1. Key Components of Innovation System
S. T. K Naim
Consultant COMSTECH,
Islamabad
3-Day Regional Consultative Workshop on
“National Innovation System and Intellectual Property”
7-9 October 2013, COMSATS, Islamabad

2. INVENTION AND INNOVATION Invention
Creation of an idea of how to do or make something (usually by an individual)
“First occurrence of an idea for a new product or process” (Fagerberg, 2004)
"an increment in the set of total technical knowledge of a given society" (Mokyr, 1990)
Inventions may be carried out in universities, hospitals, R&D organizations 2

3. Innovation
Making an idea for a new product or process real, putting it into practice
Usually carried out in Firms
First commercialization of an idea (Fagerberg 2004)
The act of creating a new good or service
Innovation concept is commonly applied to product, process or service innovation 3

4. National Innovation Systems
Definition
“..the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies.” (Freeman, 1987)
“..the elements and relationship which interact in the production, diffusion and use of new, and economically useful knowledge…and are either located within or rooted inside the borders of a nation state.” (Lundvall, 1992) 4

5. Organizational Innovation
Different types of innovations include: new products, new methods of productions, new sources of supply, exploitation of new markets and new ways to organize businesses (Schumpeter)
Organizational Innovation: US success to forge ahead was due to new ways to organize production and distribution 5

6. Radical and Incremental Innovation
Radical Introduction of new type of Innovation technology
Incremental Continuous improvement in Innovation product or process
Most innovations go through drastic changes in their life time: Automobile, Aero plane, Mobile Phones etc. 6

7. Innovation Concepts: STI and DUI Learning
STI Learning
Human Development, Scientific Research, Codification, R&D efforts and S&T organizations
Production of knowledge in Universities and codification
This captures only one form of learning.
DUI (Doing, Using and Interacting) on job training, production engineering, design, quality control, management, marketing 7

8. SI Approach focuses on three types of learning
Organizational learning takes place in firms and creates structural capital
Research and Development - carried out in universities, firms and R&D organizations – generated knowledge is often publically available
Competence Building – training and education both at schools, universities and at firms to create human capital
- These activities differ in quality and scope from one country to another 8

9. Six functional requirements for building IS (Staffan Jacobsson and Anna Bergek)
Knowledge Development and Diffusion - Identify knowledge gaps
Influence on the Direction of Search
For an IS to develop, a whole range of firms and other organization have to work together
Not just identification of new opportunity but incentives
Coordination of investment between different firms
A fuel cell operated automobile requires
Contd… 9

10. Entrepreneurial Experimentation
Investment in the development and production of fuel cells (Universities or Firms)
Fuel cell driven cars (Firms)
Production of energy carriers for fuel cells (Service providers)
Petrol stations for fuel cells
Coordination will require a range of firms supplying complimentary products and services
Entrepreneurial Experimentation
From a social perspective many entrepreneurial
experiments take place. An IS without vibrant experimentation will fail
Contd… 10

11. Market Formation
For a new IS, markets may not exist, or be greatly underdeveloped
Public purchasing for market formation
Formation of standards is often a prerequisite for markets to evolve
Incentives for entrepreneurs who introduce new technology to the market
Contd… 11

12. Resource Mobilization
Legitimating
Legitimacy is prerequisite for formation of new industries
Social Acceptance, compliance with relevant institutions
Resource Mobilization
As IS evolves different kind of resources needs to be mobilized. These includes
technical, scientific, financials etc. 12

13. Functions of Innovation System
Edquist (2004) identified 10 activities as essential functions of the Innovation system:
Research and Development
Competence building
Formation of new product markets
Articulation of user needs
Creation and change of organization
Networking around knowledge
Creating and changing institutions
Incubating activities
Financial institutions
Consultancy services 13

14. Functions of Innovation System
Lundvall (1992) added five more factors to the above 10
Competition
Openness to international trade
Capital flows (inward and outward FDI)
Labour market dynamics
Social welfare systems 14

15. Fundamental activities of an Innovation System
R&D for new knowledge creation
Competence building, investment in human capital, production and reproduction of skills, learning
Formation of new product markets (public purchasing)
Quality requirement from demand side (MSTQ system)
Establishing organizations and their frequent change with respect to new fields of innovation
Contd.. 15

16. Fundamental activities of an Innovation System
Networks through markets or other mechanisms. Interactive learning between different organizations
Creating and changing institutions e.g. IPR laws, tax laws, environment and safety regulations
Incubation facilities – providing access to facilities, administrative support
Contd.. 16

17. Fundamental activities of an Innovation System
Financing of innovation process and commercialization of knowledge
Consultancy services e.g. technology transfer, commercial information, engineering and other services 17

18. Stages in the development of an innovation systemU G F
TNC TC
Emerging IS
Mature (well functioning) IS
Time
Indigenous Firms Government
Universities Transnational corporations
Technological centres
Source: Chaminade and Vang, (2008) 18

19. A generic national innovation system
Demand
Consumers (final demand)
Producers (intermediate demand)
Framework conditions
Financial environment; taxation and incentives;
propensity to innovations and entrepreneurship;
mobility, etc.
Company
system
Large
Companies
Mature SMEs
New TBFs
Education and
research system
Professional education
and training
Higher education and
research
Public sector research
Political system
Government
Governance
STI policies
Intermediaries
Research
institutes
Brokers
Infrastructure
Banking, IPR and
venture information
capital systems
Source: Arnold and Kuhlman (2001) 19

20. Regional Innovation System
Innovation activity is not uniformly distributed across the geographical landscape
Process of knowledge production exhibits a distinctive geography
Tacit knowledge become major sources of acquiring unique capabilities
Tacit knowledge is socially and culturally embedded and is context specific
Spatial proximity is key knowledge is sticky and localized learning with in the region - Supported by cluster policy 20

21. Sectoral Systems of Innovation
A sector is set of activities that are unified by some linked product
Sectoral system focuses on three main dimensions of sectors:
Knowledge and technology domain
Actors and networks;
Institutions (Norms, routines, established practices, rules, laws, standards)
(national institutions, patent law, sectoral institutions: labour markets or sector specific financial institutions.) 21

22. THANK YOU 22