14 Policy Options and Practical Instruments

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C.The broader picture: The innovation system

Innovation is the outcome of longstanding collaboration and interactions between firms and other organizations. These include, for example, the connections of their staff with customers, other producers, subcontractors, consultants, public bodies such as development agencies, professional service providers, universities, and research institutions. This complex set of innovation stakeholders and their interrelations define an innovation system (Figure 1.2.).

Foundations of the innovation systems include:

•The organizations that are part of the network of a public and private actor whose activities and interactions initiate, import, modify and diffuse new technologies;

•The linkages that exist between organizations;

•How ideas flow across these linkages; and

•The ability for organizations to learn to change and use these ideas.

Figure 1.2. Structure of the national innovation system

Source: UNECE (2007), Creating a Conducive Environment for Higher Competitiveness and Effective National Innovation Systems. Lessons Learnt from the Experiences of UNECE Countries, New York and Geneva.

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Innovation systems can be distinguished according to their scope:

•National

•Regional

•Sectoral.

National innovation systems (NIS) may display different features regarding the degree of centralization in the allocation of resources and the importance of local arrangements in shaping coordination agreements between business, higher education and government. A broad interpretation of the effectiveness of any of these systems can be assessed by the degree to which:

•Relevant information related to innovation and economic conditions flows through partners in the system; and

•The effective use of this information to innovate.

Regional innovation systems are more likely to produce local connections based on geographical proximity. If functional regions are too small to support key knowledge generation stakeholders, such as universities, links would have to be developed beyond the region.

What can be done to strengthen an innovation system and address any weaknesses?

An innovation system is based on the connections between organizations that produce knowledge, those that utilize this knowledge, which in this context is for its commercialization, the way this is diffused through a community of businesses, the ability of companies and others to absorb the information and finally the structure or governance of the innovation process.

In order to increase the effectiveness of any system in delivering innovation, it is necessary to undertake audits of:

•Sectoral interests;

•Existing connections;

•Routines for creating connections; and

•Emerging opportunities to support connections with public bodies, universities, public research institutions as examples, in particular, public-private partnerships (Box K1.3.).