4. NATIONAL INNOVATION SYSTEM
4.3 THE CONSTRUCT OF NATIONAL SYSTEM INNOVATION
Identifying the scholar who first coined the term ‘innovation system’ has been a dilemma in academic literature, with some of the basic ideas behind the concept of NSI going back to List (1841/1959) who developed the construct as the basis for a German ‘catching- up’ strategy. List’s (1841/1959) concept of ‘national systems of production’ took into account a wide set of interactions among national institutions including those engaged in education and training as well as infrastructures such as networks for transportation of people and commodities (Freeman, 1995;
Edquist et al., 2009:11). At the end of the 1980s, economic innovation research increasingly began to concentrate on the co-development of firms and technologies, viewing innovation as not static, but rather as taking place in evolutionary systems, the so-called innovation systems (Carlsson &
Jacobsson, 2002). The NSI approach was developed through a decade of academic research and policy analysis to provide a framework and quantitative information for assessing whether and how the contribution of public policy to national innovation performance can be improved (Foray, 2010:92). According to Viotti (2002:670), in the evolutionary approach, changes in the components of the system lead to the emergence of new interactions, heterogeneity and innovation processes for supporting knowledge commercialisation. While the modern version of the concept of NSI was developed mainly in rich countries, some of the most important elements going into the combined concept came from the development issues and literature of third world countries (Johnson, Edquis &, Lundvall, 2003:2-3). In applying the system theory, the International Organisation for Standards ISO/DIS 31000 (2009) ISO clause 7.1 states:
For organisations to function, they have to define and manage numerous inter-linked processes. Often the output from one process will directly be converted into the input into the next process. The systematic identification and management of the various processes employed within an organisation, and particularly the interactions between such processes, may be referred to as the “process approach” to management.
The pioneering in writing of the concept of innovation systems can be attributed to scholars such as Rosenburg (1982), Freeman (1987) and Edquist (2005), among others. In order to provide context to his own work Lundvall (1992) reviewed the literature of List (1841/1959), Freeman, (1987), Nelson (1987:1993) and Porter (1990). By so doing, Lundvall (1992) and his colleagues such as Edquist et al. (2009) have been able to move towards the relevance of innovation and interactive learning. At present, the most developed influential innovation approach and definition in research is one that emerged in the mid-1980s, namely: the concept of NSI defined by Freeman (1987). In the proposed NSI approach, Freeman (1987) used the construct of NSI to articulate the important role of the state in developing a country’s technological infrastructure. Freeman (1987:1) defines NSI as “the network of institutions in the public and private sectors whose activities and
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interactions initiate, import, modify and diffuse new technologies”. NSI places technology and innovation at the centre stage of development and pays particular attention to the history and institutions that shape the interactions of the NSI actors. According to the OECD (2005c), the NSI is intended to promote innovation, encourage synergy between the various sectors, institutional and infrastructural elements and develop a research framework in line with national priorities.
According to this research scope, the South African NSI is viewed as consisting of six main actors:
(i) industry (both privately and publicly owned) (ii) institutions of higher education (iii) science councils (both performing and agency) (iv) government departmental research institutes (v) museums and other statutory bodies and (vi) non‐governmental organisations, which play the role of funders and performers in the system. All the NSI institutions are embedded within the financial system of innovation, the country’s legal framework and national politics that includes learned societies, associations, trade organisations and other civil society organisations. There is reason to emphasise the importance of a favourable business environment that provides strong incentives for innovative activities (Kokko, 2010:126). Oyelaran-Oyeyinka and McCormick (2007:23) note that adopting a systemic approach that supports the development of the local and NSI within which S&T and innovation should be embedded in good practice.
The NSI constitutes a multitude of porous sub-systems that are geographically dispersed, sectoral or institutional in nature, each of which may be promoted or hindered its own right, directly or indirectly. Apart from being permeable, openness is an important and fundamental feature of the NSI required in the enabling environment for innovation (Marcelle, 2011:5). This research recognises a variety of mental models that work to shape the way that NSI network participants engage within the system. The concept of the NSI has, nevertheless, proved to be open to widely divergent interpretations. However, the SA DST Ministerial Review Committee (2012:86) states that “the various actors have brought their distinctive interests to bear on how they relate to the idea, if they relate to it at all”. Within this research, the use of mental models facilitates the determination and interpretation of the construct of NSI. Furthermore, in this research the NSI concept is used as a powerful metaphor for describing the many South African NSI policies and network interactions. Edquist (2005:182) provides a broad definition of NSI as:
All important economic, social, political, organisational, institutional, and other factors that influence the development, diffusion and use of innovations… a system consist of two kinds of entities: there are firstly, some kinds of components and secondly, there are relations between these.
The apt definition of NSI adopted in this research defines the NSI as the:
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Set of functioning institutions, organisations and policies which interact constructively in the pursuit of a common set of social and economic goals and objectives, and which use the introduction of innovations as the key promoter of change (Department of S&T 2002:22; Paterson, Adam & Mullin, 2003:6).
Using Freeman’s (2002:194) terminology in this research, the “broad” approach is utilised to recognise that the “narrow” institutions are embedded in a much wider socio-economic system in which political and cultural influences as well as economic policies assist in determining the scale, direction and relative success of all innovative activities. In other words, the broad and narrow definitions enable the research to converge the differing territories and strongly divergent fields of the NSI practice. The broad and narrow definitions reveal several crucial elements of the NSI, namely: (i) a set of institutions; (ii) involves a set of social and economic objectives; (iii) entails framework conditions; (iv) policies implementations are crucial; (v) involves interacting network of institutions; (vi) is evolutionary in nature.
Figure 4.3-1 attempts to illustrate both narrow and the broad perspectives of the NSI construct. The narrow definition is a subset of the broad perspective, which includes different, connecting sub- systems that are influenced by various contexts such as historical processes, geopolitical, institutional, macroeconomic, social, and cultural.
Figure 4.3-1: Narrow versus broad perspective of the NSI Source: Cassiolato and Lastres (2008:11); Cassiolato and Soares (2014:xxx)
Although some literature has tended to focus on the elements illustrated in Figure 4.3-1 of the NSI in a narrow sense with an emphasis on R&D efforts and S&T organisations, the broader perspective of the NSI offers an extensive scope for this research. This research unbundles the
Geo-political, institutional, macro-economic, social and cultural context
Science & Technology
Subsystem Production &
Innovation Demand
Broad
Policy, promotion, Financing, Representation & Subsystem
Regulation Narrow
Subsystem
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terms that make up the concept of the NSI, namely: (i) national; (ii) system and; (iii) innovation, each of which is of importance for the South African NSI framework conditions as follows.
4.3.1 National Networks
Reviewing literature on the NSI linkages is fundamental to the functioning of the dynamics of the South African system. Lost connections present a challenge to NSI actors, specifically the South African government. This research views the restoration of lost connections or the establishment of new connections as an important asset for SD through research in the NSI. The argument is that managing the NSI actors’ perceptions and expectations during policy making is vital because dissatisfied or disillusioned stakeholders can cause policy failure.
The term ‘national’ from this research standpoint, refers to the South African government’s mechanisms that provide a framework for policies to take effect and for measures to be devised that reflect objectives of the government for innovation to achieve transformative effects across the economy for SD. From this research perspective, the national view is important for achieving a coherent and overall strategic perspective for planning, analysis, M&E of policies. This research further attributes the skewed, unequal patterns of development in which innovation has flourished in traditionally strong sectors of the economy to failure in government to view innovation systems as constituting a multitude of intertwined sub-systems. Abrahams and Pogue (2010:23) note that rather than ameliorating the NSI, the historical precedent has inadvertently resulted in deepening inequalities and imbalances.
This study endorses the definition of “networks of innovators” by the IDRC (1993:11), which refer to both formal and informal NSI network arrangements. The term ‘network’ refers to patterns of interactions between society and state, and within the public sector itself (Olsen, 1987:6; Kickert, 1995:9; Peters, 2006:124; Oyelaran-Oyeyinka & McCormick, 2007:17). Examining the NSI networks provides this research with a mechanism to conceptualise the complex relationships among the societal elements (Heclo, 1978; Rhodes, 1997; Deleon & Martell, 2006:41). Foray (2010:106) states that the “network can be created by way of institutionally grounded empirical inquiries, towards a fundamental reorientation of policies to encourage the local adaptation and distribution of knowledge to potential clients”. In this context, the South African government is a legitimate unit of analysis for the NSI as functioning and interaction of a plethora of actors for commercialisation of research. This research portrays entities such as enterprises, scientific institutions, governments, agencies and research institutes as connected networks nodes.
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In many ways, the networks theory provides an appropriate unit of investigating the South African NSI, because contemporary policy issues are attended by social actors, hopefully but not always cooperatively (Deleon & Martell, 2006:40-41). The local seedbeds or ‘millieux of innovation’
(Koppenjan & Klijn, 2004; Bekkers et al., 2011a:7) are shaped, mediated and channelled by institutional arrangements (Powell, 1998:2). In much policy discourse, invocation of the power of networks is essentially a mantra, which is more than a ‘network’ metaphor into a legitimately well worked out NSI model Apart from the recognised NSI actors in this research scope, the South African citizen plays an important role in the NSI network (Leydesdorff & Etzkowitz, 1996). From the economic theory perspective proposed by scholars such as Schumpeter (1934), Lal and Keen (2005), Rodrik (2007) and Bell (2007), in this research context a competitive economy citizens create the demand for goods and services.
4.3.2 Systems
The system approach has been considered ideal for examining the activities and outcomes leading to economic and social impacts of the NSI actors. As such, the system approach is used to imply classifying the components of the NSI and the resulting consequences of SD in South Africa through research.
Webster’s Collegiate Dictionary (2011) defines a system as “a set or arrangement of things so related or connected as to form a unity or organic whole”. Systems, according to Carlsson and Jacobsson (2002:235), are made up of components, relationships and attributes. Scholars such as Bernal (1967) and Goffin and Mitchell (2009:19) view a system as being greater than its parts.
From a ‘system’ perspective, innovation is regarded as “an intricate interplay between micro and macro phenomena. In this case macro-structures influence micro-dynamic and new macro- structures are shaped by micro-processes (Lundvall, 2007:101). Complex systems such as the NSI are dynamic and often display non-linear properties (Bernal, 1967). Traditional theories have depended on closed systems approach, thereby disregarding the differing environments and the nature of dependency on environment (Robbins, 1987:11; Katz & Kahn, 1996: 29), such as those of the NSI actors. This research recognises that open, unlike closed systems, are dynamic and fluid allowing interaction with the environment. Similar to Hillman et al., (2011, 406), in the system performance entails the combined result of all the key processes, the structural elements, and the feedback loops between those creating dynamics. This research further views the systemic character of South Africa’s NSI as that which reflects the plethora of NSI actors in order to realise shared objectives.
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The concept of innovation is explored in depth in a later section of this chapter. In brief, this research views innovation as the process of commercialising research for SD. Bhatta (2003) and OECD (2003:11) define innovation as the process of converting new or existing knowledge to value for the benefits of individuals, groups or communities. This research shares similar views with Varis and Pellikka (2004) that innovation does not occur in isolation but within a complex, interactive and interdependent network of multiple actors and influences, and within dynamic systems. Accordingly, innovation takes place through knowledge conversion to value, which is shaped by various complex interrelated factors such as political, social, cultural, structural, institutional and organisational. Having explored the construct of the NSI, the next section is literature review on the NSI historical perspective and arrangement.
4.4 HISTORICAL PERSPECTIVE OF SOUTH THE AFRICAN NATIONAL