National System of Innovation (NSI)

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Introduction
NSI concept defined as the network of
institutions in the public or private sectors whose
activities and interactions initiate, import,
modify and diffuse new technologies.
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modify and diffuse new technologies.
NSI are defined as a set of institutions whose
interactions determine the innovative
performance of national firms.
NSI are responsible for innovation mainly through the
creation and application of new knowledge.
It contains the interaction between the actors in the
system in order to turn an idea into a process, product
or service on the market.
Introductioncont
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or service on the market.
E.g. the commercialization of innovation, or, as it is
better known, entrepreneurship.
For Schumpeter (1950), an entrepreneur is a person
who is willing and able to convert a new idea or
invention into a successful innovation.
the most fundamental resource in the modern
economy is knowledge and, accordingly, that
the most important process is learning and that
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the most important process is learning and that
learning is a social process which cannot be
understood without taking into consideration its
institutional and social context
Source: Lundvall (1992, National System of Innovation, pg1.
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Rationale
The national innovation system approach has
taken on increased analytical importance in the
technology field due to three factors:
1) the recognition of the economic importance
of knowledge;
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of knowledge;
2) the increasing use of systems approaches;
and
3) the growing number of institutions involved in
knowledge generation.
The study of national innovation systems focuses on
flows of knowledge.
Analysis is increasingly directed to improving
performance in knowledge-based economies
economies which are directly based on the production,
distribution and use of knowledge and information
(OECD, 1996b).
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(OECD, 1996b).
Knowledge, as embodied in human beings (as human
capital) and in technology, has always been central to
economic development.
Economic activities are becoming more and more
knowledge-intensive as seen in the growth in high-
technology industries and the increasing demand for
highly skilled people.
Investments in knowledge, such as in research and
development, education and training, and innovative work
approaches are considered key to economic growth.
The national innovation systems approach reflects
the increasing attention given to the economic role
of knowledge.
Here, the emphasis is on mapping knowledge
flows as a complement to measuring knowledge
investments.
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investments.
These flows, particularly of knowledge codified in
publications, patents and other sources, are both
increasing and becoming easier to detect due
largely to information technology.
The intent is to evaluate and compare the main
channels for knowledge flows at the national level,
to identify bottlenecks and to suggest policies
and approaches to improve their fluidity.
As economic activities become more knowledge-
intensive, a large and growing number of institutions
with specialized expertise of very different kinds are now
involved in the production and diffusion of knowledge.
The determinants of success of enterprises, and of
national economies as a whole, are ever more
dependent on their effectiveness in gathering and
utilizing knowledge from these institutions whether
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they be in the private sector, public sector or academia.
Moreover, each country has its own institutional profile
depending on the governance regime for enterprises, the
organization of the university sector and the level and
orientation of government-funded research.
There are marked differences in the relative roles and
weight of different institutions in national innovation
systems, which partly accounts for the focus on the
country level.
Several approaches have been taken on the
nature and impact of such national systems. Here
are the factors that influence the rate and
direction of technological innovation in a country:
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1) Incentives and pressures to which firms
have to respond
2) Their competencies in production and
research
3) Institutional of corporate governance
NSI-Incentives and pressures to which firms have to
respond
National Demand- Strong local demand-pull and
price conditions for certain types of product
generates innovation opportunities for local firms.
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Competitive Rivalry- This will simulate firms to
invest in innovation, and change, else will be
threatened if they do not.
NSI-Competences in Production and Research
National advantages in natural resources and traditional
industries have been fused with related competences in broad
technological fields that then become the basis for technological
advantage in new products fields.
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National competencies in research: In large firms, R&D
laboratories actively seek support, knowledge and skills from
national basic research activities, especially in universities.
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NSI-Institution: Corporate Governance (control)
Firms innovation behaviors are strongly
influenced by the competencies of their managers
and the ways in which their performance is
judged and rewarded.
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Methods of judgment and reward vary
considerably amongst the countries.
E.g. Anglo-Saxon practiced in the USA and UK.
Nippon-Rhineland practiced in the Japan and
Germany.
Policy
For policy makers, an understanding of the national innovation
system can help identify leverage points for enhancing
innovative performance and overall competitiveness. It can
assist in pinpointing mismatches within the system, both
among institutions and in relation to government policies,
which can thwart technology development and innovation.
Countries differ in the way in which knowledge flows are
structured and in the relative importance of different types of
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structured and in the relative importance of different types of
institutions, actors and linkages for their respective
production systems.
There is no doubt that there are countries in which institutional
interactions occur more easily than in others. A number of
framework policies relating to regulations, taxes, financing,
competition and intellectual property can ease or block the
various types of interactions and knowledge flows.
Technological innovation takes place within a specific
industrial structure and national context; a better
understanding of this context or system will lead to better
government technology and innovation policies.
References:
1) Tidd, J., Bessant, J., and Pavit,K: Managing Innovation: Integrating
Technology, Market and Organizational Change. John Wiley & Sons,
Chichester, UK, 1997.
2) OECD (1997). National Innovation System, France.
3) Habaradas H.B. (2008), Strengthening the NIS of the Philippines: Lessons
from Malaysia and Thailand, Asian Journal of Technology Innovation, 16,
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from Malaysia and Thailand, Asian Journal of Technology Innovation, 16,
1, 1-22
4) Mohan, A.V, Omar, A. and Aziz, K.A (2004) ICT clusters as a way to
materialize a National System of Innovation: Malaysias Multimedia
Super Corridor flagships. The Electronic Journal on Information
Systems in Developing Countries 16, 5, 1-18.
5) Asgari and C. Y. Wong, Depicting the Technology and Economic
Development of Modern Malaysia, Asian Journal of Technology
Innovation, Vol. 15, 1, 2007, pp. 168-193.