in output attributable to growth in capital andlabor (multiplied by their respective factor prices) and ascribe the residualgrowth in output to technical progress. The most striking feature of earlyinvestigations of growth accounting was the size of the Solow residual.7

The emergence of this growth accounting literature set into motion moreconcerted and directed study into the phenomenon of technical change, whichdeveloped from the 1960s onwards. Since then, economists have been joined byscholars in related fields who have explored the phenomenon of technical

progress, or innovation, in a concentrated fashion. As a result of this trend,innovation studies has over several decades developed into a multidisciplinaryfield, with scholars studying the relationships between technological, economic,organizational, and institutional change. Furthermore, this line of analysisfocusing on technical progressforms the rationale for governments interest inpromoting innovation, and by extension, innovation policy.

4. Mapping the Broader Field of Innovation Studies: The Place of theNational Innovation Systems (NIS) Conceptual Approach within the Field

Given the broad-ranging interests of the field of innovation studies, coupled withthe wide variety of backgrounds of the scholars who inhabit it, mapping thisintellectual domain is not a straightforward task. Because the discipline isrelatively new, its boundaries are supple and changing. In this section, I providesome broad contours and outline the main strand of work in each of thedisciplines major research areas.

The field of innovation studies can be mapped in terms ofwhereinnovation takes place (in firms vs. in non-firm organizations), in terms ofhowinnovation comes about (the innovative process), by studying how innovationdiffers through time (across sectors, industries, or nations), or by types ofinnovation. Because innovation studies scholars look to Joseph Schumpeter astheir seminal innovation theorist (see, for example, Fagerberg 2005), it ispossible to apply his canonical classification method selectively to categorize thefield because almost all of the relevant literature (excepting that which discussesthe history of innovation in society) can be categorized according to his scheme.

7 For example, Solow (1957) calculated that only 12.5% of growth in output per capita in the1909-1949 period in the United States was due to factor accumulationleaving 87.5% to beexplained by technical progress. Later work refined these estimates by allowing for improvementsin human capital, but the residual remained large.


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Schumpeter defined innovation as new combinations of existingresources. This combinatory activity he labeled the entrepreneurial function tobe performed by entrepreneurs, to which he attached much importance. Infocusing on the role of innovation in economic and social change, Schumpeterargued that it was not sufficient to study the economy through a static lens,

focusing on the utilization of resources to different ends. Economic development,in his view, had to be seen as a process ofqualitative change, driven byinnovation, taking place in historical time. Schumpeters classification methodwas based on new product innovations, new methods of production, new sourcesof supply, the exploitation of new markets, and new ways to organize business.

Another approach to classifying the literature in the field, also based onSchumpeters work, is to delineate innovations according to how radical they arecompared with current technology (Freeman and Soete 1997). From thisperspective, continuous improvements are characterized as incremental ormarginal innovations, as opposed to radical innovations or technologicalrevolutions (consisting of a cluster of innovations that together may have a very

far-reaching impact).4.1 Where Does the Study of Innovation Systems Fit?

A central finding in the innovation studies literaturecommon to all types ofinnovationis that, in most cases, innovation activities depend heavily onexternal sources. Innovators rarely innovate in isolation. They work in conjunctionwith any number of entities to develop an innovation. Van de Ven, Andrew,Polley, Garaud, and Venkataraman state that the innovation journey is acollective achievement that requires key contributions from entrepreneurs in boththe public and private sectors (1999: 149). In understanding alltypes ofinnovation, it is useful to employ a systems perspective to underscore thecollective achievement, in terms of inputs into the innovative process, and tostudy its wide-ranging effects in society. Such a systems perspective presentsan overarching conceptualization, or an underlying framework, for each of theabovementioned innovation studies areas.

The study of any type of innovative activity need not, however, fall underthe innovation systems rubric. Whether or not it does is entirely the choice of theresearcher in terms of the research questions asked. In particular, if theresearcher seeks to understand how any given innovative activity connects to thewider system from which it emerges, then the study of linkages among theinnovator, resource inputs, and market outputs are helpful (that is, a systemsperspective is helpful). On the other hand, if the research questions areexclusively confined, for instance, to the inner workings of an innovating firm (forexample, organizational innovations), then the study need not be situated withinthe national innovation systems conceptual approach.8 In other words, theinnovation systems idea functions as an umbrella conceptual approach under

8 For an example of a recent study that examines organization-level theoretical issues under thebroader innovation systems rubric, see, Sharif and Chan (2004).


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which innovation studies projects may or may not fit depending on the scope andpurpose of a given research question.

It is important to note, as well, that the study of innovation systems is adiscrete area of research in itself. For example, a study of that aspect of aninnovation system that is comprised of universities and their linkages with

industry would fall generally under the innovation studies rubric without focusingon product, process, or organizational innovation. Similarly, a study of innovationpolicies and their effect on public and private innovation would represent anotherstrand that falls distinctly under the innovation systems conceptual approach. Inaddition to offering a broad-ranging framework for innovation studies research,therefore, the innovation systems conceptual approach itself represents anindependent domain of study within the innovation studies field.

5. Chief Proponents of the NIS Concept: Cast of Characters

Today, a variety of different new (and sometimes old) research centers anddepartments are concerned with the role of innovation in economic and socialchange. These research centers are usually interdisciplinary units, includingeconomics, S&TS, business studies, and even some branches of sociology.

The most notable of these departments is the Science Policy ResearchUnit (SPRU) at the University of Sussex, England. SPRU houses one of the mostrespected living founders of innovation researchProfessor Emeritus,Christopher Freeman. Until 2003, SPRU was also the intellectual home of thelate Keith Pavitt. Also in England at the University of Manchester are StanleyMetcalfe and Rod Coombs. Metcalfe has worked extensively on issues relatedto technology policy and innovation systems in the service economy, whereasCoombs has worked on issues of private sector R&D, focusing on company-levelstrategy.

The largest concentration of innovation studies scholars can be found,however, in Scandinavia. Bengt-ke Lundvall, at the University of Aalborg inDenmark (where he credits Esben Sloth Andersen for much of the earlypioneering work carried out in Aalborg), continues to be a key actor in promotingthe innovation systems concept. In Sweden, Charles Edquist and MaureenMcKelvey jointly worked on the concept of innovation systems at LinkpingUniversity in the early 1990s, before both of them left Linkping, with Edquistmoving to Lund University, and McKelvey moving to Chalmers University ofTechnology (in Lund and Gothenburg, Sweden, respectively). At Chalmers,McKelvey is joined by Staffan Jacobsson, who is interested primarily in theconcept of technological innovation systems. Keith Smith occupied a variety ofpositions in Scandinavia, including a post in Norway, and also served as advisorto the OECD while the innovation systems concept was being introduced.

No less prominent are many researchers in continental Europe workingexplicitly within the innovation systems paradigm. Among the most influential ofthis group is Luc Soete of MERIT and The United Nations University, TheNetherlands. Others include Franco Malerba at Universit Bocconi in Milan, Italy


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Table 1.1: Formal Interviews

Name InstitutionalAffiliation at Time

of Interview

Major role in developmentof NIS concept

(publication, policy role, orother role)*

Date and locationof interview

1. ChristopherFreeman

University ofSussex, England

Freeman, 1987 24 Oct 03,Brighton, England

2. RichardNelson

ColumbiaUniversity, USA

Nelson, 1993 10 Nov 03, NewYork, USA

3. Bengt-keLundvall

Aalborg University,Denmark

Lundvall, 1992 20 Oct 03, Aalborg,Denmark

4. CharlesEdquist

Lund University,Sweden

Edquist, 1997, Edquist2000

21 Oct 03, Lund,Sweden

5. MaureenMcKelvey

Chalmers Univ. ofTech., Sweden

McKelvey, 2000 (editedwith Edquist)

18 Oct 03,Alingss, Sweden

6. Keith Smith Chalmers Univ. ofTech., Sweden

Finnish Technology Policyand OECD

13 Oct 03,Gothenburg,

Sweden7. StaffanJacobsson

Chalmers Univ. ofTech., Sweden

Technological innovationsystems

17 Oct 03,Gothenburg,Sweden

8. Rod Coombs University ofManchester

PREST Group, Univ. ofManchester

23 Oct 03,Manchester,England

9. StanleyMetcalfe

University ofManchester

Metcalfe, 1995 23 Oct 03,Manchester,England

10. FrancoMalerba

Universit Bocconi,Milan, Italy

Malerba, 2004 27 Oct 03, Milan,Italy

11. Francois

Chesnais

Retired Former OECD, Science,

Technology and IndustryDirectorate

29 Oct 03, Paris,

France

12. Jean Guinet OECD, Paris,France

Current OECD, Science,Technology and IndustryDirectorate

28 Oct 03, Paris,France

* See bibliography, for full references to these authors, where applicable.

In addition to the above individuals, I also had a number of informal but in-depth conversations with other relevant individuals who have been influential inthe development of the innovation systems conceptual approach in bothacademia and policymaking on the same subject. Unlike the first set of

interviews, these interviews were unstructured, unscheduled, and usually tookplace at conferences and similar meetings. These interviews were not recordedand were, in general, shorter, lasting between 30 minutes and two hours. In onecase, I did take handwritten notes during the interview, but in most cases, I wroteup interview notes to myself only after the conversations were over. Detailsabout this group of individuals are provided in Table 1.2, below.


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Table 1.2: Informal Interviews

Name InstitutionalAffiliation at Time

of Interview

Major role in developmentof NIS concept

(publication, policy role, orother role)*

Date and Locationof Conversation

1. Pekka Yl-Antilla

ETLA, Helsinki,Finland

S&T Policy Council ofFinland

1 Dec 03, Taipei,Taiwan

2. David Mowery University ofCalifornia, Berkeley

Fagerberg, Mowery andNelson 2005

31 May 04, Lisbon,Portugal

3. Erik Reinert The Other CanonFoundation, Norway

History of knowledge-basedeconomic theory (Reinert1999, 2003)

11 Jun 04, Milan,Italy

4. Bo Carlsson Case WesternReserve University,USA

Technological innovationsystems (Carlsson1994,1995)

15 Jun 04,Copenhagen,Denmark

* See bibliography, for full references to these authors, where applicable.

6. Genesis and Development of the National Innovation SystemConceptual approach

In this section, I provide a history of the NIS concept organized around a topicalfocus. Each of these seven inter-related topics represents either a missing linkor a controversy within the NIS conceptual program. Additionally, during thedevelopment of the NIS conceptual approach, there were a number of social,political, and economic issues that are important to consider. These issues canbe classified into three areasinterpretive flexibility; closure and stabilization;

and the wider contextwhich can be mapped onto the three stages of the Pinchand Bijker (1987) SCOT research program for further consideration. Whereappropriate, I also trace the aforementioned missing pieces and controversiesonto the Pinch and Bijker SCOT program. The material that follows is from my(formal and informal) primary interviews with the chief proponents of the NISconceptual approach.

6.1 Ambiguity Surrounding the Academic or Policymaking Origins of the NISConcept

Let us consider now whether the NIS concept was first developed in academia or

in policymaking.9 It is often assumed that the concept arose in academia andthen moved to the policymaking sphere. Interestingly, there is no consensusamong practitioners about whether the roots of the NIS concept were solely andprimarily academic or policy related. My interviews suggest that ascribing theorigins of the concept solely to either of the two fields of activity (academia or

9 Policymaking here is taken to include supra-national organizations such as the OECDssuggesting policies for countries, and also policymaking within a single nation-state.


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policymaking) is incorrect: The concept arose simultaneously in academia andpolicymaking (with regards to the latter, specifically in the OECD) at around thesame time. This was possible because many of the key proponents of theconcept occupied roles in both academia and policymaking.

Keith Smith is unequivocal in his view that the concept had policy roots:

[T]he key thing about it [NIS] . . . is that it wasnt really developed as atheoretical concept. It wasnt a properly elaborated conceptual apparatus. It wasreally developed as a policy concept (Smith interview, 13 Oct 03). Similarly, inthe view of Staffan Jacobsson, the innovation systems concept took off becausea policy vehicle/agency in Swedenthe Swedish Board for TechnicalDevelopmentinitiated a study by asking a number of researchers to discussand conduct research on what they called Swedens Technological System in1988 (Jacobsson interview, 17 Oct 03).

For Bengt-ke Lundvall, determining the NIS concepts origins is to someextent an arbitrary chicken-or-egg exercise: [I]ts difficult to say whether it wasprimarily an academic concept to inform policymaking or the other way around

(Lundvall interview, 20 Oct 03). Lundvall claims that the two major contributionsin academia and policymaking that launched the NIS conceptual approach werea major book edited by Giovanni Dosi, Christopher Freeman, Richard Nelson,Gerald Silverberg, and Luc Soete on technical change published in 1988(discussed below), and a report published by the Technology/EconomyProgramme (TEP) in the OECD in 1992, respectively.

Dosi et al. (1988) combined the writings of economists and non-economists who had been involved in critical assessments of the way orthodoxeconomic theory deals with technical change. The book was supported by theInternational Federation of Institutes for Advanced Study (IFIAS) within theframework of their project,Rethinking Economic Theory. Financial support in thefinal phases of the project was also provided by the Maastricht EconomicResearch Institute on Innovation and Technology (MERIT) and a grant from theDutch Ministry of Economic Affairs.

The project began with an informal meeting of potential authors in Venicein 1986. First drafts of most of the final contributions were discussed by theauthors at a workshop in Lewes, England, in October 1986. In May 1987 asecond conference was organized in Maastricht, where an enlarged circle ofauthors presented revised versions of their contributions. Each of the chapterauthors in the book comes to the conclusion that no analysis of change thatignores the fundamental role and special character of technical change, even inthe very short run, can be valid. In other words, the book represents a systematiccritique of orthodox economic theory. The origin-story behind the NIS section inthe anthology (comprising four chapters) is recounted by Lundvall:

What happened there was we had many different chapters thatwere to be organized according to some principle. But theneverything broke down because there was a contribution by Pelikanthat almost everybody thought was . . . something getting close to


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kind of social Darwinism. And nobody wanted to be in the samesection as Pelikan for that book so there was kind of a crisis.

I saw [this situation as an] opportunity and I said toChristopher [Freeman] and Dick Nelson, why dont we make asection with four contributions on national systems of innovation?

And we included Pelikan in that section. So there are fourcontributions [in that section].I think that was important because then suddenly you had a

book where you had four chapters which were about somethingpeople never heard about, that were [by] well known people likeChristopher Freeman and Dick Nelson. (Lundvall interview, 20 Oct03).10

In the academic realm, there is a gracious rivalry between Lundvall andFreeman, with each giving credit for the concept to the other. While it is oftenobserved that the concept of national innovation systems was first introduced in

academic circles by Freeman in 1987 in his book on Japan, Lundvall in fact usedthe concept innovation systems in 1985 in a booklet on user-producer relationspublished at Aalborg University (Lundvall 1985)but without the adjectivenational added to it. In this booklet, Lundvall was concerned with explaining theDanish paradox, the phenomenon in which Denmark, with relatively low levelsof R&D spending, was able to achieve disproportionately high levels of economicgrowth. Lundvall (1985, 1992; Edquist and Lundvall 1993) sought to explain thisparadox in terms of the Learning Economy, thereby focusing attention on usersof technology (broadly defined), producers of technology, and their interactionand relationships. Lundvall followed this booklet with his 1992 book, NationalSystems of Innovation: Towards a Theory of Innovation and Interactive Learning,which explained in greater depth many of his earlier ideas.11

Freemans usage of the concept in explaining national differencesbetween economies, particularly with reference to Japans, was the first widelypublished use of the concept. Freeman formally introduced the innovation systemconcept to the literature in Technology, Policy, and Economic Performance:Lessons from Japan (1987), in connection with his analysis of the institutionalreasons for the developmental gap, that is, differences in the rates of economicgrowth among nations. At that time, the Japanese economy was growingextraordinarily rapidly, the new industrialized economies (NIEs) of East Asia were

10 The four authors with their chapters are Richard Nelson, Institutions supporting technical

change in the United States, pp. 312-329; Christopher Freeman, Japan: a new nationalinnovation system? pp. 330-348; Bengt-ke Lundvall, Innovation as an interactive process: fromuser-producer interaction to the national innovation system, pp. 349-369; Pavel Pelikan, Can theinnovation system of capitalism be outperformed? pp. 370-398. The preface to this sectioncomprising the four chapters, entitled National Systems of Innovation, is provided by RichardNelson, pp. 309-311.11 Lundvall openly asserts that he was not the founder of the idea. He does not, however, refute asuggestion that a conference participant put to him that if Lundvall was not the Charles Babbageof the NIS concept, then he was its Bill Gates (the computer analogy stems from a paper thatLundvall himself used at a DRUID conference in describing the history of the NIS concept).


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emerging as key players in the global economy, and the previously leadingeconomies of the U.S. and Europe were experiencing severe stagnation. Thesetrends received great attention in both academic and policymaking circles, andprovided the backdrop to the NIS approach, which was developed as an attemptto understand, measure, and compare the dynamics involved in the changing

configuration of nations in the global economy of the 1980s (Castellacci et al.2005).Preceding both these developments, however, was the first use of the

terminology in written form by Christopher Freeman in August 1982 in a papertitled, Technological Infrastructure and International Competitiveness, presentedat the OECDs expert group on Science, Technology and Competitiveness, whichwent unpublished at the time. Freeman was working then as an advisor to theOECD ad hoc group on science, technology, and competitiveness, chaired byJohn Ingram. In a paper presented to the group, Freeman described in detailFriedrich Lists advice to Germany on catching up with the UK, staunchlydefended Listian economics, and also described why qualitative, history-friendly

economic analyses have a place in economic thinking. In the paper, Freemanrather innocuously mentions the national innovation system concept whendiscussing the role of creation in technological innovation: Sometimes, the termcreativity is reserved for those abilities of the scientist, which lead to newdiscoveries or of the artist, which lead to new works of art. These kinds ofcreativity are important for innovation too. But when we are considering nationalinnovation systems (as opposed to global civilization and the world economy)then at least in the past they have not been so central to innovative success asthose types of creativity which are characteristic of the engineer in the work ofinvention and design and of the entrepreneur (italics in original) (Freeman 1982:9).

Interestingly, the paper was perceived to be too provocative by the OECDad hoc group and it was not published because the chairman of the group saidonly a certain number of people can read this paper because it will cause toomuch trouble (Chesnais interview, 29 Oct 03). The trouble Chesnais isreferring to is the prospect that Freeman had identified a role in the process oftechnological change to be played by factors outside of the classical neoclassicalframework. Listian economics is qualitative in nature, adopts history-friendlyanalysis, and considers a wide range of factors in influencing the innovativeprocess (in other words, the wider system is considered). It was becauseFreeman introduced these ideas in such depth and with such enthusiasm that hisideas were considered by the OECD group to be too challenging. It was only veryrecently that Lundvall was able to procure a copy of the paper and now he, too,refers to it as being the first instance where the NIS concept was used. It hasonly recently appeared in published form (Freeman 2004), with a foreword byLundvall (Lundvall 2004), 22 years after originally being published.

Among several of the chief proponents of the NIS concept to have takenup roles in policymaking, Lundvall himself worked as the Deputy Director of theScience, Technology, and Industry Directorate at the OECD from 1992 to1995.Even before Lundvall assumed this post, however, the NIS concept had


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been used in an OECD publication (1992). In particular, there was a majorinitiative whose work began towards the end of the 1980s under the OECDsTechnology/Economy Programme (TEP). The TEP was launched in 1988 tohelp integrate science and technology policies into other aspects of governmentpolicy, particularly economic, social, industrial, energy, education, and manpower

policies. From within this program, an important publication entitled Technologyand the Economy: The Key Relationships emerged in 1992. A core element ofthe report is that innovation is a kind of interactive process . . . and this was amajor theme that made it stand out (Lundvall interview, 20 Oct 03). Chesnaisconcurs on this point when he states, in that [TEP report] I coordinated, wereally did everything to muster all the possible intellectual approaches to say that[building] nations and societiessocieties are people and institutions.Technological accumulation is a long and very difficult process, and marketforces can disrupt and destroy them extraordinarily quickly (Chesnais interview,29 Oct 03).

To a degree, this uncertainty about the origins of the NIS conceptual

approach is a function of the interconnections between the academic andpolicymaking realms in which the individuals were most involved. My researchshows that it emerged concurrently in both the academic and policy fields,facilitated by the overlap of academics at the OECD (where its development wasmost pronounced). Freeman worked as a consultant to the OECD in the 1980s,Lundvall was the Deputy Director of the Science, Technology, and IndustryDirectorate (DSTI) in the OECD from 1992-1995 (he was the Danish delegate at,and advisor to, the DSTI even before this period), and Smith also worked as anadvisor to the OECD in the late 1980s.12 Furthermore, many of the key players inthe development of the NIS concept, such as Chesnais, Lundvall, and Freemanall met one another frequently at professional conferences and meetings duringthe time of the concepts inception. Such meetings were a natural extension oftheir joint work at the OECD and their independent academic work in theinnovation systems area.

Thus the main actors promoting the concept occupied dual roles (inacademic and policymaking activities). We can conclude that in their work theseactors deploy two sets of rhetoric depending on the hat they wear or the positionthey fill at a given time. In this way, these skilled actors are able to takeadvantage of the looseness and ambiguity inherent in the NIS concept toenhance its appeal to either audience depending on the purpose they are tryingto achieve. Given that the NIS concept can be interpreted flexibly and thereforefits comfortably in two different spheres, the actors are able to negotiateseamlessly between the two spheres of theory and application.

The concept of a boundary object (Star and Griesemer 1989) helps toexplain how the main proponents are able to exploit their dual roles in academiaand policymaking to promote the NIS conceptual approach (Star and Griesemer

12 Lundvall nevertheless states that, by the time he became Deputy Director at the STIdirectorate, the innovation system approach had been taken aboard already . . . and I actuallymade extra efforts not to be too much married to it, because I didnt want to undermine itsposition (Lundvall interview, 20 Oct 03).


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focus, however, on material artifacts rather than on terms or socialtechnologies).13 Bowker and Star (1999) elaborate on the boundary objectconcept by defining it as inhabiting several communities of practice [and]satisfy[ing] the information needs of each of them. They state that boundaryobjects are, thus, plastic enough to adapt to the local needs and constraints of

the several parties [sic] employment of them, yet robust enough to maintaincommon identity across the sites (Bowker and Star 1999: 297). Prior work onstudying NIS as a boundary object has been conducted by Miettinen, who arguesthat the NIS concept is analogous to a boundary object in that it permit[s] partialagreement in the usage of a term, thus allowing the participants from differentcollectives to maintain their original cultures (Miettinen 2002: 19). I agree withthis statement, and I would add that the NIS conceptual approach has theadvantage of proponents who inhabit the academic and policy realms, therebyeasing the concepts movement between the two.

If we are to understand my interviewees as actors who functioned astechnology builders, and the NIS concept as the conceptual approach they were

building, then it is possible to understand their work better. Successfultechnological work draws upon multiple types of resources and simultaneouslyaddresses multiple domains. Not only were my interviewees (among others)building the conceptual approach, but by occupying influential positions in thepolicymaking world they were also simultaneously building an alternative andhighly receptive environment in which their conceptual approachthe NISconceptcould function. That is, these actors were engaging in heterogeneousengineering(Law 1987) orheterogeneous construction (Taylor 1995). As the NISconceptual approach would not have been able to function without anenvironment, the original propagators built both the NIS conceptual approachandthe environment. I conceive of my interviewees as engineers ortechnologists for the NIS conceptual approach. As such, they helped construct itby simultaneously constructing a material and social world within which it couldflourish. As builders of the conceptual approach, Lundvall and Freeman neededboth skills and knowledge, and for this reason they enrolled a number ofadditional actors (including organizations such as universities, research groups,the OECD, the EU, and, therefore, governments). Once created, this networkcomprised of individuals, organizations, and knowledge stabilized and continuesto expand.

What is more certain than whether the concept emerged from academia orpolicymaking (if we are to understand the OECD as a policymaking body) is thefirst use of the concept in any given country for the purposes of providing aconceptual approach for making policy. The first notable, widespread, andsignificant instance of a countrys adopting the concept was Finland in 1992(Vuori and Vuorinen 1994; Miettinen 2002). In Finland, the NIS conceptunderpinned three important reviews conducted by the Science and TechnologyPolicy Council in 1993, 1996, and 2000. The 1993 review was especially

13 Star and Griesemer (1989) first noticed boundary objects in studying a museum, where thespecimens of dead birds had very different meanings to amateur bird watches and professionalbiologists, but the same bird was used by each group.


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important, as it was produced when Finland was in the midst of a severeeconomic recession.14 In the 1993 review, the NIS concept was heralded as partand parcel of the countrys developmental and recovery strategy.15

6.2 The NIS Conceptual Approach as a Rebuttal of the Neoclassical

Economics Approach to the Study of Innovation

I cannot overemphasize the extent to which the NIS concept originated as part ofa direct attack on modern mainstream economics. Even though neoclassicalgrowth models began in the 1960s to consider the effect of technical progress ongrowth, this body of work was still marginal in the broader economics literature.

Aside from the small group of economists interested in pursuing GrowthAccounting in the 1960s, neoclassical economics was dominated by formalmodeling and increasing mathematization with econometric tools; this stream ofwork continued its ascent despite the identification of a residual ascribed totechnical change by Solow in 1957.16 With the backing of influential individuals

such as Milton Friedman, Frank Knight, Henry Simons (all economists associatedwith the Chicago School) and the Austrian Friedrich Hayek, neoclassicaleconomics drew further strength from libertarians.17 Libertarians emphasize thecentral importance of personal freedom in economic and political affairs. Usingmathematics as their tool and formal models as their method, libertarians remindus of the accomplishments of the market mechanism and warn us of thepenalties falling upon any society that ignores the markets guiding hand. Therole of government in the economic arena, argue these economists, shouldtherefore be minimal (Samuelson 1992).

Associated with the libertarians is a group of free-marketmacroeconomists called the rational-expectation school, founded in the early1970s by Robert Lucas at the University of Chicago and Stanford UniversitysThomas Sargent. This school shares the libertarians skepticism aboutgovernment policies.18 The Reagan administration adopted both libertarian and

14 Real GDP dropped about 14 percent from 1990 to 1993, and unemployment rose from 3percent in 1990 to almost 20 percent in 1994. In terms of many other indicators, the economiccrisis Finland suffered during this period was more severe than the depression of the 1930s.15 Policies that responded to the NIS concept and helped to haul Finland out of recessionincluded increasing Finlands competitiveness based on knowledge and skills by developingknowledge-intensive fields; centering around technologies such as information, material science,and biotech; building Finlands NIS by immediately investing in research and development as wellas education (since the outcome of these activities appear only after a lag of several years);improving the internal efficiency of institutions that constitute the NIS by systematically evaluating

the impacts of policy measures on the national innovation system; and increasing cooperationand interaction among the components of the system (Miettenen 2002: 69-72).16 This took place after the descent in importance of Keynesian welfare economics in the 1950s.17 The term "Chicago School" is associated with a particular brand of economics that adheresstrictly to neoclassical price theory in its economic analysis and free market libertarianism inmuch of its policy work.18 A long tradition in business-cycle theory has held that errors in forecasts are a major cause ofbusiness fluctuations. Before the advent of rational expectations, economists often proposed toexploit or manipulate the publics forecasting errors in ways designed to generate betterperformance of the economy over the business cycle. Rational expectations economics


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rational-expectations views, arguing that limiting the role of government wouldexpand both personal freedom and economic growth. (This spirit was mirrored bythe conservative Thatcherite government of the UK in the 1980s.) In reading theworks of scholars belonging to both schools, we are reminded that governmentalattempts to solve problems can create other difficulties.

The rise of neoclassical economic thought permeated the policy sphere inthe 1980s. This policymaking climate mirrored the academic climate and it, too,affected the development of the NIS conceptual approach in policymaking.Chesnais (ex-OECD) articulates this point well:

We were in the 1980s, we were in a very open economy, movingtowards globalization, we sort of sensed it, but the processeswerent very clear. We still used the term internationalization, andvery many countries had balance-of-trade problems, and tradecompetition had started becoming very strong, and they, in theOECD, developed two strands of thinking and policy

recommendations.One, which based itself on classical, neoclassical, orthodoxtrade theory, comparative advantages and costs, and whose mainpolicy recommendations were to bring wage costs down; and, inthe economic department, they published a study whichIndicatorof Competitivenesswas in fact a revamped version of the level ofwages as an indicator.

And I and the group I had around me said competitiveness isbasically a holistic social phenomenon, its based on a whole set ofthings which we ended up by dubbing structural competitiveness.

And the first time Christopher Freeman brought the concept ofnational systems up was in a paper he prepared for this workinggroup at the OECD on science, technology, and competitiveness.

We were fighting neo-liberalism. We were doing this at thestart of the Uruguay round [of trade talks]. We were doing this inspite of Margaret Thatcher and Ronald Reagan so we were sayingnational when the trend was already saying governments mustbow out . . . the importance was political, really, and it became oneof the rallying flags for people who continuedto say that nationaleconomic systems are not just markets,they are institutions, thereare systemic relations, there are linkages (my italics; Chesnaisinterview, 29 Oct 03).

undermines the idea that policymakers can manipulate the economy by systematically inducingfalse expectations in the public. Robert Lucas showed that if expectations are rational, it is notpossible for the government to manipulate those forecast errors in a predictable and reliablewayfor the very reason that the errors made by a rational forecaster are inherentlyunpredictable. Lucas's work led to what has sometimes been called the "policy ineffectivenessproposition." If people have rational expectations, policies that try to manipulate the economy byinducing people into having false expectations may introduce more "noise" into the economy butcannot, on average, improve the economy's performance.


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The growing reliance in mainstream economics on mathematics, models,and tools rooted in the neoclassical tradition, in addition to the peripheral roleadvocated for governments, marginalized those who felt that economics wasbecoming detached from the realities of the contemporary world. At the sametime, the continued rise of (mainstream) neoclassical economics helped shift the

focus away from long-run economic growth toward conditions of economicequilibrium. Garnering their inspiration from Schumpeter, and holding up List asone intellectual forebear, Freeman and Lundvall represented the reawakening ofan institutionalist school of thought under the NIS banner within innovationstudies.

In his writings, from The Theory of Economic Development(1934) toCapitalism, Socialism, and Democracy(1962), Schumpeter argued against theprevailing trend among economists to define the core subject matter of thediscipline as firm behavior, prices, and quantities under conditions of equilibrium.Schumpeter was clear that the most important feature of capitalism was that itwas an engine of economic progress (Nelson 2004). Taking this as their cue,

both Freeman and Lundvall said that they felt dissatisfied with the lack ofattention mainstream economic theories accorded to knowledge, technology, andtechnical change. Influenced by Schumpeters earlier analysis, Freeman,Lundvall, and other contemporary economists studying technological advancearound the 1970s and 1980s agreed that innovation, technological or otherwise,could not be understood within the confines of a theory that assumed stableequilibrium.

In this way, the NIS concept has roots in the modern-day inadequacy ofneoclassical economic thought when treating of technology; the key individualsdiscontent is what fueled the new field.19 Here is Lundvall questioning the widerneoclassical assumptions: [M]y own motivation for doing this [NIS work] isdissatisfaction with standard economics. Lundvall elaborates:

I have always been annoyed by how, in spite of its limited relevanceand validity, neo-classical economics has pursued the pretentiousintention to colonize all thinking about the economy. One importantmotivation for my interest in innovation and innovation systems isactually that when you focus on innovation it becomes absolutelyclear that the neoclassical assumption about agents making choicesbetween well-defined alternatives cannot apply. Any true innovationinvolves uncertainty since the outcome per definition is unknown. Afocus on interactive learning in the context of innovation helps you

19 To be sure, innovation studies scholars acknowledge that New Growth Theory orEndogenous Growth Theory, for example (cf. Romer 1986, 1990; Grossman and Helpman 1991;

Aghion and Howitt 1992), incorporates more realistic assumptions into neo-classical models, butthey complain that the basic premises and features of neoclassical economics are kept largelyintact even in growth theory. Growth theory, argue evolutionary economists, is an effort to stretchan economic theory concerned with an equilibrium configuration of quantities and prices to dealwith the phenomena of continuing economic growth. To do this requires augmenting theproduction function part of that theory so as to admit continuing technological advance, but thebasic features of the theory are unchanged (Nelson 2004).


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also to understand why 'economics' cannot stand alone when itcomes to explaining economic development and whyinterdisciplinary approaches are necessary. These are soft points inthe neo-classical schemes of thought. (Lundvall interview, 20 Oct03).

In a similar spirit, Metcalfe asks, rhetorically, how does an economistthink about knowledge and information? and answers, first of all, they dontunderstand the distinction between the two very clearly! They think of them interms of being very peculiar objects, entities, which dont fill the normal canons ofan economic good. So there are all sorts of reasons why you cannot expectmarkets to do the right thing; that there will therefore be very, very big differencesbetween the private and social return to investment in knowledge (Metcalfeinterview, 23 Oct 03).

In describing why the term national innovation system was adopted,Freeman recalls, correspondingly, I thought it would be a good idea to use the

expression because it would emphasize this weakness of an economic systemthat had left out innovation in much economics literature (my italics; Freemaninterview, 24 Oct 03). Freeman continues, But it shouldnt have been necessary,really. It was only necessary because a lot of neoclassical economics hadabandoned the study of innovation, didnt take it seriously, and that was why itwas important to emphasize it, or re-emphasize it (Freeman interview, 24 Oct03).20

To be sure, the national innovation systems concept was not the onlycompetitor to neoclassical economics for explaining technological growth or thelinear model of innovation. Other competing theories and approaches were alsovying with the NIS concept (against neoclassical economics as well as the linearmodel of innovation) at the time of the NIS concepts development. At the veryleast, these competing theories and models also addressed issues thatneoclassical economics failed to consider adequately.

One such competitor to the NIS concept was Michael Porters Cluster orDiamond model of thinking, published in The Competitive Advantage of Nationsin 1990 (Porter was very fashionable at that timeJacbosson interview, 17 Oct03). Porter (1990) argued against the classical theory of international trade thatproposed that comparative advantage resides in the factor endowments (such asland, natural resources, labor, and the size of the local population) that a countrymay be fortunate enough to inherit. Porter argued that a nation can create newadvanced factor endowments such as skilled labor, a strong technology andknowledge base, government support, and culture.

McKelvey claims that Porters cluster analysis has been wildly successful[in business schools] . . . it is something people can kind of catch on to, orintuitively understand and use, and who knows how many millions and billions ofdollars have been spent on policy analysis or policy tools based on the cluster

20 Re-emphasis for the study of innovation was necessary as earlier economists such as AdamSmith, David Ricardo, and Freidrich List didconsider innovations central to a much greater extentthan did most contemporary economists.


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analysis, but that was really at the same time [as NIS], I think 1990 (McKelveyinterview, 18 Oct 03).21 On the same point, Coombs claims, Porter wasessentially making a similar kind of argument from a different kind of vantagepoint, which was drawing peoples attention to the distinctiveness of the nationalattributes in a broader competitiveness problematic, if you like, and . . . it was

certainly a competing paradigm . . . (Coombs interview, 23 Oct 03).Another competitor to the NIS concept was the Triple-Helix Model ofuniversity-industry-government interactions, developed mainly by Etzkowitz andLeydesdorff (1997). This model refers to a spiral (versus the more traditionallylinear) model of innovation that captures multiple reciprocal relationships amonginstitutional settings (public, private, and academic) at different stages in thecapitalization of knowledge. These three institutional spheres, which formerlyoperated at arms length in liberal capitalist societies, are increasingly workingtogether, exhibiting a spiral pattern of linkages emerging at various stages of theinnovation process to form the so-called Triple Helix. The model of the TripleHelix could be represented by three factors: actors (at the microeconomic level),

institutions (at the mesoeconomic level), and regulations (at the macroeconomiclevel). The Triple Helix Model was developed as a result of the convergence andcrossing over of the three worlds, which were once very much separate: pubicresearch/universities, business, and government.22 Again, the point of greatestsimilarity between the Triple Helix and NIS models is the idea that governmentsneed to step in to create conditions for innovation. They also agree in assigning acentral role to universities.

Lundvall mentions the Triple Helix as a competing paradigm but countersswiftly that just looking at the Triple Helix, [it] captures [a] very limited part of the[story] (Lundvall interview, 20 Oct 03). This view is echoed by Edquist, who alsoadds, however, that even in policymaking circles, the Triple Helix can stand as arival to the NIS concept: I would also claim that VINNOVA [The Swedish

Agency for Innovation Systems] . . . are also using the Triple Helix kind of thing(Edquist interview, 21 Oct 03).23

As scholars and policymakers involved in the NIS conceptual approachsought to challenge the dominance of neoclassical economics, especially inrelation to the issue of technical change, I argue that they formed an informalnetwork or epistemic community (Haas 1990; Haas 1992; Adler and Haas 1992;

21 McKelvey (1991) explicitly compares Porters Diamond Model to the innovation systemsconcept.22 Etzkowitz (1994) and Leydesdorff (1994) argue that a spiral model of innovation is required tocapture multiple reciprocal linkages at different stages of the capitalization of knowledge.

Elsewhere (Etzkowitz and Leydesdorff, 2000: 113), they argue that the spiral is meant todemonstrate that the overlay of communications and expectations at the network level guides thereconstructions of institutional arrangements. It is not expected to be stable. The subdynamics inthe innovation process are continuously reconstructed through discussions and negotiations inthe triple helix. What is considered as industry and what as market cannot be taken for grantedand should not be reified. Each system is defined and can be redefined as the research projectis designed. Thus, the triple helix hypothesis is that systems can be expected to remain in anendless transition.23 During 2003-2004, VINNOVA ran courses to teach the Triple Helix idea to policymakers inSweden.


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Knorr-Cetina 1999). I employ the term epistemic community to describe informalassociations of practitioners involved in the innovation studies field whodeveloped it in an interdisciplinary manner, so as to study relationships amongtechnological, economic, organizational, and institutional changes.

Informal networkstaking the form of friendly relationships between

researchers and decision-makersare as important in linking research andpolicy, and effecting policy change, as formal structures. An epistemiccommunity, writes Haas (1990), consists of colleagues who share a similarapproach, or a similar position on an issue. They maintain contact with eachother across their various locations and fields, thus creating valuable channelsfor information flow. These informal forums can be used to discuss and pass onalternative perspectives on current issues, and if the network comprisesprominent and respected individualsin the way the NIS network comprisedresearchers who simultaneously occupied influential positions in academia andpolicymakingpronouncements from these can force policymakers to engagewith an issue, just as the NIS conceptual approach did. The conclusion that Haas

(1990) offers is that such an epistemic community provides a potent means ofcounter-balancing the conservatism of the old paradigm or school of thought.Adler and Haas (1992) describe an epistemic community as an

international community of researchers and experts whose ideas influence theadoption of public policies. This community exerts its influence primarily bydiffusing ideas and influencing the positions adopted by a range of actors,including domestic and international agencies, government bureaucrats anddecisions makers (Adler and Haas 1992: 379), and by acquiring bureaucraticpositions within public organizations. According to Haas (1992), epistemiccommunities can influence national governments and international organizationsby occupying niches in advisory and regulatory bodies. This suggests that theapplication of consensual knowledge to policymaking depends on the ability ofthe groups transmitting this knowledge to gain and exercise bureaucratic power(Haas 1992: 30). My findings suggest that many of the early proponents of theNIS conceptual approach combined to function as a collective epistemiccommunity, occupying influential roles in policymaking bodies (notably theOECD) and academia, thereby forming the power base in both domains that theNIS approach enjoys today.

Knorr-Cetina (1999) employs the complementary term epistemic cultureto characterize the knowledge strategies not captured in textbooks that informexpert practice. The term refers to various techniques for creating and warrantingknowledge in different domains. If the knowledge society argument (Bell 1973,Drucker 1993, Castells 2000) is correct (i.e., that knowledge has become aproductive force replacing capital, labor, and natural resources as the centralvalue and wealth-creating factor), epistemic communities or cultures need moreattention so as to make visible the complex texture of knowledge as practiced inthe social spaces of modern institutions. A SCOT-type analysis helps bring outthis texture by drawing attention to organizational the space of knowledge-in-action programs (to examine how the relevant social groups organize), ratherthan simply observing disciplines or specialties as organizing structures.


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The NIS social group or epistemic community which comprised theoffshoot of the Schumpeterian movementfrustrated by the treatment oftechnical change in neoclassical economicshas now splintered into severalsubsidiary groups depending on how various members have interpreted the NISconcept. That is, there is more than one interpretation of the sociological fact

behind the social construction of the NIS conceptual approach. Also for thisreason, closure has not been achieved in the debates (discussed below) in whichthe NIS groups are engaged. Individuals involved in the debates often seek toenroll new social groups into their camps so as to form a new scheme, thusencouraging others to follow the enrolled group.

In this environment, stabilization of the NIS domain remains to beachieved. One group can be said to be pursuing a technical solution to theNISs problem of under-theorization by taking steps to develop its theoreticalbase, while the another group can be said to be attempting to redefine theproblem so as to achieve closure. A SCOT-type analysis is beneficial in thissituation because it draws attention to the social factors and interpretations that

the actors have adopted and that will determine the development of the NISconcept.

6.3 Interpretive Flexibility of the NIS Concept

Although the concept of a national innovation system has been in use for thepast twenty years, even today it is subject to a remarkable variety ofinterpretations. Academics and practitioners embrace varying conceptions of theconcepts domain of reference. It is freely acknowledged among the founders ofthe approach that the concept of innovation systems means different things fordifferent people (Lundvall interview, 20 Oct 03). Using the SCOT model andfocusing on debates among the relevant social groups, I am able to reveal theunderlying rationales for and outline the effects of the interpretive flexibility of theNIS conceptual approach.

This interpretive flexibility is the result of several features of the NISmovement. First, the NIS concept inspired the ambition among its progenitors totranscend a narrow disciplinary focus; such an ambition naturally complicatesconsensus building in favor of a particular definition of the concept aspractitioners from distinct disciplines impose their unique understandings on it. Asecond source of interpretive flexibility is the state of flux in which the new field ofinnovation studies finds itself as it seeks disciplinary roots. Third, partly as aresult of the failure to see the rise of the innovation systems concept as a directattack on neoclassical economics, there exists much disagreement amongacademics and policymakers as to whether it is efficacious to identify thenational unit as the delimiting criterion of an innovation system as opposed tochoosing the regional, sectoral, or technological innovation system as the chiefobject of study and measurement.

Innovation systems can be conceptualized at still other levels. Forexample, the technological, regional, sectoral, or transnational level might bemore suitable. There are some (such as Coombs) who say that the national


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system of innovation conceptual approach has run its course and now providesonly decreasing returns (there is literature that complements the NIS literaturewith regional, sectoral, and technological innovation systems; see, for example,Malerba 2004, on sectoral innovation systems and Carlsson & Jacobsson, 1997,on technological innovation systems). As a result new, complementary concepts

emphasizing the systemic characteristics of innovation that focus on economicdomains other than the nation-state have emerged. These concepts have beenpresented sometimes as alternatives and sometimes as complements to thenational innovation system approach. Advocates of the other domains haveargued that many interesting interactions in the context of modern innovationcross national borders, particularly in an era of multinational companies. There istherefore no a priori reason, the argument runs, that the national level should beprivileged.

Others (such as Freeman) argue, however, that the national domainbetter accommodates the policy dimension of the concept. As long as nation-states exist as political entities with their own agendas related to innovation, it is

useful to work with national systems as analytical objects. This latter groupargues further that, even though regional, sectoral, or technological systemsoften transcend a countrys borders, national characteristics and frameworksalways have a role to play in shaping the system in question (regardless of thedelimiting criterion employed).

If the original ancestry of the concept is traced, within both the academicand policy realms, it is clear that the national criterion was consciouslychosen.It was no accident that the original thinkers of innovation systems did not focuson local or microeconomic levels (i.e., on regions or sectors) as later studies do:The NIS concept was introduced explicitly to compete with, indeed to replace,traditional neoclassical macroeconomic theory. Innovation studies scholars andpolicymakers identified gaps in neoclassical economic thinking and proposed theNIS as an alternative that would plug those inadequacies. As Freeman puts it,most of the people working on innovation systems prefer to work at the microlevel and they are a bit frightened still of the strength of the neoclassicalparadigm at the macroeconomic level, and I think thats where they have to work.You have to have an attack on the central core of macroeconomic theory. It ishappening but not happening enough, not strongly enough argued.24 Freemanadds, more avidly, that the main area [of NIS] that needs to be strengthened isthe main core of economic theory, macroeconomic theory, and I think you cantshift the main central core of neoclassical economic theory simply withmicroeconomic studies (Freeman interview, 24 Oct 03).

In order to understand Freemans insistence on working at themacroeconomic level, it is also helpful to keep in mind the hierarchy in economicthought. Leijonhufvud (1981) argues that in economics scholarship,macroeconomic theory occupies the most prestigious position, followed bymicroeconomic theory and econometrics in turn. Below macro- and

24 Here, Freemans reference to the neoclassical paradigm at the macroeconomic level is toSolows work on creating a macro-production function from neoclassical elements. He is notreferring to Keynesian macroeconomics.


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microeconomic theory and econometrics lie the subfields of industrial policy,labor economics, development economics, institutional economics/comparativeeconomic systems, and the history of economic thought.

Considering that Freeman himself was, in the 1940s, a student of Keynes,it is not difficult to understand how this offshoot of the Schumpeterian movement

developed intentions to attack neoclassical macroeconomic theory head on. Inother words, the national innovation system conceptual approach wasestablished with the explicit goal of challenging traditional neoclassicalmacroeconomics. More to the point, this is why Freeman and other originalproponents embrace a higher, macro-scale level of aggregation.

6.4 Debate Surrounding Theorization of the Concept

There are two debates closely connected to the flexible nature of the NISconcept. The kernel of the first debate asks whether the concept should be morerigorously theoretical or not. Here, I am able to identify two groups within the NIS

research program: one holds that the concept should be more deeply theorizedand explained in greater detail, to make it more applicable (i.e., Edquist,Metcalfe, and Fagerberg), and the other argues that the concepts usefulness isa product of its being loose and flexible (i.e., Smith, Nelson, and McKelvey).

This debate, more than any other, is materially important because it hasthe potential to affect how the NIS concept develops and evolves in the future. Atpresent, researchers and policymakers attach a wide variety of meanings to theNIS conceptual approach and even the originators of the concept operate withvarying conceptions of what it means. The idea of how to evaluate a countryscompetitiveness is, therefore, interpreted flexibly, having different meanings fordifferent actors. In this way, there is no universal standard that draws the concepttogether, and no benchmark for the correct way that a country can attain anoptimal or ideal system of innovation. Because the controversy remains active, asymmetrical approach to studying this debate can generate a useful appreciationof the development of the concept, as opposed to examining the meaning of theconceptual approach it stabilized.

The extremes of this controversy are mirrored in the innovation systemsliterature. I am able to identify two co-existing and dominant strands in thedevelopment of the conceptual approach which provide some insights as to whyscholars and policymakers working in the innovation systems program have notyet reached a firm consensus on the theoretical basis for the conceptualapproach.25

In the first understanding of the conceptual approach, broad considerationis given not only to scientific and technological innovation but also to variouslearning modeslearning by doing, using, and interactingand interactionsamong various actors (for example, users and producers) within the innovationsystem. This strand of NIS-thinking, initiated in an outburst of activity in thedecade between the mid-1980s and mid-1990s was started by Lundvall andFreeman (as discussed earlier: the former in a 1985 booklet followed by a 1992

25 Sometimes these co-existent understandings overlap with one another.


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book; the latter in a 1987 book on Japan). For both Lundvall and Freeman, theNIS conceptual approach initially was a very country-specific approach that wasused to describe and explain the economic performance of two countriesDenmark and Japan respectivelyfocusing most centrally on the role oftechnology in the innovation system. The country-specific focus is mirrored in a

widely cited book edited by Nelson, National Innovation Systems: A ComparativeAnalysis (1993), which was also a collection of country-specific works. The majordifference between the Nelson volume and its two significant forebearstheLundvall (1992) and Freeman (1987) volumeswas that many of the chapters inthe Nelson anthology focused predominantly, although not solely, on R&Dsystems. The main similarity was its country-specific nature.

Innovation systems studies that fall into this strand emphasize a widerange of empirically-observable factors to account for the complex reality ofinnovation systems. These studies also embody the spirit of appreciativetheorizing set in motion by Nelson and Winter (1982) vis--vis a given economy.In focusing on a particular country, broad consideration is given either to the

number of constituent elements considered to be part of the system or to theR&D system alone (chapters from the Nelson 1993 volume).26 Regardless of theconstituents of the innovation system within the purview of study, these studiesare all bound together by the grounded nature of their theorizing, in which thestimulus for analysis stems from empirically observable phenomena.

The second understanding is characterized by a more narrowly definedanalysis of innovation systems in terms of inputs into the research anddevelopment (R&D) process (with a more exclusive focus on science andtechnology), closer links to policy formulation, and adoption of comparativeperspectives. This strand of the NIS conceptual approach began around the mid-1990s and continues today. It witnessed both a broadening and a deepening ofthe innovation systems program with a shift to a more positivist epistemology ascompared with that of the studies belonging to the first strand. Furthermore,these studies are characterized by three interconnected (but not mutuallyexclusive) features. The first is the introduction of studies that focus on differentgeographical levels (e.g., the region) or use industrial, sectoral, or technologicalcharacteristics as delimiting criteria for their analyses. Regional and sectoralinnovation system studies began to appear in the late 1990s (Carlsson 2004).The second feature is the overarching focus at the policy level (represented byOECD and EU studies) on cross-national characteristics such as networks,clusters, human resources, and education.27 Much of this work utilizes the NISconceptual approach as a macro-level navigational tool to guide policyformulation by helping to identify key linkages between the topic under scrutinywithin the innovation system and other, broader subjects. This type of work

26 Freeman (1987), for example, identified numerous determinants of Japanese success,including intra- as well as inter-organizational characteristics of firms, corporate governance, theeducation system, culture, and the role of government.27 This feature is a matter of degree as studies that belong to the first strand also emphasizepolicy (see, for example, Freeman 1987). However, the distinguishing feature of the secondstrand of NIS studies is the extent to which policy plays an important part in comparison toscholarly, conceptual analyses.


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began in the OECD in the late 1980s and was marked by the publication of theseminal TEP report in 1992. Subsequent reports from the OECD thatstrengthened this trend include Managing National Innovation Systems (1999)and Dynamising National Innovation Systems (2002). The emphasis on policyintervention contributes to the quantitative nature of the studies of this strand.

The final and perhaps most distinguishing feature of this strand is theconcentration on statistical data for R&D and patents as key (almost exclusive)indicators of innovation. For example, a number of chapters in the volume editedby Lardo and Mustar, Research and Innovation Policies in the New GlobalEconomy: An International Comparative Analysis (2001), are dominated bystatistical and numerical data, including science and technology (S&T) indicatorsof various countries innovation levels. Benchmarking and best practiceapproaches, developed largely by supranational organizations such as theEuropean Commission and the OECD, also fall into this category (see, forexample, OECD 1998, 2002).28

A major initiative in this respect was spearheaded by the European

Commission, which in 2001 published a European Innovation Scoreboard. TheScoreboard employed the innovation systems conceptual approach tosummarize a range of innovation indicators at the national level, permitting acomparison of the relative success or failure of national innovation systems(European Commission 2000).29 The predominant types of science andtechnology indicators used can be classified into two forms: resource/scienceinput and technology/science output (Laestadius 1998).

As a result of the multiple, shifting interpretations of the conceptualapproach, concrete usage of the conceptual approach in a sustained fashionvaries. Smith, for example, remarks how the NIS conceptual approach is talkedabout much more than it is actually applied (Smith interview, 13 Oct 03).Edquist, commenting on research he conducted, claims, I went through all theOECD studies [on NIS] and it is meters of material, and [NIS] is not concretelyused! It is not operationalized in a concrete and consistent manner, not used inthe way of using this framework to formulate conjectures or hypotheses and testthem in an empirical way (Edquist interview, 21 Oct 03). McKelvey concurs instating that the NIS conceptual approach doesnt always answer a researchquestion and that it may be useful for some purposes, but you have to make amuch sharper research question. As a result, she concludes that although itwas something I was familiar with and involved in . . . I didnt always use itdirectly in relation to my interests in innovation processes.30 To do so, McKelveybelieves, theories from other dimensions infuse the innovation concept withmeaning, as demonstrated in [McKelvey 1996]. (McKelvey interview, 18 Oct 03).

28 A part of this so-called OECD Jobs Study was the discovery of best practice policies related totechnology and innovation.29 Innovation Scoreboards attracted the interest of European policy makers and the decision todevelop a European innovation scoreboard was made under the Portuguese presidency of theEU at the Lisbon Summit in March 2000. The plan of work was agreed upon by the Council ofResearch Ministers of the EU on 15 June 2000.30 McKelvey believes innovation processes are key to understanding economic phenomena.


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In policymaking, Guinet, the present principal administrator of the scienceand technology policy division in the Directorate for Science, Technology, andIndustry at the OECD, remarks along similar lines when he states that thisapproach was always useful just to locate one project and to organize synergiesbetween the projects; for identifying priorities for research works which would

have direct relevance for government policy. More explicitly, he notes that thisframework in its purest form is not that complicated . . . on a mapit is like a GIS[Geographic Information System]so you know where you are driving . . . it is forthat reason only a navigation tool (Guinet interview, 28 Oct 03).

Despite its not having been highly operationalized, though, Guinetnevertheless considers the NIS tool to be valuable because it helps identifycertain key linkages between the subject you are dealing with and other broadersubjects. And this is very important from an analytical perspective and from apolicy perspective. From a policy perspective, it helps legitimize the importanceof different aspects which are important but underestimated. [For example], thereis a ministry of finance which sometimes thinks that, yes, why bother about the

innovation system, and why be so excited about the public research priority, orreform the way public research bodies are managed and financed? But the NISframework helps to tell a convincing story about the fact that this subject isclearly linked (Guinet interview, 28 Oct 03).

Partly because several practitioners in the NIS field are unhappy that theconceptual approach is not completely and uniformly operationalizable, andpartly as an effort to encourage the field to converge on a uniform interpretationof the conceptual approach, Edquist is engaged in a project aimed at making theconceptual approach less fuzzy and diffuse (Edquist and Hoemmen 2004)and removing the conceptual ambiguities (Edquist interview, 21 Oct 03)contained in it.31 Edquist utilizes his alliances and networks in the field in order to

justify his project. The major strategy he is employing in pursut of his goal is aproject sponsored by the European Science Foundation, National InnovationSystems in Ten Small Countries, covering Denmark, Finland, Hong Kong,Ireland, Korea, Sweden, The Netherlands, Norway, Singapore and Taiwan. Thisstudy not only adopts the national delimiting criterion and functions on anexplicitly national level but, more importantly, it operationalizes the conceptualapproach according to a set of uniform criteria to study all ten countriesinnovation systems. In fact, Edquist has personally taken (and continues to take)steps to ensure that the study does not fall into the other analytical frames ofregions, sectors, or technologies, for example.32

Edquist states, in this [ten-] country project now, we are trying toformulate a comparative framework for addressing the national innovationsystem countries in the same way, in all the countries, not repeating the Nelson[1993] way of doing it [where R&D systems were outlined according to the

31 One such conceptual ambiguity afflicts the term institution, which is used in different sensesby different authors. Sometimes the word means different kinds of organizations or players in thesy

Documents

Histrory and Development of the National Innovation Systems (NIS) Conceptual Approach