Policy recommendations for technological autonomy at the national and firm levels

Innovation studies: the state as the architect of the system

After the seminal work of Freeman (1982), the innovation systems’ framework has conceptualized innovation as an interactive, uncertain and cumulative process (Johnson & Lundvall, 1994). Knowledge is at the basis of innovation systems, conceived as interactive learning environments (Lundvall, 2017), and takes different forms: know-what, why, how and who (Johnson & Lundvall, 1994). Another vital element of the innovation systems’ concept is that it combines two modes of learning and innovation: the Science, Technology, and Innovation (STI) mode, with an experience-based mode of learning by Doing, Using, and Interacting (DUI-mode). The former is a science-based mode that connects science with technology, whereas the latter involves tacit-knowledge (Jensen et al., 2007).

Firms were conceived as the core of each innovation system. Nevertheless, the focus on innovation systems restricted to national borders, the National Innovation System (NIS), highlights the active role assigned to the state in the promotion of innovation (Lundvall, 1992; Nelson, 1993). The state participates in the definition of norms and standards that steer innovation, provides technological infrastructure and acts as the glue that brings the system together (Freeman, 1987; Lundvall, 1992). It was also observed that public policy - such as R&D investment, innovation incentives and investment in higher education including technical training - contributes to shaping national innovation capacity defined as a country’s ability to produce and commercialize innovations that are new-to-the-world(Furman et al., 2002).

As synthesized by Chaminade et al. (2009), this literature distinguishes between mature and emerging NIS and suggests specific policy recommendations to deal with their respective systemic problems. The emerging system corresponds to developing or underdeveloped countries and is characterized by missing or weak links and components. According to Chaminade et al. (2009, p. 366), “only some of their building blocks are in place and (...) the interactions among the elements are still in formation and thus the system appears to be fragmented”. In these cases, the NIS approach considers that states should create the necessary conditions for capabilitybuilding for innovation (Lundvall et al., 2009). It is assumed that once the links and components are in place, the N IS will mature, which is a condition for development.

Summing up, the state is the architect of the NIS. Its policies should contribute to building bridges and constructing missing components, thus solving systemic failures (Chaminade et al., 2009; Lee et al., 2014; World Bank, 2010). Lundvall (2017) explains that, in order to be at the frontier of global society’s transformations, policies must ensure the creation, reshaping and demolition of industrial complexes. In a way, he is saying that the state should motorize or be the engine behind Schumpeter’s (1934) creative destruction. The state is not supposed to be in charge of producing the innovations itself, even if it had done so, but to encourage both formal and informal interactions between different innovative actors and to build bridge institutions for articulating the links of the system (Di Meglio & Lopez Bidone, 2010; Lundvall, 2002; Pique, 2016; Wade, 2012).

Within innovation studies literature, keeping a systemic view that recognizes the central role assigned to the state, the entrepreneurial state approach has won momentum.

The entrepreneurial state

Mazzucato (2015) observes that the US state was an entrepreneur behind revolutionary innovations since the Cold War, from the internet to different prescription drugs. However, the returns of those major endeavours have been gathered by powerful corporations (such as Apple, Google and Big Pharmaceuticals), examples of what this book has conceived as intellectual monopolies.

According to Mazzucato (2015), the US tax system is not providing the expected returns for those investments due to tax avoidance, tax evasion and the global trait of contemporary capitalism. Therefore, she argues that when the state takes the risks that firms are not willing to take, the potential returns should not be exclusively appropriated by private firms. As a risk-taker, the state should receive part of those returns. To that end, she suggests creating different institutions that could provide a “risk-reward dynamic” with a more collective distribution of the rewards. Furthermore, she argues that this could contribute to equitable and stable growth as well as to trigger even more significant innovations. These arguments are picked up by the author in a later work where she insists on the government’s responsibility to tilt the playing field setting the direction of change that will prompt bottom-up exploration, discovery and learning. In this later contribution, Mazzucato (2016) also points out that states must develop mechanisms to increase the risks taken by large companies in innovation processes.


Both approaches share a systemic view of innovation and the implicit conception of a state with at least some capacity to organize and govern the NIS. Besides, the innovation systems’ literature has reconsidered NIS and policy recommendations under globalization. Resulting contributions include analyses of the intersections between N IS - with different degrees of completeness - and the place of local firms in GVC (Fagerberg et al., 2018; Jurowetzki et al., 2018; Pietrobelli & Rabellotti, 2009, 2011). The main policy recommendations for development given from a GVC perspective are overviewed next.

Global value chains and catching-up

Driven by Gereffi, GVC literature analyses governance within supply chains considering outsourcing and offshoring. Power relations are identified in the governance of the chain, particularly but not exclusively exercised by GVC leaders (Dallas et al., 2019; Gereffi, 2014; Gereffi et al., 1994, 2005; Ponte & Sturgeon, 2014; Sturgeon, 2009).

Its initial version as Global Commodity Chains conceived the role of the state as centrally focused on industrial and, especially, trade policies and international trade regulations (Bair, 2005). Policies ought to prevent value created inside a country from squeezing through international trade. However, this focus was somehow lost and upgrading in the chain became their main policy recommendation for emerging and underdeveloped countries. Upgrading in the GVC meant that local companies should move up the ladder in terms of value creation and capture within the chain (Gereffi, 2014; Giuliani et al., 2005; Humphrey & Schmitz, 2002; Lee & Gereffi, 2015). It requires local companies to absorb technology (Dedrick & Kraemer, 2015). Humphrey and Schmitz (2002) distinguished between process upgrading, product upgrading (manufacture a product with higher unit value), functional upgrading (increasing skills) and inter-chain upgrading (apply learned competencies from one chain to another one). Later, Bolwig et al. (2010) argued that assessments on GVC upgrading should also consider the effects on poverty, labour, gender and the environment.

Technological catching-up and leapfrogging could contribute to upgrading since they are conceived as strategies to reduce productivity gaps (Abramovitz, 1986; Fagerberg & Godinho, 2004; Lee & Lim, 2001; Lee & Malerba, 2017; Perez & Soete, 1988). To this end, the role of the state has proven to be paramount in the experience of East Asian countries (Amsden, 1992; Lee & Lim, 2001).

In simple terms, when latecomers catch-up, they “follow the path of technological development of the advanced countries” (Lee & Lim, 2001, p. 460). Leapfrogging, on the contrary, involves skipping stages or creating new paths. According to Perez and Soete (1988), leapfrogging results from windows of opportunity due to shifts in generations of technology. Latecomers can quickly adopt the new technology, while forerunners could be locked in existing technologies falling into the “incumbent trap”. Lee (2013) reinforced this argument by stating that short cycle technologies (that change at high speed) offer greater catching-up opportunities if latecomers have at least some absorption capabilities. From this thesis, Lee and Malerba (2017, p. 346) state that windows of opportunity for latecomers spring from the reluctance of forerunners to adopt new technologies due to their higher costs.

Next, we reflect on the limitations of all the overviewed policy recommendations in the context of intellectual monopoly capitalism.

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