The dynamics of national innovation systems: A panel cointegration analysis of the coevolution between innovative capability and absorptive capacity

Abstract

This paper puts forward the idea that the dynamics of national innovation systems is driven by the coevolution of two main dimensions: innovative capability and absorptive capacity. The empirical analysis employs a broad set of indicators measuring national innovative capabilities and absorptive capacity for a panel of 98 countries in the period 1980-2008, and makes use of panel cointegration analysis to investigate long-run relationships and coevolution patterns among these variables. The results indicate that the dynamics of national systems of innovation is driven by the coevolution of three innovative capability variables (technological output, scientific output, innovative input), on the one hand, and three absorptive capacity factors (income per capita, infrastructures and international trade), on the other.Keywords: national systems of innovation; innovative capability; absorptive capacity; economic growth and development; coevolution; panel cointegration analysis.JEL codes: O1, O3, O4 1 IntroductionThe study of national innovation systems (NIS) has attracted considerable attention in the last two decades (Lundvall, 2007). While a substantial amount of research has been devoted to the investigation of cross-country differences in technological capabilities and the related institutional and policy framework, much less attention has so far been given to the analysis of the dynamics of national systems over time.This is unfortunate, since evolution and change represent indeed key aspects of Schumpeterian research, which did in fact constitute some of the crucial motivations for the original development of the NIS approach. The lack of focus on dynamic aspects is partly explained by the non-availability of time series data for a sufficiently long period of time, and partly by the analytical and methodological difficulties that are faced when it comes to model and empirically analyse the dynamics of complex evolving systems (Foster, 1991).The Schumpeterian literature on innovation and economic growth does however provide important insights and key building blocks for developing an analytically stronger framework to study NIS dynamics. First, idea-based new growth models point out the important role of national innovation capability for the growth of the economic system (Romer, 1990;Furman, Porter and Stern, 2002). Secondly, technology-gap models highlight the important role played by countries" absorptive capacity for imitation-based catching up, and show the large set of factors that contribute to define a country"s absorptive capacity (Abramovitz, 1986;Verspagen, 1991;Godinho et al., 2006;Fagerberg and Srholec, 2008).Most of the empirical literature on innovation and growth, though, has so far neglected the study of two important issues. The first is that, while a substantial amount of research has been devoted to the analysis of the impacts of innovation on economic growth, the investigation of the determinants and drivers of national innovative activities, has so far received only limited attention...

National innovation system capabilities among leader and follower countries: widening gaps or global convergence?

“…As stated above, empirical works have indeed corroborated the positive impacts of human capital (or educational attainment) on nations' innovative capabilities and performance (Makkonen and Inkinen 2013;Teles and Joiozo 2011). In fact, human capital can be seen as a major factor for countries in developing their NISs from a purely imitation-based phase towards a more developed innovation stage (Castellacci and Natera 2013).…”

“…However, innovation and technologic capabilities are essential but not sufficient to gather for the different aspects of innovation systems necessary for sustained innovation development. Rather, the NISs also need a certain degree of absorptive capacity for imitation-based technological development and catch-up (Castellacci and Natera 2013).…”

“…The dimension is commonly associated with indicators related to the knowledge transfer and diffusion aspects of NISs, including the numbers of Internet users and telephone subscribers (Baskaran and Muchie 2006) as well as the volume of cross-country transportation and the quality of national transport infrastructure also highly important for innovations (Ridley, Yee-Cheung, and Juma 2006). In particular, the importance of information and communication technologies (ICT) has been proven to play a significant role in the diffusion of knowledge across the globe, which is important for innovation creation as well as for the national absorptive capabilities in imitating and adopting innovations produced elsewhere (Castellacci and Natera 2013). This heightened importance of ICT, might turn out particularly problematic for developing countries, since according to empirical evidence, they seem to lack behind in the access to (and the ability to use) ICT (Hilbert 2010).…”

Who captures value from science-based innovation? The distribution of benefits from GMR in the hard disk drive industry

“…The concept of absorptive capacity also has been used at the level of countries (Castellacci and Natera, 2012) and regions or geographic clusters (Giuliani, 2005). In the case of countries, successful innovation is considered a key to sustained economic growth, job creation and improved living standards (Castellaci and Natera, 2012).…”

“…In addition, there are conceptual (Mowery & Oxley, 1995) and quantitative (Castellacci and Natera, 2012) country level studies. These build and test models of absorptive capacity, its antecedents, and its outcomes, but do not look in depth at the actual process and context in which new knowledge is assimilated and applied.…”