Innovation systems and the competitive process in developing economies

There is a very real sense that in the aftermath of the limited success of the development paradigm (recipe) of the Washington consensus based on the pillars of liberalization, privatization and deregulation, new and challenging thinking and analysis need to be brought to bear on the problems faced by developing countries. While sound macro policies and low inflation are undoubtedly important precursors to self sustainable growth, they are not in themselves sufficient to deliver development. We argue that if development is a matter of self transformation arising from within an economy, then innovation must play a central role in the process and so to must the capacity for an economy to develop, integrate and adapt to novelty. This is at the core of the concept of self sustaining development and indeed why development is an emergent phenomenon. Thus the key questions for policy makers are: How can a transformation of innovation performance be achieved in a competitive international economy? What are the appropriate policy instruments? What role is there for universities? What stimuli can be given to entrepreneurial action? We explore these in terms of a critical evaluation of the idea of innovation systems and of the nature of innovation policy appropriate to innovation based development. (C) 2007 Board of Trustees of the University of Illinois. All rights reserved.