1. Systems of innovation and development policy:
Some lessons learned
Pointers for discussion
Indonesia in Motion
PPI-UK
19 March 2010
Yanuar Nugroho, PhD.
Manchester Institute of Innovation Research – MIOIR/PREST
Manchester Business School
The University of Manchester
© March 2010

2. Contents
• What is innovation?
• National Systems of Innovation
• Modes of knowledge production and Triple Helix
• Science &Technology in Development Policy Perspective
• Some lessons learned
• Concluding remarks

3. Innovation and creative destruction
Joseph Alois Schumpeter (1883 -1950) was an
economist and political scientist. He popularised the
term "creative destruction" in economics and lays out
a clear concept of entrepreneurship. He distinguished
inventions from the entrepreneur’s innovations.
Schumpeter pointed out that entrepreneurs innovate
not just by figuring out how to use inventions, but also
by introducing new means of production, new
products, and new forms of organisation. These
innovations, he argued, take just as much skill and
daring as does the process of invention.
Innovation by the entrepreneur, argued Schumpeter, leads to gales of “creative
destruction” as innovations cause old inventories, ideas, technologies, skills,
and equipment to become obsolete. The question is not “how capitalism
administers existing structures, ... [but] how it creates and destroys them.” This
creative destruction, he believed, causes continuous progress and improves the
standards of living for everyone.

4. Innovation – Some basic concepts
• Innovation is usually understood to be distinct from invention. While
invention is the first occurrence of an idea for a new product or process,
innovation is the first attempt to carry it through into practice (c.f.
‘Creative Destruction’ – Schumpeter, 1934).
• Obviously they are closely linked and difficult to distinguish one from the
other (Fagerberg, 2005).
• Literature on innovation is extensive and covers a wide range of topics ,
and studies on the role of innovation in economic and social change show
a trend towards cross-disciplinarity. This reflects the fact that no single
discipline is capable of dealing with all aspects of innovation.
• Innovation studies examine: Invention and “search” (e.g. research and
development); Innovation (not just successful innovation);
Implementation; Diffusion; Changed practices

5. Innovation – core categorisation
Innovation
Process Product Systems
Technological Organisational Goods Services
National Regional Local

6. Technological Innovation – A classification
Series of Incremental
Innovations
Radical
Innovations
Revolutionary
Innovations
Source: Freeman, 1997

7. (Tech.) Innovation – diffusion and adoption
LEVEL ceiling
Competitive success not just
Late
based on quality of innovation:
adopters,
often issues of “complementary
suppliers,
assets” designs
From niches and pioneering
Early
users to major markets
adopters,
suppliers,
designs
TIME
From “ridiculous idea” to “we always knew this was the next big thing”
Source: Rogers, 1995

8. National Systems of Innovation
• Conceptualisations of socio-economic relations of science and
technology - National Systems of Innovation
• Origins of National Systems of Innovations
• “systems” approach rooted in evolutionary economics – non-linearity,
learning, technology at the centre
• Why- to understand the relative economic performance and
competitiveness of countries – similarities and differences – do they
explain differences in national performance (Nelson, 1993)
• Freeman 1987– (Japan) NSI “the network of institutions in the public
and private sectors whose activities and interactions initiate, import,
modify and diffuse new technologies” i.e. processes of innovation
• Role of firms in national economy
Source: Flanagan & Barker PR6011

9. National Systems of Innovation
• Foundations of National Systems of Innovation
• Lundvall 1992 – narrow (“searching and exploring”) and
broad definitions – all parts and aspects of the economic
structure and the institutional set up affecting learning as well
as searching and exploring…production, marketing, finance
sub-systems
• Nelson and Rosenberg 1993 – “a set of institutions whose
interactions determine the innovative performance of national
firms”
• Broad concept of innovation where the context is crucial –
not just leading edge technological firms or world class
research performers – but national technological capabilities
and processes of transforming them into economic wealth
Source: Flanagan & Barker PR6011

10. Science, Technology Governance & Society
• Links to Policy perspective
• Metcalfe 1995 – “that 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.”
• Motivations, incentives and interconnectedness
• Science & technology from the policy perspective
• Changing dynamics of knowledge production?
Source: Flanagan & Barker PR6011

11. Conceptualisation of knowledge production
Mode 1 Mode 2
University as the main site Socially-distributed
of knowledge production knowledge production –
university just one actor
Individual researchers Collaboration and teams
Disciplinary Trans-disciplinary
‘Disinterested’ generation Solving problems in ‘context
and validation of new of application’
knowledge
Peer review – autonomy Reflexivity and evaluation –
social accountability
Science policy Innovation policy
Source: Gibbons, et al., 1984; Shinn, 1999

12. Triple Helix: University-Industry-Government
The Triple Helix thesis states that the university
can play an enhanced role in innovation in
increasingly knowledge-based societies
(Etzkowitz & Leydesdorff, 2000)
Three institutional spheres drive the global
knowledge-based economic system: university,
industry and government
Interactions between them shape them (dynamic)
- inter-institutional relations
Three ‘dynamics’:
1. Economic dynamics of the market
2. Internal dynamics of knowledge production
3. Governance of the interface
Firms not centre stage

13. Triple Helix: University-Industry-Government
• Triple Helix 1 – interaction across boundaries is mediated by
organisations e.g. industrial liaison offices, strong direction by the state
of relationships
• Triple Helix 2 – separate institutional spheres and control at the
interfaces
• Triple Helix 3 – overlapping institutional spheres, interchange of roles
and hybrid organisations
In one form or another, most countries and regions are presently
trying to attain some form of Triple Helix III. The common objective is
to realize an innovative environment consisting of university spin-off
firms, tri-lateral initiatives for knowledge-based economic
development, and strategic alliances among firms, government
laboratories, and academic research groups
E & L, 2000

14. S&T in (Devp.) Policy Perspective – Rationales
• “Policy for Science” (1945-1970)
• “Science, the Endless Frontier”(Bush, 1945)
• S&T funded because unquestionably worthwhile, required for national security;
many decisions taken by industrial-military complex elites;
• linear model of innovation – science as the motor of progress (without clear idea
of exactly how..)
• big science and technology programmes, e.g. nuclear, aerospace (prestige)
• Policy concerned with managing growth of science as determined by scientists in
their disciplines
• “Science in Policy” (1970-1980s)
• an age of questioning – need for reform – energy crisis, “Limits to growth”
• Brooks report (OECD 1971) Science, Growth and Society
• recognition that science should support policy objectives of modern state, policy
not merely concerned with science itself
• Social goal rationales move into the ascendancy – national well-being
• science as a problem-solver
• more demand than supply-led
Source: Flanagan PR6011

15. S&T in (Devp.) Policy Perspective – Rationales
• “Research for Competitiveness and Innovation” 1980s, 1990s…?
• slow economic growth – need to relate science to national economic
performance
• strategic science, “critical technologies”, focus on technology strengthening
• Rise of large cooperative technological programmes leading to market failure
• evaluation and foresight
• integrate demand and supply – more systemic and network views abound –
about greater co-ordination
• Rationales for the new millennium?
• Re-emergence of rationales for funding basic research (eg Japan)
• Dominance of systems views founded in evolutionary economics
• Support of networks (eg ERA, regional science policy)
• Recognition of changes in institutions and global context of research
Source: Flanagan PR6011

16. Lessons learned
• EU – strong research policy
• ‘Aho report’ criticising failure to meet Lisbon target
• Triple Helix as norm, despite (heavy) criticisms
• BRIC – strong leadership
• Clear technology policy (or at least, technological visions)
• State plays a central role
• SEA – clear objective
• Singapore: clear policy, lead by state, influenced by business, ‘supplied’ by
university; (civil) society left behind market; services and service industries
• Thailand: policy transfer, referring to EU techno park as manifestation of TH
practices; strong role of government; central role of culture creative and
services industry
• Malaysia: technology centre; strong role of government, high level of institutional
coordination; high participation of (civil) society; but lacking systems at national
level
• India – wide participation
• Strong role of (civil) society, clear policy objective, facilitated by state, influenced
by brain circulation

17. What should public institutions do?
• Governments and public institutions need to be ahead of the game
in understanding changes in the innovation process and to be fully
aware of their potential.
• It can enhance the efficiency and productivity of public services and
extend the range of those services and the way governments and
public institutions engage with the public.
• Well-implemented systems can improve policy decision-making
• Governments
• to develop the technical infrastructure to support innovation –
(including research & development)
• to facilitate organisational infrastructure and collaboration skills to
enable next generation innovation.
• Universities will become more entrepreneurial, but many will lag
far behind the leading edge of innovative practice. Many will need
to restructure their educational offerings considerably to provide
the talent and skills necessary for new generation innovation.

18. Future matters – some conceptual issues
All is about fallibility and uncertainties in the direction to which the society
progresses
• From ‘Futures’ to ‘Foresight’ (~Innov. Tech) – arguments:
• The discovery of the future is intertwined with recognition of the transformative
powers of Science, Technology and Innovation
• Imagining a better world: from Utopia (1516) to the New Atlantis (1627)
• ‘Bravery’ in developing, combining methods
Thanks to Ian Miles

19. BPS2008 – Map of trends 2008-2015
• Environmental and
sustainability concerns
are shared by all
• Changing socio‐
economic patterns
and environmental
and sustainability
concerns are tightly
linked
• Financial crisis close to
Trends the core issues
Source: Nugroho and Saritas, 2009

20. BPS2008 – Map of trends 2016-2025
• The relationship between
environmental and
sustainability concerns,
alternative energy
sources, and the role of
S&T is emphasised by all
• Ageing population is a
more shared concern
• Financial crisis becomes
more peripheral for world
regions
Trends
Source: Nugroho and Saritas, 2009

21. BPS2008 – Map of trends 2025-beyond
• Climate change is right at
the centre and becomes
appreciated by all world
regions
• More emphasis on the
scarcity of natural
resources
• No mention of financial
crisis, globalisation, and
new diseases and
pandemics
Trends
Source: Nugroho and Saritas, 2009

22. Some reflections
• Weaknesses of NSI approach
• Is national the right level? (multiple systems within one nation)
• Links to globalisation?
• How to measure (measure R&D expenditure, patents – or try to include
human element for skills and knowledge transfer)
• Gives static not dynamic analysis
• Gives explanations? Or a means of description?
• What are key factors? (comparative analysis problems)
• Has been too linked to views of information transfer and not knowledge
transfer
• Triple Helix: Political rhetoric or conceptual framework?

23. Concluding remarks
• Innovation offers the prospect of generating more ideas, selecting
more efficiently from them and then developing them faster.
Moreover, it increasingly offers the prospect of doing this not just
for the biggest businesses but for its smaller ones and for its
public services – improving quality of life and maintaining our
economic edge in an increasingly competitive world.
• Increasing the speed and effectiveness of innovation adoption are
not simple, nor do they offer quick wins. Indeed, it may not be
obvious when they are succeeding. But the speed of the
development of international competition based on innovation
means that we have to quickly and cleverly use every tool
available to its fullest advantage to improve innovation
research and collaboration.

24. Thank you.