Developing Innovation Systems

Mexico in a Global Context

Mario Cimoli

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136547232
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

Mexico provides a case study of a cornerstone economy in the development of the hemospheric free trade zone in the Americas, an adjusting economy which has been integrated into uneven economies (Canada and the US). This volume examines the Mexican economy and its attempt to develop an innovation system, providing an example of the dynamics that are of concern to evolutionary economists.

CHAPTER ONE

Developing Innovation Systems

M. Cimoli

Introduction

Since it was recognized as an engine for economic growth in the 1940s, Mexican manufacturing industry has been growing under a regime of intensive protection. The orientation maintained a strong inward bias, at least until the 1982 financial crisis. In contrast, the more recent period has undergone a major shift in its orientation: the nation faced a ‘radical shock’ involving new economic reforms, in which the primary objective was to generate the conditions for faster economic growth and a new pattern of economic development. This ‘radical shock’ should provide an effective way to retool economic activities, by combining a favourable environment in terms of relative prices with an improvement in the incentives for technology upgrades. Since the beginning of this liberalization period, and combined with the further privatization of services, Mexican industry has experienced a profound structural transformation, and one of the major consequences has been a steady internationalization process that is based on an external performance which the nation had never experienced before.

At the present time, it is particularly difficult to evaluate the long-term effect of these policy instruments, since they were only created in recent years and were designed to influence phenomena of an inherently long-term nature. This situation is a sharp contrast with the sometimes very brief horizon for most macropolicies. Furthermore, the country's geographical position and its participation in the North American Free Trade Agreement (NAFTA) are extremely influential factors.

However, under these circumstances, the modes to adopt and diffuse innovation processes are causing a transformation towards a new pattern. Specifically, our aim is to understand whether the set of incentives that are responsible for Mexican exports’ increase in competitiveness has upgraded or, rather, downgraded local efforts in endogenous innovation. We are interested in the different modes of technological efforts and the learning capabilities in the manufacturing firms, as defined by research and development (R&D) efforts, linkages within the local productive and institutional networks, and the firms’ ability to solve both technical and organizational problems.

Today it is generally accepted that a society's economic development is based on its capacity to generate and absorb innovation processes. New approaches assert that innovation has to be considered and defined as an interactive process in which firms almost never innovate in isolation. In this context, strategic alliances and interactions between firms, research institutes, universities and other institutions are at the heart of this analysis. In fact, innovation is seen as a social process that evolves most successfully in a network in which there is intensive interaction between the suppliers and buyers of goods, services, knowledge and technology, including the public sector organizations that promote knowledge infrastructure, such as universities and government agencies that produce knowledge. A great deal of empirical research supporting this view has developed since the 1980s.

The steps leading from innovation towards a more aggregate analysis are numerous and complex. The concept of a national innovation system (NIS), as explained by Nelson (1993), consists of a set of institutions whose interactions determine the innovative performance of national firms (whereby innovative activity is broadly understood as inclusive of all the processes by which firms master and put into practice product designs and manufacturing processes that are new to them). In order to capture differences in development between countries, a schematic representation of the NIS and its interplay with economic performances is introduced here (de la Mothe and Paquet, 1996; Cimoli and della Giusta, 2000). The purpose is to carry out a comparative analysis of the ‘goodness’ or ‘badness’ of the NIS in terms of the main implications involved in specialization and economic performances, as shown through different scenarios characterized by perspectives dealing with catching up, falling behind and forging ahead (Cimoli and de la Mothe, 2000).

The systematization of the NIS presented in the following pages allows us to pursue two different directions. On the one hand, we can identify a representation in which the main threads that link technology, institutions and economic performances may be organized and described. On the other hand, and in relation to a broader set of approaches that search for a framework in which the mechanisms that support technical change and innovation can be understood, there exists the possibility for governments to form and implement policies in order to influence the innovation process. By analysing the linkages from micro studies on innovation to a broad aggregate system, we propose a concept and representation of innovation systems – (macro, regional, sectoral and micro levels) – with a view to empirically capturing some components of the Mexican innovation system. In this introductory chapter, the first section describes technological capabilities and production capacity in the development process. The next section reviews the theme of the national innovation system in the context of developing economies. The final section provides a model of integration for the Mexican innovation system through four different dimensions: temporal, technological, institutional and different aggregation levels. As part of this section, the organization of the book is described.

Technological capabilities and development process

During the past three decades, developing countries have displayed increased technological dynamism, which is associated with the subsequent development of their industrial structures; thus, some significant technological progress did indeed occur in the new industrialized economies (NIEs). The evolutionary path of technological learning is related to both the capacity to acquire technologies (capital goods, know-how, etc.) and the capability to absorb these technologies and adapt them to local conditions. In this respect, we now have a good deal of micro-technological evidence highlighting the mechanisms that stimulate and limit endogenous learning in the NIEs. A number of empirical studies describe the increased technological accumulation which has matured in some NIEs during the past three decades; in fact, some of them even have become exporters of technology (see Katz, 1984, 2000; Teitel, 1984; Teubal, 1984; Lall, 1987; Kim, 1999).

In order to understand the steps by which development process takes place, a distinction between production capacity and the accumulation of technological capabilities has to be made. Production capacity is associated with the development of the industry and its sectoral composition in terms of GDP participation, specialization and employment in manufacturing activities. Technological capabilities are the resources needed for the generation and management of technological change, the acquisition of embodied technology and labour skills, the management of organization and the assimilation of knowledge.

Analysis of the increase in the NIEs’ technological capabilities has revealed the crucial role of certain ‘core technologies’ (in the past, electricity and electrical devices; nowadays, also information technologies) which play an essential role as sources of technological skills, problem-solving opportunities and improvements in productivity. These core technologies determine the overall absolute advantages or disadvantages of each country, in that they also imply infrastructures and networks common in a wide range of activities (electricity grid, highway system, telecommunications and, more recently, the information network). Moreover, some patterns appear to have formed, albeit rather loosely, in the industrialization process and in the development of a national production capacity, and these patterns explain how technological capabilities are acquired and upgraded. For example, practically every country starts with the manufacturing of clothing and textiles, and possibly natural resource processing; and, in turn, the nation moves on – if it does – to more complex and knowledge-intensive activities. A recent statement of that rationale is as follows:

Even at today's advanced stage, the competitive advantage of East Asia's latecomers is low-cost, high-quality production engineering, rather than software or R&D. Although the NIEs are increasing their investments in science and advanced technology, they remain conspicuously weak compared with Japan and other OECD countries.

Also in contrast with leapfrogging, much latecomer learning took place in a field which could be described as pre-electronic: mechanical, electromechanical and precision engineering activities, for example. Competencies tended to build upon each other incrementally, leading to advanced engineering and software. Firms tended to enter at the mature, well-established phase of the product life cycle, rather than at the early stage, again contrary to the leapfrogging idea.

The policy implication of this finding is that to build an electronics industry, local firms require human resources trained in a range of basic craft, technician, engineering and industrial skills, rather than the software and computer-based skills normally associated with information technology. Like the NIEs, other developing countries should take very seriously the low-technology side of so-called high-technology industries. Only by developing capabilities in fields such as plastics, mouldings, machinery, assembly and electromechanical interfacing, did East Asia emerge as the leading export region for electronics. (Hobday, 1995: 200).

Thus, in general, it is possible to identify a pattern of development that evolves as sectors emerge, according to the technological complexity and direct investment requested. We do not at all suggest that there is any invariant sequence of industrial sectors which account for the upgrading of national technological capabilities. However, one might still be able to identify some rough sequences in the predominant modes of technological learning. In this respect, the taxonomy of the sectoral patterns for the acquisition of innovative knowledge suggested by Pavitt (1984) is a good – albeit somewhat theoretically fuzzy – point of departure. Pavitt identifies five sectoral patterns which allow the derivation of industry-specific models for technological change:¹ the supplier-dominated sector (agriculture and traditional manufacture), the scale-intensive sector (consumer durables, automobiles, civil engineering and bulk materials), the information-intensive sector (finance, retail, publishing and travel), the science-based sector (electronics and chemicals) and the specialized suppliers (machinery, instruments and software). In the supplier-dominated and information-intensive sectors, the main sources of technical knowledge are located outside the firm. In the science-based sectors, the main sources of technical advance are in-house R&D and basic science; in terms of the discussion presented in this section, the science-based sector can be characterized as being of the late Schumpeter-type (science-push and anticipated demand). The scale-intensive sector, which is characterized by continuous processes, finds its main sources of technology in production engineering, production learning, suppliers and design offices, whereas design and advanced users are the sources for specialized suppliers; both sectors are characterized by conservative and very incremental processes and can be described as being closer to the Schmookler-type (demand-driven).

In the broadest sense, it is important to bear in mind that it is not possible to formulate a general theory for technical change based exclusively on the technology-push or demand-pull models. From this brief summary of the main characteristics of innovation it is perhaps already possible to understand how certain components of technology do not make it feasible to apply definitions that would be appropriate in all sectors, industries and firms. The demand-pull and technology-push explanations include elements which permit the description of specificities of innovative processes in certain sectors, or during certain periods in the historical dynamics of technology. In these cases, one model prevails over the other, depending on the circumstances (Cimoli and della Giusta, 2000.) For example, Walsh's (1984) analysis on the changes in innovation during the developmental stages for two chemical industry subsectors confirms the general sectoral characteristics included in Pavitt's taxonomy, as well as the specificities of the subsectors’ evolution. Plastics seem to have, at first, followed an early-Schumpeterian pattern, in that the first goods primarily were developed through inventors’ entrepreneurial activity; later on, however, science and anticipated demand in large corporations played a major role, following the late-Schumpeterian model. Analysis of patents in dyestuffs, on the contrary, produces conflicting results if either a solely quantitative, or a qualitative analysis is performed. When only quantitative analysis is carried out, a demand-pull model seems to emerge; in contrast, when a qualitative analysis is conducted, an early-Schumpeterian pattern is evident again.

More generally, despite the difficulties in describing the intermediate steps that relate to industrialization, production capacity and technological capability, a comprehensive pattern can be traced. The initial stage in the development of a manufacturing sector is led by the supplier-dominated and specialized supplier sectors, since activity is related to the transfer of foreign technology and various forms of incremental learning take place (use of equipment, development of engineering skills in machine and product adaptation and manufacturing). A second stage is related to the emergence of scale-intensive industries, which have new technological efforts focused on creating a technological synergism between production and use of sets of innovations (which gives rise to horizontal and vertical integration); the adoption of technologies is associated with the exploitation of static and dynamic economies to scale; and, finally, the development of formal R&D occurs and is a complement to informal learning. The final stage is that in which a science-based sector is created, and the knowledge base is exploited economically through formalized research efforts; R&D is the typical learning mechanism.

Among these sectors, input–output linkages and knowledge flows give rise to a wide set of externalities and interdependencies that are based upon common knowledge bases, complementarities and technological spillovers. Such non-negotiable or non-tradable technological flows are essential not only for the technological development of the enterprises involved, but also for the nation's entire industrial development in general. Specialized suppliers produce product innovation and capital inputs for the other sectors, whereas through the production of components and materials the science-based sector generates positive effects which are propagated throughout the whole system. All these linkages are fundamental for industrialization, in particular those which establish themselves between the most innovative and the traditional and natural resources-based sectors. Applications of this type of taxonomic dynamic analysis to the cases of some Latin American and Southeast Asian countries can be found in Katz (1984), Cimoli (1988) and Bell and Pavitt (1993a).

The firms and sectoral learning patterns, however, clearly form part of broader (‘macro’) conditions that exist at the regional and national level, such as those defining the educational system (Cimoli and Dosi, 1995; Hobday, 1995). For example, in ‘supplier-dominated’ and ‘specialized supplier’ sectors, a significant role is played by the levels of the labour forces’ literacy and skills, as well as the skills and technical competence of engineers and designers in the mechanical and (increasingly) electronics fields. In scale-intensive sectors, the existence of managers capable of efficiently running complex organizations is also likely to be important. In science-based sectors, the quality of higher education and research capabilities is obviously relevant. In particular, the role of technology transfer as a source for the local technological accumulation has been extensively investigated: increasing technology flows towards developing economies have taken place, with a special emphasis on Asian countries. The development of technological capabilities, which is at the centre of the industrialization processes, is related to both the capacity to acquire technology and the ability to absorb and adapt it to the local environment. By looking at the nature and direction of learning at the level of companies, it is possible to identify a few major activities through which such learning takes place. In particular, the modification of an adopted technology entails learning how to develop an adequate production capacity and how to adapt it to the local specificities; through these processes, incremental innovation takes place, and, moreover, a specific pattern of technical change begins to take shape.

Knowledge accessibility and local absorption

The perception that the patterns of technological accumulation described above are assuming a new path emerges fundamentally from the changing nature of the world economy. In order to begin to understand the complex nature of innovative activity, it is useful first to summarize some stylized facts concerning innovative activity. Scientific inputs have become increasingly important in the innovative process, and R&D activities have become more complex; therefore, it is necessary to adopt a long-term perspective in planning innovative activities within firms. Likewise, there are a number of studies that correlate such R&D efforts with innovative output, for various industrial sectors (in which market and demand changes do not exhibit significant correlation). Another stylized fact that has emerged is the importance of innovation generated through learning-by-doing, as embodied by people and organizations. In terms of the nature of the innovation process, an intrinsically uncertain vision prevails over the assumption of known ex ante fixed sets of choices. However, this does not imply that technical change occurs randomly: the direction of technological change is determined by the state-of-the-art technologies and, at the level of firms, by the tec...

Table of contents

• Front Cover
• Half Title
• Science, Technology and the International Political Economy
• Title Page
• Copyright
• Contents
• List of Figures
• List of Tables
• List of Contributors
• Acknowledgements
• 1. Developing Innovation Systems
• Part I: Macroeconomic Setting, Production System and Globalization of Technology
• Part II: Institutional Infrastructure and Networks
• Part III: Sectoral and Regional Innovation Systems
• Bibliography
• Index