Functional approach to national systems of innovation: The case of a small catching-up country

Although systems of innovation approach is gaining popularity among researchers and policy-makers, it is still rather difficult to apply this approach to specific policy settings and designs, because the approach is too general and does not provide many direct suggestions for building up an innovation system. It is often pointed out that in catching-up countries the innovation policy is not aligned with the specific circumstances of the innovation systems, but copies similar policies in more developed countries instead. This article finds by analysing the functional side of Estonian national innovation system, that the functions involving the provision of knowledge inputs and constituents of the innovation system, but also support services for innovating firms rather than demand-side activities are recognized by local policy designers. We suggest that by aligning the structure of the innovation system, more coherent logic of public-private co-evolution and better alignment of respective innovation policy measures should be followed. By looking at individual functions, it is clear, that the demand-side activities of innovation policy can be used more to enhance innovation activities in a more targeted way. More generally, we find that the functions that public sector performs in a national innovation system, should be designed and developed carefully in a balanced way, which is especially important for a small catching-up country, where the risk to create misalignments in the system is larger.