The Value of Using a Sectoral Innovation Systems Framework Approach in Developing Countries

Sustained high rates of economic growth in developing countries, particularly middle income developing countries, do not only depend on the accumulation of factors of production (capital, labour, land, etc.), but also on the continuous incorporation of technology and knowledge into the production processes; i.e., innovation.

Indeed, it is technology and knowledge incorporation that condition the efficiency and productivity of factors of production and their return in terms of economic growth.

The Inter-American Development Bank (IDB) which promotes competitiveness, technology and innovation in the Latin American & Caribbean (LAC) nations, tasked CI to undertake a project to develop a framework that could be used to evaluate and promote a roadmap for innovation in LAC. Because of the acknowledged low level of innovation in the LAC region it was recognised that the framework of a National Innovation System (NIS) was unlikely to provide a broad based way forward.

This project was led by Dr Robert Devlin, in collaboration with Patrick Daly, Jos Evertsen and David O’Donovan. The most common approach is the conceptual framework of a National Innovation Systems (NIS). This approach emphasizes the network of interactions of institutions and organizations (public and private), along with their individual actors that are factors in developing/adapting, applying and diffusing information and technologies that support innovations; the NIS concept has been most often applied to evaluations of developed countries.

However, while the concept of an NIS may be a cogent operational yardstick by which to evaluate innovation activities in a developed economy, there are many reasons why it is not so compelling for use in developing countries. A developed economy will have the basic components of a NIS in place and be well rooted; hence, the job of an evaluation is to identify ways to better connect and order them and strengthen the relatively weaker legs. In developing countries, from a strictly functional point of view, the national system can be highly dysfunctional and indeed at a practical level there may be no real NIS in place at all.

Having reviewed current papers the team selected a Sectoral Innovation Systems framework (SIS) approach. While the analytical framework of a SIS is generally considered complementary to the NIS framework, it is fundamentally quite different as a diagnostic and prescriptive tool.

The NIS approach focuses on the system as-a-whole and generates horizontal policy prescriptions. A diagnosis based on the framework of SISs, while complementary to the traditional NIS diagnostic, addresses the limitations in the NIS by honing in on the dynamics of innovation for firms sharing a specific productive platform. The framework developed within the SIS, enables functional transitional arrangements and/or constraining bottlenecks, including missing components of an innovation system, to be better identified through evidence-based diagnostics and addressed by policies that are fine-tuned to the diverse realities of sectors. In addition, when there are functionally only fragments of an NIS in place, as in many developing countries, this framework can help to progressively contribute from the bottom up to efforts to construct an NIS, but one better aligned with a country’s diverse productive activities.

In effect, the SIS framework for diagnosis and policy prescription might be considered an incremental method to strengthen NISs. This confines the inherent risk of unintended consequences arising from public policy by allowing faster identification of problems that are of more manageable proportions for remedial action than if they emerged for the economy as-a-whole.