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Erik E. Lehmann and Julian Schenkenhofer

The pursuit of economic growth stands out as one of the main imperatives within modern economies. Nevertheless, economies differ considerably in their competitiveness. Theories on the endogeneity of growth agree on the value of knowledge creation and innovativeness to determine a country’s capability to achieve a sustained performance and to adapt to the dynamics of changing environments and faster information flows. To this effect, national institutional regimes shape nation-specific contexts and embed individuals and firms. The resulting incentive structures shape the attitudes and behavior of individuals and firms alike, whose interactions contribute to the accumulation and flow of knowledge among the nodes of their networks. National systems of innovation (NSIs) therefore embody a concept that aims to analyze the national innovation performance of economies. It rests its rationale in the variation of national institutions that shape the diffusion of technologies through the process of shared knowledge creation and the development of learning routines. Both public and private institutions are thought to interact in a given nation-specific institutional context that essentially affects incentive schemes and resource allocation of the involved economic agents in creating, sharing, distributing, absorbing, and commercializing knowledge. To this effect, public policy plays a key role in the NSI through building bridges between these actors, reducing information asymmetries, and providing them with resources from others within the system. The different actors contributing to the creation and diffusion of knowledge within the system are needed to exchange information and provide the engine for sustained economic growth. Universities, research institutes, companies and the individual entrepreneur are in charge of shaping their economic system in a way that resource and skill complementarities are exploited to the mutual benefit.


Scientific advance and innovation are major sources of economic growth and are crucial for making development socially and environmentally sustainable. A critical question is: Will private enterprises invest sufficiently in research technological development and innovation and, if not, to what degree and how should governments engage in the support of science, technology, and innovation? While neoclassical economists point to market failure as the main rationale for innovation policy, evolutionary economists point to the role of government in building stronger innovation systems and creating wider opportunities for innovation. Research shows that the transmission mechanisms between scientific advance and innovation are complex and indirect. There are other equally important sources of innovation including experience-based learning. Innovation is increasingly seen as a systemic process, where the feedback from users needs to be taken into account when designing public policy. Science and innovation policy may aim at accelerating knowledge production along well-established trajectories, or it may aim at giving new direction to the production and use of knowledge. It may be focused exclusively on economic growth, or it may give attention to impact on social inclusion and the natural environment. An emerging topic is to what extent national perspectives continue to be relevant in a globalizing learning economy facing multiple global complex challenges, including the issue of climate change. Scholars point to a movement toward transformative innovation policy and global knowledge sharing as a response to current challenges.