Network-based innovation systems: A capital base for the Monterrey

city-region, Mexico
Blanca C. Garcia
a,
, Danilo Chavez
b,1
a
Colegio de la Frontera Norte, COLEF, Northern Borderlands Research College, 277, Tcnicos St. Col. Tecnologico, Monterrey, N.L. 64700, Mexico
b
EGAP School of Government and Public Policy, Tecnologico de Monterrey, Eugenio Garza Lagera & Runo Tamayo, Colonia Valle Oriente, San Pedro Garza Garcia, N.L. 66269, Mexico
a r t i c l e i n f o
Keywords:
Knowledge-based development
Knowledge-city
Capitals system
Relational capital
Regional innovation systems
Monterrey
Mexico
a b s t r a c t
This paper advances notions of interactive learning as one of the key drivers of the knowledge based-
development perspective. The paper explores the strategic role and close relationship between social
and institutional learning as critical processes in order to generate knowledge and innovation in an urban
contexti.e., knowledge city. The research reported in this paper makes an account of: (i) considering a
capitals system perspective for knowledge ows to add value for the development of knowledge cities
and communities; (ii) learning interactive processes among actors that leverage institutional capacity
within regional innovation systems, and; (iii) adopting a knowledge-based development framework for
investigating the capital basis of the City of Monterrey, Mexico. This research sheds light on howknowledge-
intensive elementssuch as higher education institutions, research centers, rms and other local actors
are contributing community building in a knowledge-based urban contexti.e., knowledge city.
2014 Elsevier Ltd. All rights reserved.
1. Introduction
It has been advanced that a knowledge-based economy has
become an attribute of leading urban centers (i.e., knowledge cities,
or in short KCs) and has transformed them into important creators
of value for nations, communities and regions (Carrillo, 2004;
World Bank Institute [WBI], 2008; Yigitcanlar, 2009). Indeed, the
new millennium has seen how knowledge content of goods and
services are on the rise: we are increasingly buying and selling
more and more knowledge. Such changes have given birth to
new development paradigms, for example, the knowledge-based
development paradigm or in short KBDit is also referred as
knowledge-based urban development (KBUD) further focusing on
urban development dynamics (see Yigitcanlar 2010; Yigitcanlar &
Lonnqvist, 2013; Yigitcanlar, OConnor, & Westerman, 2008). This
paradigm is the combination of a number of trends and develop-
ment approaches: such as sustainable development and knowl-
edge management. In addition to changes under the KBD ag,
the emergence of complementary paradigms such as relational
society (Allen, Deragon, Orem, & Smith, 2008; Castells & Cardoso,
2006; Donati, 2010; Mendoza & Vernis, 2008) is seemingly acceler-
ating their impact and inuence on a global scale. Unfortunately
relational society only explains part of the complex and radical
transformation of global cultures taking place in our cities, regions
and nations.
Within these contexts, this paper focuses on notions of interac-
tive learning as a key driver for KBD. It explores the strategic role
and close relationship between social learning, knowledge and
innovation in city-regional contexts for which social capital models
indicate that proximity matters. The paper aims to characterize
existing knowledge-based structures within regional innovation
system (RIS) models through the lens of a KBD framework. This,
in order to identify if learning competences and knowledge-based
scaffolding are actually being built in the RIS. In such aim, this pa-
per is set out to explore what we currently know about an emerg-
ing RIS in Monterrey, a city at the heart of the Mexico-Texas, US
borderland region. Hence, the paper would invite a glimpse on
how key individuals and organizations in Monterrey are building
their intangible assets, their experience and their knowledge-based
relationships their institutions and their future.
This paper rst introduces the role of knowledge in city build-
ing, so as to give a context for the meaning-creation processes that
dene value-based taxonomies such as the KC concept. This is fol-
lowed by a literature review on RIS and notions of interactive learn-
ing for innovation, as some identied models advance. The paper
also attempts to bring further understanding on how intangible
infrastructures contribute to the creation of new knowledge-based
urban community paradigms. Then, the paper introduces the
KC case for Monterrey, and the kind of RIS developing in the
http://dx.doi.org/10.1016/j.eswa.2014.02.014
0957-4174/ 2014 Elsevier Ltd. All rights reserved.

Corresponding author. Tel.: +52 81 8287 0634.

E-mail addresses: blancagnava@gmail.com (B.C. Garcia), tredicinov@gmail.com
(D. Chavez).
1
Tel.: +52 81 8625 8360.
Expert Systems with Applications 41 (2014) 56365646
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city-region. The closing section aims to highlight a culture shift ob-
served in the way people share their knowledge in a wider, more
social sphere, thus creating new forms of social learning and
interaction.
2. Knowledge city: learning, knowledge and innovation
In urban settings specially, the 1990s challenged our societies to
become accurate information managers. As data ows escalated
and multiplied, individuals, organizations and societies were com-
pelled to make sense of information (and ideally, knowledge) in
real time despite of geographical distance (Castells, 2000). Infor-
mation ows also changed our concept of development. A frantic
rush for golden strategies to process knowledge and enable learn-
ing accelerated most organizations, and not few societies. In such
context, the notion of learning regions started to emerge as a
framework for understanding development in a multi-dimensional,
highly networked setting beyond city limits (Florida, 1995), along
with other conceptual tools such as a system of innovation
approach (Cooke, Gomez-Uranga, & Etxebarria, 1997; Edquist &
Johnson, 1997; Lundvall, 1992), clusters (Porter, 1995), intellec-
tual capital systems (Stewart, 1997), global networks (WBI, 2002),
capacity building strategies (United Nations Development
Programme [UNDP], 1997), capacity development (WBI, 2009),
and other related concepts.
However, such rich blend of theory and practice is directed to
knowledge-based typologies such as digital city, learning city, KC,
a learning city driven by knowledge production (Work Foundation,
2005); or the Ideopolis, a city of Ideas and inclusive communities.
The nature of knowledge, as an intangible asset, a ow and a pro-
cess, imposed a new millennial epistemological shift from matter-
centered to relation-centered knowledge (Carrillo, 2002). Hence,
for the purposes of this paper, value-based systems and capital
dimensions are the key elements of a KC denition. A KC is a city
purposefully designed to nurture knowledge (Edvinsson, 2002,
in Dvir & Pasher, 2004, p.17). It is a region that bases its ability
to create wealth on its capacity to generate and leverage its knowl-
edge capabilities through knowledge-based extended networks
formed by enterprises and people (Chatzkel, 2004, p.62). In an-
other terms, a KC is one in which its citizenship undertakes a
deliberate, systematic attempt to identify and develop its capital
system, with a balanced and sustainable approach (Carrillo,
2004, p.34).
Amongst KBD approaches, a strategic framework will be ad-
vanced for the identication, valuation and systematic develop-
ment of the citys traditional and knowledge capital in an
integrated way (Garca, Carrillo, Rivera, Leal, & Garca, 2009), which
in turn will support a RIS analysis. The advanced knowledge-based
framework is basically a taxonomy of urban capital that deliber-
ately and systematically maps out all city resourcesboth tradi-
tional and knowledge-based required to leverage the balanced
and sustainable development of contemporary urban communi-
ties. Such taxonomy is based on an assessment of a citys urban
capitals system (CS) (Carrillo, 1997; Carrillo, 2002). The CS taxon-
omy has been the foundational basis of applications such as the
Most Admired Knowledge City Awards (MAKCi), which greatly re-
ects how knowledge-intensive research work now depends on
an extended community network to gain the necessary perspec-
tives and paths to learn and make sense of emerging KBD
initiatives.
The underlying rationale for this taxonomy is to satisfy the for-
mal requirements of a value-production system, i.e., that it be com-
plete, consistent and homogeneous. This taxonomy builds upon
other efforts to identify and value collective individual capital in
urban, national or regional levels. Known as CS, this taxonomy
identies the basic capital elements of productive systems and
meta-capitals: those other forms of capital not productive them-
selves but signicantly leveraging the systems overall capacity. In
the particular case of the RIS for Monterrey, the CS methodology
will be applied in rst instance to build up the analysis of the cap-
itals system within the city. This would eventually create a com-
plete and consistent set of indicators, within a coherent and
practical framework. The key capital category dimensions used in
the present exercise are:
1. Identity capital
2. Intelligence capital
3. Financial capital
4. Relational capital
5. Human individual capital
6. Human collective capital
7. Instrumental-material capital
8. Instrumental-knowledge capital.
The rst four capital dimensions are considered meta-capitals
as they facilitate the action of the agent (human) capitals and the
instrumental capitals. The CS is the base criteria for the eight MAK-
Ci Awards category dimensions that shape the consultation exer-
cise. They constitute a generic taxonomy of urban capitals,
deliberately and systematically mapped upon all the resources
both traditional and knowledge-based. The CS assumes that the
eight capital dimensions are required to leverage the balanced
and sustainable development of contemporary urban communi-
ties. The CS framework is immersed within context, where the va-
lue-based background, history and capabilities of a city play a
major role. It mirrors the citys historical antecedents and pre-
existing knowledge, as well as present knowledge repositories
and capital, which in turn will enhance the citys future potential
for development.
2.1. Interactive learning for innovation
Cities are but one type of adaptive social forms of organization,
an ever-challenging task in our post-modern world (Giddens,
2002). In them, social capital characterizations on emerging social
structures are clearly sensitive to their corresponding ecosystems.
They express their full complexity, through actors who are intelli-
gent, expert, complex adaptive systems as well. Actors in cities are
accompanied by organizational and institutional structures and
rules that are continuously reconsidered and adjusted to match
the multifaceted and ever-changing environment. Clearly, innova-
tive capability and the spread of innovation are a property of a so-
cial system that depends on its learning capability (Wenger, 2009,
p. 2). This notion of learning was introduced by Etienne Wenger in
1998, following a long tradition of learning as a social process of
development. With Jean Lave, Wenger pioneered research work
on the communities of practice (CoPs) concept. They advanced that
people in CoPs could develop the capacity to create and share
knowledge. This could become a social ecosystem of (social) learn-
ing which includes the ability to nd meaning in activities and to
engage competently with other people involved (Wenger, 2009,
p. 4). Wenger sees such engagement as social learning accountabil-
ity. It is perhaps the central challenge for 21st century organiza-
tions in all sectors that are concerned with systemic learning and
innovative capability (Wenger, 2009; Wolfe, 2009).
In these emerging paradigms, notions of a learning economy,
(Lundvall & Borrs, 1998; Lundvall & Johnson, 1994), and a knowl-
edge-based economy (WBI, 2008) have been recurrent. Moreover,
knowledge-based frameworks that involve RIS and/or clustering
processes for development (Wolfe, 2002) assume learning as
knowledge-generative and innovation-led, in which social
B.C. Garcia, D. Chavez / Expert Systems with Applications 41 (2014) 56365646 5637
processes engage people in mutually benecial dialogues and
interactions a kind of learning-through-interacting (Johnson,
1992; Lundvall, 1992). These perspectives presuppose the social
nature of learning, knowledge management and innovation.
Embedded in relational capital perspectives, these processes seem-
ingly work best when partners involved are close enough to one
another to allow frequent interaction and the easy, effective ex-
change of information (Wolfe, 2002; Wolfe, 2004; Wolfe, 2009).
Moreover, it is believed in these models that innovative capabili-
ties are sustained through regional communities that share a com-
mon knowledge base. According to some observers, the regional
level is critical because the factors of space and proximity contrib-
ute to the kind of tacit knowledge and the capacity for learning
that support innovation (Granovetter, 1973; Wolfe, 2002). Re-
gions seemingly generate a collective learning process leading
to the rapid diffusion of knowledge and best practice (Nauwelaers
& Reid, 1995 in Wolfe, 2002, p. 6) that links social (or societal)
learning to knowledge, knowledge to innovation and innovation
to development altogether, as advanced henceforth in this paper.
Innovation is thus understood as the result of interaction between
various economic and social processes (Manley, 2008), in which
entities need the capabilities of other fellowactors. Research in this
context focused on innovation systems supported by interactive
learning, because learning has become the central core of the
new canonical thinking about the source of wealth of nations
(de la Mothe & Paquet, 1998, in Lundvall, 1992; Manley, 2002).
Emerging shapes and forms of interactive innovation frameworks
involving learning and knowledge sharing (Manley, 2008, p. 3) are:
Development blocks (Dahmen, 1988);
Complexes (Glatz & van Tulder, 1989; Marceau, 1995);
Innovation milieu (Camagni, 1991; Ratti et al., 1997);
Complex products and systems (Hobday, Rush, & Tidd, 2000);
Competence blocs (Eliasson, 1997);
Technological regimes (Nelson & Winter, 1982);
Industrial ligrees (van Tulder & Junne, 1988);
Innovation districts (Pyke et al., 1990);
Sectorial innovation systems (Breschi & Malerba, 2000, chap. 6);
Regional innovation systems (Cooke et al., 1997);
Technological innovation systems (Carlsson & Stankiewicz,
1991);
National innovation systems (Lundvall, 1992; Nelson, 1993);
Innovation networks (De Bresson & Amesse, 1991);
Business networks (BIE 1991);
Value-chains (Walters & Lancaster, 2000), and;
Clusters (Porter, 1990).
Research prior to this paper has concentrated on four key ap-
proaches from this list of frameworks: systems, networks, value-
chains and clusters. However, compared to other frameworks,
the innovation system approach encompasses the broadest range
of relationships, also focusing on technical support instances and
a norm-based regulatory framework. In terms of a networking/
learning approach in institutional contexts, the innovation system
approach is the most comprehensive of the four approaches
(Manley, 2008) and has therefore been preferred for this paper
purposes. Indeed, authors like Manley (2002), Manley (2008) and
Lundvall (2004) stress the increasing complexity of successful
innovation and the importance of external knowledge sources.
Both authors account for two main modes of innovation: explicit
codied knowledge (STI-mode of innovation) and learning-based
innovation, accessed by doing, using and interacting (DUI-mode
of innovation). In brief, an innovation-based interactive learning
is the ability to learn from success as well as failure, to identify
and correct mistakes, and to diffuse technology throughout the
organization. This ability is essential for long-term survival of the
system, if it is able to adapt to changing circumstances (especially
changes in technology). Interactive learning assumes a reliance on
multiple sources of tacit knowledge in the learning process,
according to Lundvall (2004). Manley (2002), on the other hand,
identied four key drivers of innovation in innovation systems:
knowledge ows, institutions, interactive learning and economic
competence, all of which are critically important when dening
capacity building and impact aspects of a RIS.
As shown in Table 1, Manleys dimensions and indicators have
been further developed in the recent literature on RIS. This is par-
ticularly true for the knowledge ows driver, and a list of indicators
is available from Organization for Economic Co-operation and
Development (Organization for Economic Co-operation, 1997),
Franke (2005) and Manley (2008) among others. However, the
institutions driver is a more complex process to observe and it
was clear that a gap in the literature on how to approach this driver
existed. As part of an on-going research that aims to eventually
tackle all four drivers here proposed in a deep and extensive man-
ner, this paper will introduce an operational model to observe the
institutional aspect of a RIS. It will put the model in context and
will complement it with knowledge ows observed through a par-
allel instrument: a capitals system approach in the next
paragraphs.
2.2. Institutions, interactive learning and the capacity approach
Cities have become a privileged place where innovation takes
place due to its urban conglomerate where (positive or negative)
outcomes like patents grow at an exponential level (Badger,
2013; Shearmur, 2012). This is why specialized literature links
the concept of learning (dened as a knowledge-generating capac-
ity) with the ability to improve a condition or set of circumstances
(Sen, 1999). The term capacity is matched to the skill, and the po-
tential availability of performing, producing and developing
improvements. This term applies to governments, public institu-
tions and communities. It involves the level of achievement of
these entities and additionally, assets and/or powers to achieve
the objectives (Hall, 2002). Hence, capacity refers to the ability of
its individuals, organizational units and institutions to carry out
their functions effectively, efciently and sustainably (Ospina,
2002). Capacity involves the active use of a continuous process,
where people are the central factor in capacity building in all areas.
Also dened as the ability of a context in a set of entities operating
under a common purpose according to certain rules and processes
(United Nations Development Programme (UNDP)., 1997, p. 121).
One aspect to consider is measuring the concept of capacity. Intrin-
sically, the ability refers to resources and their allocation. Requires
an agreement and the mapping of the agents involved. Grindle
(1997) suggests that capacity development initiatives in the public
sector must be seen in three dimensions: human resource develop-
ment (focus on providing professional and technical personnel),
management systems for organizational development (to improve
the performance of specic tasks and functions, micro-structures),
and institutional reforms (institutions, systems and macro-
structures).
Institutions: In the context of a regional system of innovation,
the role of institutions as social organizations are elements within
the system that change and shape the relationships among eco-
nomic, state organizations and private rms. Institutional capaci-
ties are the ability of the state to enforce the board sets of rules
that govern economic and political interactions (Grindle, 1997).
The concept of institutional capacity has expanded and has been
approached from various perspectives, some authors understand
it as an input (in-put), a process, as a result (Morgan, 2006) and
institutional quality (Fukuyama, 2004; Israel, 1987), as an attribute
of governance, governance (Grindle, 1997), as an organizational
5638 B.C. Garcia, D. Chavez / Expert Systems with Applications 41 (2014) 56365646
feature (Tobelem, 1992; Morgan, 2006), or as an element that en-
hance the individual (Sen, 1999). In addition, it has been used as a
synonym for quality management, organizational performance,
efciency, management or training (PNUD, 2009, p. 49). Nelissen
(2002) suggests that the capacity can be of two types: indicated
when government bodies have to perform a certain task, or it
can be effective in terms of performance of the capacity of local
government to act and the context where the action occurs.
Table 1
Four drivers of an innovation system approach (Lundvall, 2004; Manley, 2002; OECD, 1997).
Drivers Dimensions
Industrial Alliances
Inter-rm Research Cooperation
Firm surveys. Literature-based counting
Industry/University Interactions
Co-operative industry/University R&D University Annual Reports
Industry/University co-patents Patent record Analysis
Industry/University co-publications Publications analysis
Industry use of university patents Citation Analysis
Industry/University information-sharing Firm Surveys
Knowledge Flows Industry/Research Institute Interactions
Co-operative industry/Institute R&D Government Reports
Industry/Institute co-patents Patent record Analysis
Industry/Institute co-publications Publications analysis
Industry use of research institute patents Citation Analysis
Industry/Institute information-sharing Firm Surveys
Technology Diffusion
Technology use by industry Firm Surveys
Embodied technology diffusion Input/output analysis
Personnel Mobility
Movement of Technical Personnel amongst industry, universities and research Labor Market statistics, University (Institute Reports).
Institutional Subsystems
Finance system; the taxation system; the intellectual property rights system; the training system; the education system; the industrial
relations system.
Institutions Other Institutional/organizational Structures
Labor markets; the internal structure of corporate rms and government bodies;
Norms and perception of norms
Conceptions of fairness and justice held by capital and labor; the structure of the state and its policies; and idiosyncratic customs,
traditions, norms, moral principles, rules, laws, standards and routines.
Uncertainty
The lack of full information about the occurrence of known events, the existence of techno-economic problems whose solution
procedures are unknown, and the inability to predict precisely the consequences of ones actions. The involvement of multiple players in
interactive learning increases the stock of knowledge and the breadth of experience that can be drawn onto reduce uncertainty in the
innovation process.
Interactive Learning Scientic Knowledge
The increasing reliance of major new technological opportunities on advances in scientic knowledge highlights the importance of
linkages between R&D users and major R&D organizations in interactive learning.
Complexity
The increasing complexity of R&D activity means that multiple players are needed in order to access multiple knowledge sources, rather
than just relying on the skills of individual innovators. Experimentation: the increasing role of experimentation in the form of learning-
by-doing and learning-by-using requires access to appropriate partners to maximize the value of experimentation.
Experimentation
The increasing role of experimentation in the form of learning-by-doing and learning-by-using requires access to appropriate partners to
maximize the value of experimentation.
Cumulativeness
The cumulative character of innovative activity means that past decisions shape future opportunities. Hence, it is important to keep
options open by maintaining a broad array of innovation interests through multiple relationships, through activities such as: user-
producer interaction, formal R&D agreements, professional association functions, consultations with regulators/training organizations/
nance providers, production agreements, licensing, joint ventures, sub-contracting and conference/workshop/forum attendance.
Economic Competence
(Firm-level)
Selective/Strategic Ability. The ability to: make innovative choices between markets, products, technologies and organization structures;
engage in entrepreneurial activity; select key personnel; and acquire other key resources, including new competencies. An important
part of strategic capability is the notion of receiver competence or absorptive capacity, which involves the ability to scan and monitor
relevant technological and economic information; identify technical and market opportunities; and acquire knowledge, information and
skills needed to exploit opportunities.
Organizational/Integrative/Coordinating ability
The ability to organize and coordinate resources and economic activities within the organization so that overall objectives are met. This
includes the ability to generate and improve technologies through new combinations of existing knowledge and skills. This should be the
main function of middle management in an organization.
Technical/Functional ability
The efcient execution of various functions within the rm to implement technologies and utilize them effectively in chosen markets.
Learning/adaptive ability
The ability to learn from success as well as failure, to identify and correct mistakes, and to diffuse technology throughout the
organization. This ability is essential for long-term survival. A rm that is both effective and efcient at a point in time eventually
becomes neither unless it can adapt to changing circumstances (especially changing technology).
Organizational/Integrative/Coordinating ability
The ability to focus on core competencies and utilize complementary resources from other rms. This ability has increased in importance
in recent years due to the pressures of globalization, the increasing complexity of input and output markets and the increasing speed of
technical change.
B.C. Garcia, D. Chavez / Expert Systems with Applications 41 (2014) 56365646 5639
3. Regional innovation systems
On the other hand, a working denition for innovation is a pro-
cess that leads to an outcome (and this outcome is an object or a
way of doing that previously did not exist) (Shearmur, 2012). In
parallel, an innovation system can be dened as a collective of
organizations, institutions and people that interact in the produc-
tion and diffusion of new economically useful knowledge (Lundv-
all, 1992, p. 11). These denitions frame a number of key strategies
for regional development has been identied as RIS.
3.1. Regional innovation system as a network-based hub
RIS has been identied as the constellation of institutions at the
regional level that contribute to the innovation process (Braczyk,
Cooke, & Heidenreich, 2004). A RIS is clearly identied with its
set of institutions, both public and private, that produces pervasive
and systemic effects which encourage rms within the region to
adopt common norms, expectations, values, attitudes and prac-
ticesin short, a common culture of innovation that is reinforced
by the process of social learning (Wolfe, 2002). Hence, denitions
of a RIS vary, but for this paper purposes, it will be dened as
the set of economic, political and institutional relationships
occurring in a given geographical area which generates a collective
learning process leading to the rapid diffusion of knowledge and
best practice (Nauwelaers & Reid, 1995, in Wolfe, 2002, p. 6)
where innovation activities takes place (Niosi, 2000).
Clearly, like any other knowledge-based environments, RIS
function both on the basis of inclusion as well as exclusion, and
these processes may assume sharp contours within the entire
dynamism of any given system. Networks and clusters within a
RIS work as bodies or entities where new knowledge and innova-
tions can be generated and disseminated. They seem to have re-
placedto a great extentother more rigid institutions in which
not so long ago knowledge was created and preserved. However,
this can lead to a gloomier side of network life. It could lead to
the creation of global networks, which could multiply and parcel
global competition that may lead to polarization, creation of elite
networks at the cost of greater exclusion of many groups. Indeed,
for a number of international observers, the key problem of knowl-
edge society will be to cope with inequality and exclusion
(Hamdouch, 2008).
3.2. Regional innovation system frameworks
There is a consensus that economic development is based on
the capacity to generate and absorb innovation processes (Cimoli,
2000). It becomes relevant to master the use of knowledge in sci-
ence and technology from external sources. Learning processes de-
pend on the role between institutions related to science,
technology and innovation (STI) and appropriate policy framework
to foster business relationships (Niosi, 2010).
The literature in RIS is extensive and has gained great recogni-
tion in developed and developing countries. Factors that inuence
RIS include: the presence of local public research institutions,
industry clusters, venture capital, an environment conducive to
business creation and infrastructure for STI, vertical and horizontal
links in the clusters, the human capital endowment, the orienta-
tion to export markets, the role of the State (Autio, 1998; Chavez,
2013; Consejo Mexiquense de Ciencia y Tecnologa [COMECYT],
2011; Cooke & Memedovic, 2003; Niosi, 2000; Padilla-Perez, Vang,
& Chaminade, 2009) among others. The regional level began to gain
more attention from scholars and policy makers; they began to
focus on the particular combinations of political, cultural, and eco-
nomic structures (Cooke et al., 1997). The RIS approach emphasizes
external economies are generated by strong companies, a stock of
labor capacities, network of suppliers, and local based knowledge
(Malecki, 1997). Hence, RIS as a concept is becoming increasingly
relevant due to the implementation of policies at regional and state
level that are concerned with the growth of specic region
mobilizing players in specic areas (Chaminade & Edquist, 2006).
Porter (1990) showed that competitiveness and innovation are ex-
plained in the existence of innovation systems based on local and
regional clusters. These kinds of innovation systems are dened
by regions of economic activities and depend largely on the
emergence of intermediate organizations (Casalet, 2007) based
on the work of the actors and their networks. The competitiveness
and sustainability of the countries and regions seemingly depend
on their ability to attract, capture, generate and exchange
knowledge, eventually reected in their value chains (Cooke
et al., 1997).
Following such agenda, Autio (1998) developed a framework to
study RIS capturing the main characteristics and relationships of a
RIS operating at different levels of government such as local, na-
tional and international level. It has distinguished two subsystems
that constitute the main building blocks of RIS: (i) the knowledge-
application and exploitation sub-system, and (ii) the knowledge-
generation and diffusion sub-system. Both sub-systems co-habit
in a socioeconomic and cultural context. The main external inu-
ences on RIS take the form of national innovation systems (NIS).
A RIS is formed by systems, networks, value-chains and clusters,
and it can similarly be analyzed at a number of levels, including na-
tional, regional, local, sectoral and technological levels (Manley,
2008). The components of the structure according to Autio (1998)
are in the two subsystems mentioned and its division also corre-
sponds to a distinction between public and private sectors, and be-
tween commercial and noncommercial activities. In this way there
is a reference to a bidirectional ow of knowledge and the interac-
tion of resources and human capital. Autios (1998) model provides
an approach to the RIS relations taking into account user and pro-
ducer of knowledge, both seen as subsystems with bidirectional rela-
tionship through the exchange of ows of knowledge, resources, and
human capital in an environment where shared social, economic,
political and cultural characteristics, which in turn are inuenced
by national and international external environment (Fig. 1). Clearly,
regions are a privileged context to develop competitive environ-
ments because of its factors of learning through interaction,
geographical proximity, and the generation, use and dissemination
of knowledge (Niosi, 2010). RISs approach emphasizes the systemic
dimensions, the propensity of interaction and relation between
actors in innovation processes (Manley, 2008).
Cooke et al. (1997) states that regions can be viewed as a
regionalism or regionalization phenomena. The rst type involves
a set of characteristics such as culture ties, language, and common
customs. The second type has to do with political boundaries such
as a municipality, province, State, Nations. Several examples of
successful RIS exist in the literature, such as Silicon Valley, Route
128, and so on. Other studies suggest that RIS are more frequently
found within cities or metropolitan areas (Katz & Bradley, 2013).
Some regional differences in innovation performance are identied
between old industrial regions, metropolitan regions, and periphe-
ral regions. Some authors (such as Zucker et al., 1999) suggest that
most knowledge externalities and venture capital activities take
place within maximum 50 to 100 km. For Niosi (2000) in subna-
tional jurisdictions like in the USA and Canada are far too large
for most externalities to occur homogeneously across their territo-
ries. In that sense RIS are considerate also as urban agglomeration.
The Metropolitan City of Monterrey in this case will be considered
as a RIS where the Nuevo Leon State government has the compe-
tence to establish normative framework through policies, incen-
tives, and regulations.
5640 B.C. Garcia, D. Chavez / Expert Systems with Applications 41 (2014) 56365646
4. A capital systems approach for the regional innovation
system of Monterrey
4.1. Methodology of the capital system framework
For the purposes of this paper, two key moments of analysis are
presented for Monterrey RIS. (i) First, an interpretation of actual
city proles with specic categories as expressed in a sample CS
for Monterrey (Table 2). Although not as apparent, this city CS ac-
counts for a number of knowledge ows that were observed in de-
tail in a previous research work (Garca, Carrillo, Rivera, Leal, and
Garca, 2009). For the purposes of this paper, a number of charac-
teristics have since been identied for the Monterrey city-region
prole generated by the MAKCi framework, highlighting the multi-
dimensional tapestry that has already several successive building
blocks (Garcia, 2010; Garcia et al., 2009) as observed by partici-
pants in successive MAKCi exercises. (ii) A second moment of anal-
ysis in the paper advances a detailed institutions (relational/
institutional capital) process within Monterreys RIS, as an approx-
imation of on-going research on the four innovation drivers men-
tioned in previous paragraphs.
Monterrey is the capital city of the State of Nuevo Leon, in the
northeast Mexican territory, located at a three-hour driving distance
from the Texas border (USA) and about a 12-h drive from Mexicos
capital city. Presently, a network of highway and railroad systems
connect Monterrey to four borders crossing in Texas and to all
mayor cities and seaports throughout Mexico, making it an epicen-
ter for commerce and business. Back in 2004, the regional State Gov-
ernment engaged the whole region into the Project Monterrey:
International City of Knowledge (MICK). It became one of ve core
strategic initiatives of the 20042009 State Government Adminis-
tration. The corollary of the MICK initiative yielded a number of re-
ports and documents, one of which is Monterrey s CS taxonomy of
the city as MICK. The project triggered an on-demand diagnosis of
Monterreys tangible and intangible capitals. This resulted in the
rst illustrated capitals-dashboard and a laboriously integrated Va-
lue Capitals Report for the City of Monterrey, published in 2008.
Nonetheless, further and present research is now focused to ob-
serve how the knowledge-based networks in Monterrey, as well as
its clustering strategies and its social learning practices are creat-
ing advancements in a context challenged by pervasive poverty
and inequality, climate change and violence. Following CS criteria,
instruments and tools, Table 1 introduces a sample-summarized
interpretation of the city prole (MAKCi dimensions) for Monter-
rey city-region, in order to show how a full city prole is built
through the CS/MAKCi framework during the MAKCi consultation
exercises of 2011 and 2012.
Monterrey as a city-region has nevertheless been both at the
leading and bleeding edge of Mexicos socio-economical history
(Pavlakovich-Kochi, Morehouse, & Walst-Walter, 2004). Shaped
by its unique geo-historical conditions, Monterrey has developed
original forms of human collective capital, dened and character-
ized by its condition of borderland. Despite notorious poverty
pockets throughout the region, Monterreys recent government ini-
tiatives were seeking to converge one of Mexicos most thriving lo-
cal economies with the oil-powered economy of the Texan USA
border (Gobierno de Nuevo Leon., 2004). This was an attempt to
re-dene the MexicanAmerican border, creating a corridor of
opportunities for collaboration within the contradictory, yet simul-
taneous processes triggered by the North American Free Trade
Agreement (NAFTA) (Pavlakovich-Kochi et al., 2004). Unlike the
Juarez-El Paso or Sonora-Arizona borderlands, Monterreys leader-
ship has sought to develop strong relationships with its Texan
neighbors through business-led and academic-led co-operation,
made possible by the core strengths of the citys educational and
university system, as identied by Wolfe (2004; 2009). Whereas
most analyses of university-industry links focus primarily on the
processes of creating and transferring knowledge from universities
to industry (Villasana, 2011), the university, in fact, plays a much
broader role as a key institutional support for the development of lo-
cal innovation systems and cluster development. A key role for gov-
ernment apparently lies in strengthening the governance capacity at
local and community levels (Chavez, 2013) so as to deploy its en-
abling powers more effectively to promote a process of social learn-
ing among rms and local institutions (Wolfe, 2004). In 2012, with
all these data available, the MAKCi exercise obtained a full city CS
prole for Monterrey, here summarized in a radial representing
the city s capitals (and apparent knowledge ows) prole (Fig. 2).
Fig. 1. Regional system of innovation (adapted from Autio, 1998, p. 134).
B.C. Garcia, D. Chavez / Expert Systems with Applications 41 (2014) 56365646 5641
4.2. Regional innovation system of Monterrey
Today, Monterrey metropolitan area is working its way to cre-
ate a distinctive long-term KC offer, by developing partnerships
in which HEIs and parallel knowledge-intensive entities are medi-
ators across sectors. Despite an increasing gap in social justice,
Monterrey has developed a number of knowledge-based character-
istics of a KC. The city is home to the largest software-development
rm and a national top quality educational system that includes
both private and public sector HEIs. Over half of the scal alloca-
tion of the city is budgeted for education with emphasis on private
sector participation. There are 231 technical schools, 2 technical
universities (i.e., Tecnologico de Monterrey [ITESM], UTM) and
over 30 higher education institutions. Moreover, the city has
adopted a cluster development approach with a focus on software,
biomedicine aeronautics, mechatronics and automotive sectors.
These clusters are characterized by values such as eco-friendliness,
potential of high volume exports, trade with technological changes,
talent development and hiring, and high salary proles. In order to
support this Monterrey boasts a close collaboration between aca-
demia, public sector and private sector. Both prominent private
(i.e., ITESM, University of Monterrey [UDEM]) and public (i.e.,
UANL, IPN) universities have developed a mutually benecial rela-
tionship with the city, strengthening the power base in terms of
quality education for the city-region.
Monterrey s present RIS is composed by public and private orga-
nizations, also local and national and international entities.
According to the denition provided for the knowledge generation
subsystem, its elements are research institutions, universities and
technical, human capital and intermediate organizations. Interme-
diate organizations are entities involved in business support and
their regular activities, which operate at national, regional or local
level. They are also identied as facilitators of other actors within
the RIS. These organizations within the subsystem are those dis-
seminators of knowledge and serve as a liaison between buyers
and sellers of products and services involved in the STI.
From the 14 public research centers established in Nuevo Leon
(20032012) 10 are located in the Research of Innovation Technol-
ogy Park (PIIT)opened in 2005. In 2013 two centers were already
built and will start operation. The remaining four centers belong to
the State University of Nuevo Leon (UANL); three of these centers
are located within the premises of the University and the other one
near the airport of the city. Regarding private research centers
(PRC) detected in the document review. There are 19 PRC dedi-
cated to scientic research and technological development. These
Table 2
MAKCi capital dimensions for Monterrey (World Capital Institute, 2012).
MAKCi Capital dimensions The City of Monterrey, Mexico
1. Identity capital Monterrey is the entrepreneurial capital city of Mexico. Situated three hours from the Mexico-Texas border, a network of highway
and railroad systems connect Monterrey to all mayor cities and seaports throughout Mexico, and some important metropolis in the
USA, making it an epicenter for commerce and business. In balance, the Identity capital of the city resides in the positive value of its
distinctive regional and urban personality, as well as the recent renovation in prominent areas of the urban infrastructure and the
techno-industrial background of the city.
2. Intelligence capital The Institute for Research and Technology Transfer (i2T2) is the GO appointed agency to develop the Monterrey International City of
Knowledge initiative along with links to technology development strategy: Innovation and Technology Transfer Park (PIIT).
3. Financial capital Industrial clusters are: Beverages, Glass, Food Processing, Petrochemicals, Cement, Steel, Household Appliances, Automotive, and
Electronics & Telecommunications. Other emerging clusters are software, biomedicine, Aeronautics and Mechatronics. Indeed,
Monterrey, as the capital city of Nuevo Leon has thus become a Mexican leading urban community in the 20th Century, with a
prominent (iron & steel-based) industrial, commercial and educational potential in the Mexican context.
4. Relational capital Monterrey conveys several favorable elements for external relations, potentially positioning the city as an important inter-
continental node. However, Monterreys relational capital also shows a negative balance in terms of internal social cohesion, due to
the recent increase of insecurity in the city, the wider poverty gap during the last decade and the marginalization of women from the
productive sectors. Moreover, the prevalence of the domestic violence in observed in almost all social scopes. This circumstance
causes a vicious circle of marginalization-poverty-criminality-corruption that begins to debilitate the internal social cohesion, which
although observed in the country as a whole, in Monterrey it deserves determined and effective regional solutions.
5. Human capital (Individual
base)
Monterrey presents great contrasts in terms of education, nutrition, self-care and participation in the productive life. The comparative
national and regional school performance are outstanding and are receiving growing attention, while the performance at the global
level is rather poor.
On the other hand, the nutritional bad habits, lack of self-care, as well as illiteracy, diminished the value added that each Monterrey
can bring to the community, generating a huge social cost and avoidable health and a deterioration of the quality of life.
6. Human capital (Collective
base)
Monterrey also encompasses a number of social account liabilities. Population habits such as obesity; gender inequalities; the still
disadvantageous referencing of school performance at international level and the challenges in urban governability (amongst others)
demand a sound response before they start compromising future viability of Monterreys local society. Consolidate educational
advances, to bring them to international standards and achieve its value-transfer into the community, along with basic lifestyle
training, including eating habits, and emotional intelligence, are a prerequisite for Monterrey as a city of knowledge.
7. Instrumental capital
(Tangible base)
The City of Monterrey is committed to promoting a sustainable future by conserving water, reusing, reducing and recycling solid
waste, building Green buildings and many other programs. To achieve success, the municipality (SDE) launched the Alliance for the
Future (2020) and the Environment Action Pledge.
8. Instrumental capital
(Intangible base)
In order to identify, appreciate and systematically develop Monterreys elements of community value an urgent and immediate
institutionalization of urban social capital accounts is needed, as a mirror created to reveal its intangible and tangible value base and
therefore allow the city to manage its advancements towards its Knowledge City aspirations.
0
2
4
6
8
10
1.Identity Capital
2.Intelligence Capital
3.Financial Capital
4. Relational Capital
5.Human Ind Capital
6.HumanCollect Capital
7.Instrumental
Tangible Capital
8.Instrumental
Intangible Capital
Monterrey 2012
Fig. 2. Monterrey capital system overview.
5642 B.C. Garcia, D. Chavez / Expert Systems with Applications 41 (2014) 56365646
centers belong to private HEIs, regional companies and multina-
tionals such as Motorola. The seven remaining centers, six belong
to the ITESM and one to the UDEM them are located in respective
of their campus facilities. It is noteworthy that the ITESM has three
centers began operating in the late nineties and in the following
decade and constituted strengthened. The rest of the PRC have
been incorporated from 2005 onwards (see Fig. 3).
Knowledge application and exploitation sub-system: The subsys-
tem of application and exploitation of knowledge is characterized
by producers, suppliers and consumers in general. Monterrey pri-
vate sector system has been characterized by its entrepreneurial
activities in manufacturing. Historically, Monterrey has been con-
sidered the industrial capital of Mexico. In its metropolitan area
is San Pedro Garza Garcia, one of the municipalities with the high-
est human development index for the Americas and the world (i.e.,
index gure of 0.8). The city is home to major Mexican industrial
and nancial groups from abroad also found several international
consulting rms.
Regional policy sub-system: The regional policy subsystem is char-
acterized by governmental regional entities, public administration, a
normative set of framework, and policy instruments. A central
administration, a semi-public administration and the government of-
ce compose the State s Government of Nuevo Leon. The central
administration has fourteen central ofces such as the Education,
Security, Economic Development, Social Development, among others.
Six administrative unites such as public relations, international af-
fairs, and a representative ofce in the Mexico City.
The Secretary of Economic Development is in charge of policy
instruments from external source (NIS) can be mentioned inter-
governmental coordination Mixed Funds (FOMIX) contemplated
in Article 35 of the Law of Science and Technology. FOMIX supports
the scientic and technological development in municipal and
State governments, through a sum of contributions from the State
Government or Municipality, and the Federal Government, through
CONACYT (National Council of Science and Technology). It has
three main objectives:
To allow the State governments and municipalities to allocate
resources for scientic research and technological develop-
ments, aimed at solving strategic problems, specied by the
state itself, with the sharing of federal resources.
Promote the development and strengthening of scientic and
technological capabilities of states or municipalities.
To distribute economic resources to assist in the development
of the entity through scientic and technological actions.
Another tool that promotes the development of STI capabilities
to the states is the Regional Institutional Fund for Development
Science, Technology and Innovation (FORDECYT). Its objective is
to promote scientic activities, technology and innovation as well
as the formation of high-level human resources, collaboration and
integration of regions and regional systems strengthening science,
technology and innovation. Also, a major player in the governmen-
tal side is the State Council of Science and technology. The name of
these organizations is Innovation and Technology Transfer Insti-
tute (I2T2). This organism has an autonomous characteristic
among the Public Administration. Three advisory councils compose
it: academic, rms and citizen. Its internal conguration composed
by directors of planning, education and promotion of new rms to
foster innovation activities in the metropolitan area and the State
see Table 3, which elaborates the institutional driver concept.
5. Discussion
Institutional capacity of Monterrey: In recent years, Monterrey
has maintained a leading place in competitiveness in Mexico
(Instituto Mexicano para la Competitividad [IMCO], 2012; Organi-
zation for Economic Co-operation, 2009). City competitiveness is
based on the ability to attract, retain and develop human talent
and investment to produce goods and services of high value added
to generate gainful employment and quality of life for its habitants.
The institutional framework that the state government has estab-
lished includes policies oriented towards better and effective inter-
actions between triple helix components. The STI public policy
issue is set in a fast technological development environment, and
the composition of various actors taking part of it. There is an evo-
lution in the STI policies in legislation in Mexico and in the State of
Nuevo Leon, especially in Monterrey metropolitan area, using the
development of scientic knowledge as an engine of development.
Government actions are provided within a planning framework.
This process is important because it is represented by a plan that
Fig. 3. Monterrey regional innovation system (Chavez, 2013, p.108).
B.C. Garcia, D. Chavez / Expert Systems with Applications 41 (2014) 56365646 5643
includes explicit and consistent decisions to allocate resources to
predetermined purposes to foster innovation. Thus it is important
to know the regulatory framework and the establishment of rules.
In Monterreys case, the efforts of the government have been
able to support the emerging RIS and create a bottom-up set of pol-
icies. Subsystems shown in Table 3 are pat of the emerging struc-
ture of institutions that support the knowledge ow and
interactive learning required for a RIS. This was reected in the
Nuevo Leon, 20042009 and 20102015 State Development Plan.
This Plan established the relevance of interactions among govern-
ment, industry and academia for economic development through
initiatives that involve these actors. In this period of government
there was a strategic administration supporting a long-term con-
cept of KC, highly signicant for the State of Nuevo Leon, (Ciencia,
2010). These initiatives seek to stimulate these interactions pri-
marily through: (i) establishing the institutional settings for
knowledge transfer; (ii) creating the environment for attracting
industry, and; (iii) strengthening and developing clusters in the
State.
In 2003 the State Congress approved the Law for the Promotion
of KBD. This led to the creation of the Coordinating Ofce for Sci-
ence and Technology (COCYTENL) in 2004 with the purpose of
bringing together all actors of science and technology in Nuevo
Leon, and creates the Program of MICK. In 2005 the Law was refor-
matted and create the I2T2 replacing the COCYTENL. The I2T2 it is
an agency of the State Government of Nuevo Leon, with the author-
ity to sign agreements and allocate nancial resources to programs
and projects of innovation, science, and technology. The Institute
administrates the program MICK. MICK revolves around seven ba-
sic strategies: (i) redesigning the agenda for the education system;
(ii) attracting new research centers and technology-based rms;
(iii) promoting innovation in rms, universities, and research insti-
tutions; (iv) creating new innovation rms; (x) widening urban and
cultural infrastructure; (xi) diffusing a new entrepreneurial culture,
and; (vii) improving instruments that support innovation (Garcia
et.al., 2009).
Fostering knowledge-based activities is also anchored in the na-
tional STI instruments such as the FOMIX CONACYT-Nuevo Leon, in
addition to other programs designed by the State Government
aimed at promoting the creation of new rms. The number of ap-
proved projects through the mixed funds as well as the amounts
has varied, and they include industrial development and the crea-
tion of a scientic and technological infrastructure (Foro Consultivo
Cientco Tecnolgico [FCCyT], 2009). The I2T2 is in charge of
monitoring and evaluating the evolution of: (i) the development
of a mayor cluster of researchers in the state; (ii) to build of tech-
nological infrastructure; (iii) to foster graduated programs in insert
into international networks; (iv) to promote and attract Foreign
Direct Investment (FDI); (v) to promote Nuevo Leons exports; (vi)
to accelerate development of human capital (Specialists and
Technologists); (vii) to link and make alliances between companies
and academic institutions; (viii) to incorporate of Science &
Technology to basic education; (ix) to patent technology develop-
ments and transfers; (x) to incorporate R & D in the companies,
and; (xi) to create business incubators and venture capital (Ciencia,
Conocimiento y Tecnologa, 2010).
6. Conclusion
This paper has revisited a model of four key drivers of innova-
tion in RISknowledge ows, institutions, interactive learning
and economic competence. It has purposefully concentrated on
the second driver, institutions, for which models in recent litera-
ture exhibited a gap in concepts and applications, particularly for
the context targeted for observation. In rst instance, we were able
to see the City of Monterrey (in the Mexico-Texas borderland re-
gion) emerging as a type of KC by using a CS lens, and the MAKCi
framework, which aims to provide a comprehensive view of the
complex interplay that city capitals and knowledge ows repre-
sent. For some observers, Monterrey can be seen as a catalyst KC,
the kind of city that found through challenges, crisis, and uncer-
tainty the key inection moments to make a swift transition possi-
ble and needs to create the possibility to move into a harmonious
and balanced regional development (Scheel, 2011). Likely, one of
those city possibilities is Monterrey s RIS. Through the RIS ap-
proach, we could perceive the role of subnational government in
supporting innovation activities, and the policy process itself for
innovation policy. The new public management adopted during
the 1990s and the rst decade of the new century, is seemingly
leading towards a strong state in some countries; from centraliza-
tion to decentralization activities; from the involvement of govern-
ment in providing public goods to private and public partnerships;
from transparency, accountability to open government; from pyra-
midal structure of organization to new types of governance.
In terms of a RIS for Monterrey, a second moment of the paper
highlights the role of subnational government in supporting inno-
vation activities. It has been argued that the performance of a gov-
ernment through innovation policy can be measured by its
capacity to fulll the objective for what the policy has been de-
signed and implemented: to foster and support innovation
processes.
With the framework proposed RIS and Institutional capacity the
organizations at governmental level can be track and see how
some strategies and the implementation of policy from local o fed-
eral level foster innovation activities and foster the building of an
emerging innovation system. Hence, further enhanced denitions
of social capital through clustering, norms, edges and borderland
territories is deem necessary. A specic account of relational capi-
tal in a borderland context will be expected to shed some light on
how creativity and innovation are leveraged to add value for the
development of cities and communities. Borderlands are thought
to be places where the knowledge of the world can be decon-
structed. . .. then reconstructed (Pavlakovich-Kochi et al., 2004,
p. 31). Hence, by using a KBD framework, and the Mexico-Texas
border as a context, the paper aimed to converge with parallel inte-
grative exercises (PWC, 2006; Honeywill, 2010) in which cities
knowledge-based capital engages in similar institutional capacity
capital system frameworks brought into play as in the case of
Monterrey, a city with many knowledge-based aspirations.
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