Research Policy 31 (2002) 185–190
Editorial
1. Introduction
This issue of Research Policy brings together a
number of scholars who have made important con-
tributions to the analysis of innovation systems. The
modern version of the innovation system concept was
introduced in a booklet on user–producer interaction
and product innovation (Lundvall, 1985, p. 55). It
was brought to an international audience by Freeman
(1987) and by some of the contributions in Dosi et al.
(1988) (see Freeman, 1988; Nelson, 1988; Lundvall,
1988). Niosi and colleagues gave an early critical
perspective on the concept (Niosi et al., 1993). Bo
Carlsson and his colleagues introduced the concept
of technological system in the beginning of the 1990s
(Carlsson et al., 1992). Malerba introduced the con-
cept of sectoral innovation systems in the second half
of the nineties but it has roots back in his earlier work
(Malerba and Orsenigo, 1993). Coriat worked with
a concept similar to national innovation systems but
more focused on the national characteristics of the
manufacturing sector under the heading of ‘Made in
France’ (see Taddei and Coriat, 1993).
The aim of this issue is to take stock of the field
of research and to define some of the most important
tasks ahead. Several of the papers raise important
methodological issues and aims at clarifying central
concepts connected to the innovation system ap-
proach. Most of the articles were first presented at
the 1999 DRUID Summer Conference on Innova-
tion Systems at Rebild Bakker. The two introductory
papers by Freeman and by four Aalborg economists
(Lundvall, Johnson, Dalum and Andersen) have been
added to the selection in order to give more full
coverage of the subject.
The paper by Freeman gives an effective demonstra-
tion of the usefulness of the concept for understanding
the history of the wealth of nations over long periods.
0048-7333/02/$ – see front matter © 2002 Elsevier Science B.V. All rights reserved.
PII: S 0 0 4 8 - 7 3 3 3 ( 0 1 ) 0 0 1 4 3 - 3
Several of the papers discuss the need to define
the limits for the innovation system in geographical
and economic space—national versus technological
and sectoral systems. This is true for the papers by
Lundvall et al., Carlsson et al. and Malerba. Another
important theme addressed especially in the papers by
Nelson and Coriat/Weinstein is the need to develop
a concept of institution that distinguishes it from and
relates it to organisation and technology. The paper by
Niosi points to the need for a more precise approach to
study the performance of national innovation systems.
In this introduction, we will not try to make a sum-
ming up on all the issues raised in the papers. We will
reflect upon three questions. Why study systems of
innovation? How does the concept relate to economic
theory? How to design the analysis if the major aim is
to understand and contribute to regional and national
development?
1.1. Why study innovation systems?
In this issue, innovation systems are introduced
at three different levels. The papers by Freeman and
Lundvall et al. analyse innovation systems as spa-
tial and economic–political entities. The focus is
mainly on national innovation systems. The article by
Carlsson et al. is about technological systems and the
one by Malerba about sectoral systems. At all three
levels, we can separate out three possible objectives
for the analysis. The first is to enhance the understand-
ing of historical processes of economic evolution. The
second is to establish a basis for decision-making and
policy. The third is to contribute to theory.
While the major direction in Freeman’s contribu-
tion is toward the first objective it also gives some
important hints to theory. The emphasis on the match
and mismatch between structure and institutions
as fundamental for the relative success of regional
186 Editorial / Research Policy 31 (2002) 185–190
and national institutions and his distinction between
passive and active learning systems give important
signposts for future theoretical work.
The contribution by Lundvall et al. is mainly add-
ressed to policy issues in more and in less developed
economies. It uses the system’s concept to demon-
strate the need to integrate and co-ordinate different
policy areas that tend to be seen as separate and
independent. Again there are elements in the analysis
that have theoretical implications. The idea of isolat-
ing an economic sphere where institutions and social
elements are absent is not at all useful when the fo-
cus is on innovation as an interactive process. The
system perspective may thus be seen as a remedy to
exaggerated specialisation both in policy making and
academic research.
The analysis of technological system contributes
primarily to the first two types of objectives. It im-
proves the understanding of how specific technolo-
gical fields have evolved in an interaction between
firms and knowledge institutions. It may be especially
helpful in supporting industrial policy and techno-
logy policy when it comes to promote new emerging
technological systems. But it also helps to qualify
innovation theory by helping us to understand what
are general and technology specific characteristics of
innovation processes.
The analysis of sectoral systems of innovation is
perhaps the approach most closely related to a specific
sub-field in economic theory. It represents an original
contribution to industrial economics with its emphasis
on industrial dynamics. At the same time, it offers
decision makers in the private and public sector with
a taxonomy that may help them to avoid the trap of
generalising policies without taking sector specificities
into account.
The emphasis on the three objectives is different
but the three levels of analysis have in common that
they aim at understanding economic dynamics in a
systemic context. By sharing this aim they present a
critical perspective on standard economics.
1.2. Innovation systems and economic theory
Neo-classical and new-classical economics focus
on problems of allocation in a general equilibrium
context. The basic perspective is one were agents
with given preferences and amounts of information,
including a given stock of publicly shared techni-
cal knowledge, engage in making rational choices.
On the basis of this set of assumptions, normative
conclusions about how the economic system should
be organised are drawn. This theoretical perspective,
where scarcity is at the core of the analysis and where
there is little room for genuine uncertainty, might
be useful for the analysis of partial and short term
issues. It is less adequate though for the analysis of
economic development.
When the objective of the analysis is to understand
economic development the process of innovation—
the on-going creation and diffusion of new products
and processes—must be taken into account. Today,
the rate of change in these dimensions is rapid and
the firm which were to use all its efforts to allocate
existing resources in a better way, while sticking to
the same product and the same techniques, would not
only stagnate; it would gradually become increasingly
go bankrupt because its products would become less
and less in demand.
In this perspective, it becomes clear that the in-
formation and knowledge that agents already have,
may be less important than their learning capability.
Again, in a rapidly changing world, the well-informed
and knowledgeable agent—be it an individual or a
collective unit—would soon find him/her/themselves
by-passed by competitors if he/she/they did not learn
anew and this includes learning to do new things and
to handle new situations as well as getting access to
new information.
One basic intention behind the concept of national
systems of innovation is thus to change the analytical
perspective from allocation to innovation and from
decision-making to learning. This can be illustrated in
the following way Table 1.
It should be noted that the learning perspective can
be applied also to allocation. This is the case in cer-
tain Austrian contributions where the entrepreneur in
connection with the market process is obtaining profit
through exploiting the void of ignorance separating
suppliers from users (Kirzner, 1979). It should also be
noted that certain aspects of the process of innovation
have been approached from a neo-classical perspec-
tive of rational choice (selection of R&D-projects,
allocation of R&D-resources as a process of ratio-
nal choice). It is only when we combine innovation
and learning in the analytical perspective that we
 Editorial / Research Policy 31 (2002) 185–190
Table 1
The NSI-perspective is evolutionary and takes into account innovation and learning
Allocation
Rational choice Neo-classical economics
Learning Austrian economics
effectively transcend the limits of the neo-classical
paradigm.
For instance it is not reasonable to analyse a pro-
cess of learning and innovation without bringing
fundamental uncertainty into the picture. To do so
would boil down to the contradictory assumption
that learners already knew everything which could
be learnt in advance and that innovators knew all
possible outcomes of the process of innovation.
The NSI approach is also critical to derived dog-
mas about the general superiority of pure markets and
of maximum flexibility in the conditions of workers.
It reflects the assumption that innovation is rooted
in processes of interactive learning and interactive
learning does not thrive in pure markets. Especially
in labour markets, industrial relations and inter-firm
relationships, elements of ‘rigidity’ of long-term
non-market relationships involving authority, loyalty
and trust are necessary to make learning possible. The
pure market economy would if it could be reproduced
in reality get close to what Schumpeter defined as
a state of Circular Flow. Little learning would take
place, few innovations would be introduced and the
economy would be stagnant. It would definitely be
another world than modern capitalism.
1.3. On the importance of institutions
and economic structure
The focus on interactive learning evokes also the
important role of economic structure and institutions
in determining the rate and direction of innovative
activities. Institutions understood as norms, habits and
rules are deeply ingrained in society and they play a
major role in determining how people relate to each
other and how they learn and use their knowledge (see
the contributions by, respectively, Richard Nelson and
Coriat and Weinstein in this issue). In an economy
characterised by on-going innovation and fundamental
uncertainty the institutional setting will have a major
187
Innovation
Management of innovation
Evolutionary economics
impact upon how the economic agents behave and how
firms perform.
If institutions define how things are done and how
learning takes place it is the economic structure which
affects what is done, and therefore, what is learnt.
It should not be too controversial to argue that the
economic structure differs between countries. For in-
stance, international specialisation is at the very core
of neo-classical trade theory. What is important is that
the specialisation reflects advantages that have been
created by cumulative processes of learning rather
than ‘natural’ comparative advantages. The economic
structure and the pattern of specialisation will reflect
accumulated learning and at the same time it will be
a major factor in determining the direction of future
learning and innovation. This reflects the fundamental
assumption behind the system of innovation approach:
that interactive learning is rooted in routine activities
and that most search activities will be closely oriented
toward problems emanating from the existing set of
economic activities.
1.4. Do institutions shape structure or is it the
structure that determines the institutional set-up?
Among those who recognise that national differ-
ences exist some have argued that the differences em-
anate mainly from structural characteristics (Breschi
and Malerba, 1997). In principle, the composition of
the economy in terms of sectors or technologies may
explain completely the institutional differences bet-
ween countries. If this were the case a kind of revised
neo-classical history might be constructed. First,
countries became specialised in specific products—
reflecting for instance the relative scarcity of factors
of production and raw materials. Given the resulting
specialisation the institutional characteristics were
established.
Others have taken the opposite road and try to
demonstrate that the institutional set-up is a major
188 Editorial / Research Policy 31 (2002) 185–190
factor in determining the specialisation of the nati-
onal economy (Guerreri and Tylecote, 1997). They
try to predict the pattern of technological and sectoral
specialisation of the national economy by character-
ising it in terms of its institutional characteristics.
Both these perspectives may be partially right. On
the one hand it is reasonable to assume that the his-
torical pattern of specialisation which often had its
roots in access to natural resources has affected the
institutional set-up. Once this institutional set-up has
become established it is reasonable to assume that it
will attract those industries which are most compat-
ible with it. The two perspectives converge in their
emphasis of the fact that the two dimensions of the
innovation system are interdependent.
This interdependence is one reason why it is mean-
ingful to apply a system’s perspective. But some care
should be exercised to avoid simplistic functionalist
reasoning. As a matter of fact the main reason for
differences in performance between national systems
may be that the degree of matching between struc-
ture and institutions differ among countries (see the
contribution by Freeman). Institutions may be rooted
far back in social history and they might be slow to
adapt to the change in economic structure. Therefore,
one should not expect a one to one correlation and
the kind of analysis referred to above could have as
its most important outcome a better understanding of
why a complete matching does not appear and how
this affects the performance of systems of innovation.
1.5. Innovation systems and economic dynamics
One of the themes discussed in the paper by
Carlsson et al. and in the paper by Malerba is how to
define the limits of an innovation system. It is almost
trivial to say that the appropriate definition must
reflect the intentions of the use of the concept. In what
follows we will discuss the appropriate definition
under the assumption that the objective is to under-
stand the performance in terms of wealth creation and
sustainability of a national economy.
One of the most fundamental characteristics of the
innovation system approach is that it opens up for
understanding economic dynamics and socio-economic
development. At the same time it is important to reco-
gnise that economic performance may reflect more
or less dynamic capabilities. We may separate three
levels of dynamism that all have an impact on wealth
creation. First, the capacity utilisation, allocation and
the on-going reallocation of given resources as rela-
tive prices change are important for wealth creation
(neo-classical and Kirznerian dynamics). Second, so
will the introduction and diffusion of innovations and
the introduction and growth of new industries on the
basis of a given set of competences (Schumpeterian
and Penrosian dynamics). Third, one major outcome
of investment in knowledge production or of learning
processes is the creation of new competences and this
may be what determines performance in the very long
run (learning economy dynamics).
To analyse sectoral, technological and national sys-
tems along these lines may be useful. In some more
stable sectors and technologies (construction, transport
and retailing) neo-classical dynamics may be most
important while in the most dynamic (software and
knowledge intensive business services) the creation
of new competences are crucial for performance.
National systems may be more or less prone to sup-
port these different kinds of dynamics. The Japanese
model (cross-ownership, long term employment and
supplier contracts) promoted Schumpeterian and
learning economy dynamics in a more stable context
while the present US success in Hi tech seems to
reflect the combination of institutions that are more
successful in a context of accelerating rates of change
(high mobility in labour markets and venture capital).
1.6. National innovation systems
in the learning economy
The national innovation system approach gained
ground as empirical findings through the 1970s and
1980s revealed that innovations reflect a process where
feed backs from the market and knowledge inputs
from users interact with knowledge creation and en-
trepreneurial initiatives on the supply side. These rela-
tionships and interactions between agents involved
non-market relationships and they were presented as
organised markets with elements of power, trust and
loyalty (Lundvall, 1985). It was also demonstrated that
different national contexts offered disparate possibil-
ities for establishing organised markets. A series of
studies pointed, for instance, to the long term develop-
ment of selective inter-firm relationships in Japan and
contrasted them with the arm’s length relationships
 Editorial / Research Policy 31 (2002) 185–190
predominating in the Anglo Saxon countries (Dore,
1986; Sako, 1990).
The specific character of user–producer relation-
ships may still be seen as one of the factors that
structure and separate regional and national innova-
tion systems. The transformation of the economy to
a state with more rapid change points to a need to
supplement this perspective with one where human
resources and competence building in general comes
more into focus. The point is that in more and more
sectors firms are confronted with an increasing trans-
formation pressure reflecting the combined impact of
new technology, deregulation and the entrance of new
competitors at the global level. This transformation
pressure gives a premium to organisations that have
the capability to renew their competences. For firms
in the exposed sectors the alternatives are either to
move to a lower cost region and close down or to
enhance its competence building capacity. This can
be done by building competence in house, by hiring
competent personnel in the labour market or by en-
tering into closer and more intense and close network
relationships. This indicates that a system’s approach
to the performance of national systems needs to focus
not only upon network relationships but also on edu-
cation and training, the dynamics in the labour market
and the diffusion of new forms of organisation (with
learning organisation characteristics).
1.7. Benchmarking national innovation systems
Recently, there has been an explosive growth in
the interest for ‘benchmarking’ national economies
in different dimensions. The idea that there are more
or less efficient ways of organising innovation related
activities has been accepted in the European Union
and currently there are many different initiatives em-
anating from Bruxelles. The rational core of bench-
marking is that it promotes reflection on how you do
things and that you may be inspired by how it is done
elsewhere—it promotes ‘learning by comparing’.
On the other hand, the idea that there in specific
areas exist general ‘best-practise’ that ought to be dif-
fused to all other countries is unsound. The reason that
it is unsound is of course that what is ‘best’ practise
will depend on the context and that there are systemic
differences between countries. Therefore, a process of
successful policy learning and policy perfection needs
189
to combine bench-marking with insights of systemic
characteristics of national economies. What appears
as a good practise in one systemic context will often
prove to be less so in another.
The complexities of benchmarking may also be
stated in terms of the vocabulary on different orders
of dynamics introduced above. Some institutions and
practises may promote first order (neo-classical) dy-
namics, others second order dynamics and finally a
third type may support third order dynamics. Rather
than locating best practises there will be a need for
diversity in institutions and practises so that systems
strike a reasonable balance between the different
orders of dynamics.
To benchmark states of systems may also be less
interesting than to compare the dynamic properties of
innovation systems. One interesting exercise would
be to compare how national and regional systems ex-
posed to similar types of transformation pressure cope
with these given the constellation of institutions and
structure. Why did the Swedish and the Danish econ-
omy within a decade change place in terms of GNP
per capita (GNP per capita was 20% higher in Sweden
and now it is 20% higher in Denmark)? What forms of
transformation in terms of adjustment, innovation and
competence-building took place in the two systems?
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Esben Sloth Andersen∗
Bengt-Åke Lundvall, Henrik Sorrn-Friese
Copenhagen Business School, Aalborg University
Fibigerstraede 4, 9220 Alaborg, Denmark
∗ Corresponding
author. Fax: +45-98-156013
E-mail address: esa@business.auc.dk
(E.S. Andersen)