The National Innovation System (also NIS, National System of Innovation) is the flow of technology and information among people, enterprises and institutions which is key to the innovative process on the national level. In this study we tried to focus on the National Innovation System of Thailand and the role of Industries there on contrast of countries like South Korea, Japan, USA, Germany, Singapore.

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Supervisor:
MD. Rashedur Rahman,
Assistant Professor,
Management of Multinational Corporation (IB-405)
Dept. Of International Business.
Submitter
Team ALPHABET
Submission Date: 31/05/2017

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Topic
National Innovation System in Thailand

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Group Members
Name ID
Shabab Jan Chowdhury 01
Shihab Bin Kabir 56
Ameera Noor 96
Anika Tabassum 112
Shefaz Been Rahim 115

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National Innovation System
The National Innovation System (also NIS, National System of Innovation) is
the flow of technology and information among people, enterprises and
institutions which is key to the innovative process on the national level.
According to innovation system theory, innovation and technology development
are results of a complex set of relationships among actors in the system, which
includes enterprises, universities and government research institutes.
National Innovation System means a core concept for analyzing an economy‘s
capacity to produce, commercialize, import, and utilize knowledge and
technology. Innovation, learning and technological development, indispensable
for long-term economic development of a nation, are now seen as systemic
activities involving many and diverse economic actors. Therefore the NIS
concept rests on the premise that enhancing linkages among various actors,
especially with respect to knowledge creation, diffusion and use, is a crucial for
improving a country‘s innovative performance
For example, public research institutes, academia and industry serve as research
producers carrying out R&D activities. On the other hand, governments either
central or regional play the role of coordinator among research producers in
terms of their policy instruments, visions and perspectives for the future.
Furthermore, in order to promote innovation the different innovative actors
must have strong linkages with each other based on a strong level of trust and
governments should promote and activate trust among the different innovation
actors.

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Definitions of NIS
There are various definitions if NIS few of them are:
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 relationships 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)
A set of institutions whose interactions determine the innovative performance
of national firm. (Nelson,1993)
The national institutions, their incentive structures and their competencies,
that determine the rate and direction of technological learning (or the volume
and composition of change generating activities) in a country. (Patel and
Pavitt, 1994)
The set of distinct institutions which jointly and individually contribute to the
development and diffusion of new technologies and which provides the
framework within which governments form and implement policies to
influence the innovation process. As such it is a system of interconnected
institutions to create, store and transfer the knowledge, skills and artefacts
which define new technologies.(Metcalfe,1995)

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Analysis
Freeman has defined NIS as a network of institutions whereas Lundvall has
defined it as the interactions and relationships that exist, but all the definitions
of NIS is based on a single common ground which has been highlighted from
different perspectives by different individuals.
We can come to the conclusion that NIS is indeed a cluster of networks rather
than a single network, and these networks each exhibit relationships and
interactions among the actors or the key players involved in the system. We are
referring to it as a cluster of network because there is a network system present
among the institutions, industries have their own network system similarly does
the other actors, and finally all these networks form a bigger network with each
other along with the government.
These network systems not only work with each other but also with other actors
which diffuses new ideas, technologies, and knowledge across the whole
economy. Ideas and innovation not necessarily are generated from high-tech
areas with abundant resources and institutions to support the innovation.
Innovative ideas can also be generated from low-tech areas such as villages and
rural communities who doesn‘t have abundant resources and doesn‘t get that
much support both financially and technically.
These innovative ideas and knowledge are very important to shape a country
and present it in the global arena. This is because a country which can generate
greater number of innovative ideas and are able to give these ideas a proper
shape and able to transform it into new technologies and innovations will get a
competitive edge.
So we can say that NIS can prove to be a backbone of a nation and it is very
important that all the actors play their role efficiently and effectively properly to
get the desired output.

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Features of National Innovation System
 Non-linear
Research-business links are most effective when they exhibit strong
feedback loops and are rather non-linear in nature. so that information
flow are bi-directional.
 Pervasive
Innovation typically occurs right across the economy, in low-tech as well
as high-tech areas, so policies should support both developments. They
should be widespread and reach every corner of the economy.
 Specialization
As firms invest in capabilities and intangible assets that support
innovation, the resource commitments involved are risky and exhibit path
dependence, due to this specialization is required in order to generate
output with certainty and less risk.
 Cumulative
In a world of widely distributed knowledge, companies cannot afford to
rely entirely on their own research, but should instead buy or license
processes or inventions (i.e. patents) from other companies. In addition,
internal inventions not being used in a firm's business should be taken
outside the company. It also includes external sources of innovation such
as customers, rival companies, and academic institutions, and can be as
much a change in the use, management, and employment of intellectual
property as it is in the technical and research driven generation of
intellectual property.

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 Collaborative
For innovating effectively, firms require interactions with the science
system and within industry clusters over long periods. The actors should
work together with each other and form linkages within themselves.
Effective features of NIS
 Small-scale innovation systems face considerable regional and cultural
disparities along with adverse cost levels for inputs and organizational
challenges at the company level. These disparities can even have a larger
influence on innovations than they do in a larger country.
 National innovation systems are relatively more dependent on the inflow
of FDI because local levels of investment capital are insufficient.
 The rapid development of economies and their subsequent innovation
systems is at least initially based predominantly on inward transfers of
knowledge and technologies
 National innovation systems require well-developed policy schemes and
integrated efforts in order to enhance the development of domestic R&D
activities, innovations, and entrepreneurship.
 International cooperation and foreign openness along with enhanced
cross-border network ties beyond FDI and knowledge inflows are
essential substitutes for the restricted capabilities of domestic support
 The success of national innovation systems is inherently more dependent
on using limited resources and capabilities for well-defined and focused
innovation activities than that of larger systems. Thus, priority setting
procedures are likely to have crucial importance
 National innovation systems should build predominantly on human and
social capital in order to cope with inherent financial constraints.

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 National innovation systems offer flexible policy adjustment
opportunities, but they could be reduced by inefficient collaboration and
by disagreements concerning goal setting
Role of industries in South Korea:
In 1962 the South Korean Government launched its first 5-Year Economic
Development Plan. This focused on the development of labor intensive export
industries such as textiles, clothing and footwear. Innovation was of less
importance in this period than industrial development. However, there was the
establishment of the Korea Institute of Science and Technology (KIST) and the
Korea Advanced Institute of Science (KAIS). By the 1970s and 1980s the focus
shifted to heavy industries such as petrochemicals, shipbuilding, automotive
manufacturing and consumer electronics. A key outcome of this
industrialization was the development of the country‘s major conglomerates or
chaebols. These firms were assisted to borrow foreign capital and supported in
their investments into heavy industry. Innovation was given less attention,
although the higher education system was expanded along with government
funded research institutes. From the mid-1980s the Korean Government‘s
attention was turned to fostering high-technology industries such as
semiconductors. This transitioned in the 1990s into more knowledge-intensive
industries. Over this time there was significant investment made by the
government into the creation of industrial cities, technology and science parks.
A National R&D Program was launched along with initiatives aimed at helping
private companies develop high technologies. It was in this period that the
major investment in R&D shifted from the government to the private sector. By
2007 80% of Korea‘s R&D expenditure was occurring within the private sector.
This was supported by government tax incentives for R&D and the importation

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of foreign technology. South Korea‘s transition from a low-wage factor-driven
economy through a medium wage efficiency-driven economy and into the
realms of a high wage innovation-driven economy over recent decades has been
impressive.
According to Professor Sam Ock Park from Seoul National University, South
Korea‘s economic transformation was the result of strong intervention by the
national government, with particular focus on five major policy initiatives.
The first of these was the fostering of region-specific industrial clusters. These
comprised around four strategically important industries in each region, with
support from government at both the national and local level. Regional
innovation councils were used to help facilitate the development of these
clusters.
The second was the creation of environments conducive to the fostering of
entrepreneurship and innovation. This included the creation of a business
environment that encouraged new business formation and offered stable and
transparent legal systems. Quality of life and access to financing, business
support services, flexible labor, education and training, plus R&D centers were
also features of these initiatives.
The third initiative was the enhancement of a collective learning process within
innovation networks. This included strategies such as the removal of legal and
regulatory obstacles to inter-firm cooperation. Also included were incentives for
collaborative research between industry and universities, plus access to
professional services and the fostering of social networks.

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The fourth initiative was the building up of a stock of social capital. This was
facilitated via the active engagement of non-government organizations,
Churches and through social networking forums such as conferences,
workshops and seminars.
Finally, there was a promotion of local and global networks. This included
engagement with other countries such as Japan, Singapore and China in cross-
border knowledge exchange for education, research and industry collaboration.
These five policy initiatives are illustrated in the diagram below.
Role of Industries in NIS of Japan:
During the 1980s, Japanese corporations and industry sectors did largely benefit
from the tacit knowledge embedded into their work and sales forces, and of an
appropriate national managerial system in which the knowledge was interpreted
(Motohashi, 2005; Whittaker, 2001). However, the benefit of an intense use of
tacit knowledge probed to be insufficient to overcome the macro-economic
crisis, hence firms and industries were compelled to efficiently create,
incorporate and retain science-based knowledge (Whittaker, 2001). This event
has notoriously influenced the history of collaboration between universities,
firms and industries. Nevertheless, Japanese firms still have a strong ―in-house‖
R&D approach. In general, collaboration between universities and firms has
always existed in Japan, but its formalization – in the form of IPR policies – is a
more recent event (Motohashi, 2005). However, it is not yet clear what has been
the real effect of IPR policies as facilitator of new collaborations (Motohashi,
2006). Conversely, there is consensus about the important role of informal
collaboration based on open-science mechanisms, particularly among SMS

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firms (Kodama and Suzuki, 2006). In the current governmental S&T strategy,
the private sector plays an important role, principally in the strategic allocation
and design of R&D efforts. In this ambit, public and private funding is
supporting the revamp of domestic research production at basic and applied
levels at an unprecedented rate. During the last years, an also unprecedented
number of formal collaborations between universities, research institutes and
industries have been observed. Some of these initiatives include venture
business laboratories and spin-off companies.
Role of industries in NIS of USA:
A cornerstone of U.S. success at innovation has been its mix of entrepreneurial
and large firm capitalism. While evidence is still lacking on the extent to which
major inventions are best generated by entrepreneurial start-ups and
independent inventors, it is clear that small new ventures or independent
inventors often develop new technologies that apparently would emerge much
less readily from major firms. At the same time, large established firms have
often developed and commercialized major new technologies, and moreover
they have carried out the extensive product and process improvements that
refined new technologies to the point at which they become widely used. One
example is penicillin, discovered by an individual, Alexander Fleming, but
made a practical product by several large U.S. firms (notably Merck, Squibb,
and Pfizer) as a World War II priority. Depending on the circumstances and
technologies, it would appear that entrepreneurs and large established firms are
at different times best placed to deliver new technology. U.S. government
funding is in part reserved for small businesses, under the Small Business
Innovation Research program, and legislation generally has not impeded small
business formation (although there are recent concerns, for example, with the
Sarbanes-Oxley Act, which deters new business ventures from raising funds
through stock offers because of high accounting costs for public companies).

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Role of industries in NIS of Germany:
Studies on technology transfer not only between the academic and business
communities but also related to inter firm collaborations regularly reveal that a
substantial part of existing technology transfer in the German innovation system
is self-organized, and takes place directly between scientists and corporate
technicians or managers. Cooperative projects both between the science sector
and the industry and inter firm collaborations are the most effective form of
knowledge and technology transfer. Cooperative research projects are usually
conditional on ongoing R&D activities at the companies involved. The
cooperation partner can always contribute only complementary knowledge. In
the case of cooperative projects with public-sector research institutions in
particular, companies cannot outsource the necessity to design market-driven
product/process innovations. Universities and public-sector institutions, remote
as they are from the marketplace, are of limited suitability for developing
finished products for the actual market. Some empirical findings are worth to
mention:
• Cooperative projects presuppose in-house capabilities, and evolve
complementary synergies.
• Geographically apportioned obligations are rendered obsolete: the partners
interchange their roles.
• The foundation is personal experience and mutual trust.
• Transfer is made directly; institutionalization is possible and desired only to a
very slight extent.

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Role of industries in NIS of Singapore:
Since its independence from the British in 1965, Singapore has gone through
multiple stages of industrialization and economic revitalization, which are
always taken into comparison with other ―Asian Miracle‖ economies — Hong
Kong, Taiwan, and South Korea. Many would argue that its economic take-off
as latecomer over the last few decades is likewise attributed to its effective
industrial policy making by the government to attain a desired macro-economic
environment for industrial development (Goh, 2005; Hu and Mathews, 2005).
Under the small-open economic framework, as a market price-taker Singapore
government has adopted strong interventions in labour, land, and industrial
development to ensure its transition from a third-world to a first-world country.
During 1960s and 1970s, facing the scarcity of natural resources, Singapore
directed the industrial policies towards employment-creation, using favorable
incentives to attract foreign direct investment and multi-national companies
(MNCs) to increase productive capacity. Gradually, a vibrant manufacturing
sector was formed and dominated the economy. Unlike other ―Asian Miracles‖,
Singapore primarily relied upon MNCs to produce the knowledge spillovers and
technology transfers necessary to develop its national technological capability
rather than indigenous R&D, for example, the initiation of the government to
establish a Singapore Science Park was to attract Foreign Direct Investment
(FDI) and MNCs. But past experiences show that such over-reliance on FDI and
MNCs had constrained the country‘s ability to resist external economic crisis as
global competition intensifies (Goh, 2005). Thereafter, Singapore began the
pursuit of sustainable economic growth through promoting entrepreneurship and
raising the quality of indigenous human capital to international standards (Tan
2003). In 1989, Singapore government created the first Small and Medium-
Sized Enterprise (SME) Master Plan to introduce measures and assistant
schemes for SME development and to improve entrepreneurial infrastructure.

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Moreover, entrepreneurial mindset was introduced in civil services through the
Public Service for the 21st Century in 1995; a deliberate exercise aimed at
nurturing entrepreneurial attitude of excellence and fostering an
entrepreneurship-friendly environment in the public service. In 2000, the
Enterprise Challenge (a branch under the Prime Minister‘s Office) even set up a
S$10 million fund to sponsor innovative projects which may improve the
provision of public service. Hit by the 1997 Asian financial crisis, the
government released the second Master Plan (SME21) in 2001, calling for
urgency to inspire entrepreneurship yet again in Singapore. Meanwhile, it also
actively promoted spending in the private sector through various incentives. To
maintain its attractiveness as a place for business of the future, in recent years
Singapore has gradually switched its developmental focus from a large
manufacturing base for MNCs to a dynamic innovation hub that supports high-
tech manufacturing and R&D, which is best indicated by the steady and
continuous increase of R&D expenditure as a percentage of annual GDP (see
Figure 2). Singapore‘s S&T advancement in the last two decades is
accomplished through four five-year National S&T Plan (1991-1995, 1996-
2000, 2001-2005, and 2006-2010) week indigenous technology development
after the first economic recession, in the early 1990s the Singaporean
government planned to double R&D investment in the coming years, targeting
primarily long-term strategic research (Koh, 2006). The first five-year National
S&T Plan has invested a total of S$2 billion to develop key resources in
technology, manpower and skills to meet the needs of industry. During the plan,
the National Science and Technology Board (NSTB) was assigned to develop
new research institutes for a number of identified key research areas, including
biotechnology, food and agro-technology, information technology and
telecommunication, microelectronics and semi-conductors. In the second plan
from 1996 to 2000, the government envisioned ―an innovative and enterprising
society that embraces science and technology to develop a thriving knowledge

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economy and good quality of life‖, and therefore shifted its developmental
strategy to domestic capacities in applied and basic scientific researches. In
order to meet the world-class science and technological capacities, it had been
set that by the end of this period, government‘s R&D expenditure should reach
2.6 percent and the research talent pool should be strengthened to achieve the
level of 65 research scientists per 10,000 workers. These targets were achieved
two years ahead of time with S$4 billion of investment funding. A number of
new policy initiatives promoting technology entrepreneurship were also
released at the same time in order to firm up coordination between scientific
infrastructure and industrial capacity. In the first two S&T National Plans, the
government started to realize that it should work more efficiently with private
companies in exploiting technological innovation by facilitating them to
develop their innovation capacities. In this regard, a number of financial
assistances and tax incentive programs were therefore designed to promote
innovation, especially among the SMEs.7 Major financial schemes which aim at
promoting technology commercialization include the Research Incentive
Scheme for Companies, the Research and Development Assistance Scheme, and
the Patent Application Fund The third S&T National Plan from 2001 to 2005
marked another phase of R&D in Singapore as it emphasized the crucial role of
research institutions and universities in undertaking research of several strategic
areas with medium-to-long run relevance (MTI, 2006). Half of the S$7 billion
budget was channeled into technology development and R&D experiments,
while 30 percent was used to encourage corporate labs to set up research centers
in Singapore. The remainder has been pumped into broad-based manpower
development, which includes fellowship training programs and postgraduate
scholarships. In addition, the fourth S&T National Plan from 2006 to 2010
intended to strengthen the support to SMEs, promote technology transfer and
intellectual property management, and to create incentives that could attract
international talents to Singapore. With the assistance of the government

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policies, universities started to take up a more significant role in the recent
decade, especially in the establishment of science parks. In 2000, the
government announced a devolvement of S$15 billion to establish a new
science park targeting bio-sciences and information technology as new growth
engines of Singapore‘s economy (A*STAR, 2009). This One-North Project was
modeled after Silicon Valley to create a multifaceted high-tech research
community. With a focus on knowledge-intensive activities in critical growth
sectors, it would provide an intellectually stimulating and creative physical
environment for entrepreneurs and researchers to congregate and exchange
ideas. Focusing on the full range of production activities, it includes not only
research institutes and business offices, but residential properties, shopping,
public parks and other facilities as well. Like any other science parks around the
world, the new science parks are located adjacent to several universities: the
National University of Singapore, the Institute of Technical Education, the
Singapore Polytechnic, and the National University Hospital. The efforts being
put together by the Singapore Government has paid off since the ranking of the
city-state in global ranking related to innovation has improved in the most
recent years Analyzing the development of innovation and technology
development in Singapore, it is clear that the national innovation system is more
government-led despite the fact that the Singapore government has made
attempts to facilitate more deep collaborations between the industry (especially
more with SMEs) and the university in driving technology and innovation
development in the city-state.

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Effective NIS on account of Thailand
Thailand has joined the ranks of middle-income countries, but further growth
will have to come from innovation and efficiency improvements in the
manufacturing and services sectors. Since the 1980s, economic performance has
depended on foreign investment and exports. Thailand has become a key
production base for global automotive and electronics firms from Japan, the
United States and Europe. The agricultural sector employs over 40% of workers
and Thailand continues to be one of the world‘s largest rice exporters. Services
carry great potential for growth, but tourism has been threatened by political
instability. Economically, Thailand is in a "middle-income" trap. On the one
hand it is under pressure from lower-cost but more dynamic economies such as
China, India, Viet Nam and Indonesia; on the other, it is threatened by the more
technological, learning-intensive economies of the original four Asian Tigers
(Singapore; Korea; Hong Kong, China; and Chinese Taipei). The government
has adopted a dual track policy to enhance the capabilities of Thai firms while
increasing international competitiveness by expanding foreign investment,
exports and tourism. The cluster concept, focused on automobiles, food, fashion
and software, underpins industrial and innovation policy. Programs to
encourage R and D and technology development have had limited results.
Thailand has derived few technological capabilities from multinational firms,
which primarily transfer technology embodied in equipment. Levels of R and D
spending, S and T workers and patents are below those of Thailand‘s principal
competitors. Thailand can boost performance in the long term by improving the
skills level of the labor force, investing in ICT infrastructure, and better
coordinating and implementing S and T policies. Upgrading the country‘s
innovative capabilities depends, in part, on enhancing the quality of teaching
and research at Thai universities, investing in targeted public research facilities,
and providing R and D incentives to foreign and local firms. To move beyond

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labor-intensive parts production and assembly, firms in Thailand‘s
manufacturing sector will need to strengthen collaborative innovation linkages.
Apparently, Thailand looks like a successful country in terms of economic
development. The World Bank once categorized Thailand with other seven
High-performing economies to be studied by the other developing countries. It
praised Thailand for its macroeconomic management, poverty reduction, export,
push strategy, and high literacy rate from an overall perspective. According to
research private firms, government and universities have the main roles in
shaping Thailand‘s NIS. We shall describe the features of Thailand‘s NIS by
examining both its actors and linkages.
Several studies of Thai firms conducted since the 1980s state that most firms
have grown without deepening their technological capabilities in the long run,
and their technological learning has been very slow and passive. While the
majority are still struggling with increasing their design and engineering
capability. For a very large number of SMEs, the key issue is much more
concerned with building up more basic operational capabilities, together with
craft and technician capabilities for efficient acquisition, assimilation and
incremental upgrading of fairly standard technology.
Contrary to several OECD countries where innovation have been given high
priority in national policy making and the concept of NIS has been well
perceived and implemented or there is no explicit and coherent national
innovation policy in Thailand. ‗Innovation‘, though mentioned in the present
National Economic and Social Development Plan (1997–2001), is not well
understood conceptually.

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Different from developed countries and NIS‘s development of Thai innovation
systems started from the 1950s but has not resulted in progressive
specialization. The structural feature of the system exhibits high degree of
multiplicity and limited specialization. There are several institutions doing a
number of similar duties, namely, providing technical support services, carrying
out applied technology development and transfer, and undertaking
strategic/basic research, and funding R&D. This feature reflects the inability of
government over 40–50 years to abolish or reorganize existing institutions when
new ones are founded.
At present, there are 24 public universities and 50 private universities.
Altogether Thailand has capacity of educating 1.1 million students, most are
concentrated on social science and humanities areas. The quality of universities
themselves and their graduates are not high compared to other universities in
Asia. Their research capabilities are generally unsatisfactory. Relevancy of
research to the industry is rather low.

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Role of Industries
 The business sector is the main performer of research and development
and source of innovation.
 One of the most significant knowledge flows in a national innovation
system is that stemming from technical collaboration among enterprises
as well as their more informal interactions.
 Firms can collaborate to pool technical resources, achieve economies of
scale and gain synergies from complementary human and technical
assets.
 The informal linkages and contacts among firms whereby knowledge and
knowhow are transferred, including relationships among users and
producers and the role of competitors as both a source for and stimulus to
innovation are important.
 An increase in competences and skills that positively influence a firm‘s
innovative capacity, such as networking capabilities and the ability to
identify and adapt useful technology is possible.
 Not revealed in these analyses are the role of the informal contacts among
competing firms and those involved in horizontal and vertical
relationships.
 These linkages are also prime contributors to net innovative capacity, but
may be more fully captured through cluster analyses, firm surveys and
other techniques.

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References
 https://en.wikipedia.org/wiki/National_innovation_system
 https://www.oecd.org/science/inno/2101733.pdf
 INNOVATION & HIGHER EDUCATION: A Comparative Study of
Five Asian Societies by Professor Ka Ho Mok
 National innovation systems and the intermediary role of industry
associations in building institutional capacities for innovation in
developing countries: A critical review of the literature by Andrew
Watkins , Theo Papaioannou, Julius Mugwagwa, Dinar Kale
 The National Innovation Systems of Singapore and Malaysia, Trevor
Monroe a Self-Study with Professor Samphantharak
 National Innovation System and Mapping Innovative Clusters at the
Firm Level by Alfred Spielkamp and Katrin Vopel
 National Innovation System in Less Successful Developing Countries:
The case of Thailand By Patarapong Intarakamnerd, Pun-arj Chairatana,
Tipawan Tangchitpiboons