Determinants of National Innovation Systems: Policy implications for developing countries

Abstract

The importance of National Innovation Systems (NIS) for the economic performance of a country is widely acknowledged. In order to close the development gap, it is crucial for developing countries to identify the degree to which knowledge institutions, governments and business corporations determine NIS and deduce relevant innovation policies from this. We model and estimate their relationship from a network perspective for NIS of 46 developed economies and emerging markets at the macro level using secondary data from a series of international measures. We find that, while the structural dynamics of knowledge management, decision-making, government-business relations and the market are crucial to NIS behaviour, overall innovation in this context is dominated by market forces. This implies developing economies should focus on establishing an institutional environment that supports markets and market transactions which, subsequently, supports the domestic NIS and economic growth.