Innovation, Growth, and Co-ordination Through Institutions: A Discussion on ‘Innovation Systems’

The aim of this paper is to discuss the recent emphasis on national and local systems of innovation. First, it argues that both concepts contribute to the understanding of the various ways in which institutions support innovation and growth. One can consider the literature on national systems of innovation as a kind of ‘top-down’ approach wherein national institutions have a predominant role in supporting innovation processes. Conversely, local systems of innovation can be considered as a kind of ‘bottom-up’ approach emphasizing the role of decentralized institutional initiatives aimed at supporting innovation processes. Second, such ‘alternative’ approaches highlight the relevance of institutional arrangements in favouring suitable growth regimes, suitable in such cases being related to the establishment of incentives able to maintain co-ordination failures in an acceptable viability corridor in order to ensure long-term growth. As a consequence, it will be argued that the interest in this concept of innovation system essentially lies (1) in the specific interplay between firms and institutions, which defines the frontiers of a specific innovation system (whatever its geographical dimension), and (2) in the role that those institutions play in favouring relationships between a given system and its external environment.