National Innovation Systems and Developing Countries: A Critical Review of Literature

Developed over the past three decades, the national innovation system concept (NIS) has been widely used by both scholars and policy makers to explain how interactions between a set of distinct, nationally bounded institutions supports and facilitates technological change and the emergence and diffusion of new innovations. This concept provides a framework by which developing countries can adopt for purposes of catching up. Initially conceived on structures and interactions identified in economically advanced countries, the application of the NIS concept to developing countries has been gradual and has coincided-in the MS literature-with a move away from overly macro-interpretations to an emphasis on micro- level interactions and processes, with much of this work questioning the nation state as the most appropriate level of analysis, as well as the emergence of certain intermediary actors thought to facilitate knowledge exchange between actors and institutions. This paper reviews the NIS literature chronologically, showing how this shift in emphasis, while offering insights to how new technologies are selected, developed, and diffused, has also diminished somewhat the importance of both institutions, particularly governments, and the process of institutional capacity building. In doing so, the paper suggests that more recent literature on intermediaries such as industry associations may offer valuable insights to how institutional capacity building occurs and how it might be directed, particularly in the context of developing countries where governance capacities are often lacking, contributing to less effective innovation systems, stagnant economies, and unequal development.