Innovation Systems and Catch-Up by Latecomers: National, Sectoral, Regional, and Corporate Innovation Systems

This chapter provides a review of the recent works applying the concept of innovation systems to the analyses of economic catch-up by latecomer nations, sectors, regions, and firms. First, at the level of NIS and catch-up, this study discusses varieties of NIS, each of which correspond to different record of economic catching up. In particular, the discussion first involved comparing the two catching NIS. The one is short TCT (technology cycle time)-oriented and thus imbalanced NIS, which include South Korea, Taiwan, and China. The other is medium-TCT-oriented and thus balanced NIS, which include India, and Russia, etc. These two catching-up NIS are contrasted with long-TCT-oriented and thus imbalanced but trapped NIS, which include South Africa and many of the Latin American economies. At the sectoral level, this chapter addresses the issue of the double-edged nature of TCT. On the one hand, short-TCT sectors tend to be subject to high incidence of creative destruction and thus can be a window of opportunity because frequent creative destruction means quick obsolescence of existing technologies, corresponding to low-entry barriers. On the other hand, short TCT can be regarded as a further source of difficulty, which is associated with the truncation of learning from existing technologies (Lall, 2000). At the level of regions and cities, the discussion focuses on identifying the characteristics of the RISs of catching-up regions. There are possibly two distinct modes of catch-up RIS, weak vs strong catching-up. Two of them are similar in that both relied initially on FDI but revealed eventual differences as the strong group showed the rising role of domestically owned firms. In other words, a more successful RIS upgrading can be associated with involving growth of domestically owned big businesses exploring domestic knowledge sourcing while reducing reliance on foreign knowledge. Finally, at the firm level, this study deals with the issue of possible convergence in the behavior and strategies of a catching-up firm towards mature firms in the long term. As a catching-up firm builds up, accumulates, and enhances its level of technological capabilities, it has no longer to seek in niche in the short-TCT area but may diversify into long-TCT businesses. Across the four levels discussed above, the overarching keywords are “detour” and “convergence.” Given the entry barriers against high-end long-TCT sectors, latecomers are advised to adopt the detour strategy of moving towards short-TCT sectors, which have an opposite or a different direction from the incumbent, and avoid emulating the incumbent forerunners in the long-TCT sectors. Then, as the level of capabilities of latecomers increase and accumulate over time, they may switch their specialization from short- to long-TCT sectors and activities, thereby realizing a convergence in terms of behavior and strategy at the firm, sector, and country levels.