Innovation In Organizations That Stems From `The Concept Of `National Systems Of Innovation`
The vicissitude in human wants and the desires to progress in ways of conducting their activities has brought about the need to embrace constantly means to bring about innovation in technology and pattern of operating a business concern. The concept on National System of Innovation (NSI) has to do with a collaborative effort between organizations in the public sector and their counterpart in private sector to form a network in bringing initiatives that would culminate into innovative technologies.
According to Freeman (1987), who first used the concept in published form, he defined National System of Innovation as “…the network of institutions in the public and private sectors whose activities and interactions initiate, import, and diffuse new technologies”.
NSI, thus includes those political, social, economical, cultural, organizational and institutional factors that promotes innovation and its utilization (Edquist, 1997: 14, cited in Edquist 2003: 4).
For National System of Innovation, theories have being amply utilized in bringing about innovation creativity as pertaining to national dimension. Theories are abstractions from the real world to give and show the existing relationship between or among a variables or a given phenomenon. Thus, they are as map used in showing the direction of the known from the unknown. In social sciences, scholars had propounded diverse theories in explaining different social different situations. However, other methodologies had being utilized for NSI, other than theoretical approach.
These include empirical case studies approach, while other focus more on research and development system (Edquist 2003). Outside the National System Innovation, there are other genres of innovation development pertaining to sub political geographical sector, example the Regional System Innovation, and Local System Innovation. System Innovative concept could be categorized into product innovations and process innovations. Product innovations embrace new or better product or services, both in material form and intangibles.
While, process innovation entails new ways of producing goods and services. Both system innovation concepts maybe technological or organizational based. Giving an illustration on the usefulness of National System Innovation Freeman (1987), explains that Japanese industry and innovative performance, during its post war era is linked on the competence of its national system to direct resources to innovation and investment in new strategic activities. Lundvall (1998) used three central points to distinguished economics of innovation with the neoclassical mainstream economies.
Firstly, economic of innovation focus more on change, while the neo classical economics is mostly central focused. Secondly, the neo-classical economies have general validated theory; while economics of innovation is an open approach that has united theory. Thirdly, agents of change with diversity of variables are central to neoclassical economies, while economics of innovation evolutionary mechanisms are fundamental.
This write-up will be specific in analyzing a segment of National System Innovation that pertains to economy geography, i. . industry agglomeration. BACKGROUND TO AGGLOMERATION OR SPATIAL CLUSTERING THEORY Agglomeration as a concept entails the clustering of people or the concentration of economic activities in an area. This concept according to Malmberg & Peter (2001:3) has two angles to it. Firstly, the spatial concentration of people in an urbanized area brings about gains from urbanization economies. “Agglomeration economies in this sense accrue from the geographical propinquity of industries and services in general” (Maskell 2001:2).
Secondly, the advantages ascribed to localization of industries (Industry agglomeration) is numerous in terms of having adequate labour skill, reduced raw material sourcing, technology and infrastructure improvement, having access to subsidiary firms services, competitive advantage inter-alia. Firms agglomeration goes a long way to improve the profitability of firms by reducing their costs of exchange of both goods and information (Appold 1995, cited in Malmberg & Maskell 2001:9)
Maskell (2001:3) explains that locational economies embrace those economies that arise from the geographical agglomeration of related economic activities. Thus, spatial clustering has to do with the concentration of similar firms in the same industry in a locality. This is what the agglomeration theory or clustering theory entails; that is, it is based on classical issues pertaining economy geography. Literatures on clustering theory have two source of knowledge.
This based on ideographic work that has to do with historical origin, and the other is on the development of different typologies of localized clusters that gives advantage to localized firm in form of cost reduction. The ideographic historical approach tries to capture the historical origin and trace the evolution of localized clusters. According to Malmberg & Maskell (2001:4), the knowledge base of ideographic historical approach originate from the event or action which prompted succeeding developments, which sometimes turns out to be related to some more or less traditional factor of location.
The activity leading to localization of firms comes from the development in a geographical location, which results in successful economic activity that is accomplished by related subsidiary or supplementary services from similar firms. Furthermore, another reason for the development of clustering is adduced to the fact that firms tend to maintain their location, especially when they are deeply rooted in such areas. This prevents their relocation. According to Ross (1896), cited in Malmberg & Maskell (2001:5), “The power of a locality to hold an industry greatly exceeds its original power to attract.
The new locality must not only excel the old, but it must excel it by margin enough to more than offset the resisting power of the matrix”. The cost reduction approach gives an explanation to those identified static advantages that is accrued to firms located in close juxtaposition to similar and related firms. This is analysed and weighed in line with the state of firm in isolated location. Geographical space and localization of industry has in the past being amply researched.
Scholars noting the role of localization of industry in the effective operation have approached the study of spatial clustering from different dimensions, which include general organizational strategic approach, production process in firms, or analyzing industrial agglomeration from the role of local firm in the globalizing world economy. In innovating new concept or cluster theory, some principles need to be followed. This will go a long way to validate the theory. According to Maskell (2002:14), first such theory should at least have explanation for the existence of the cluster.
Secondly, the cluster theory must include an explanation for the growth of the cluster. Thirdly, such theory should be validated on its ability to identify the boundaries of the cluster by identifying the rationale behind clustering of some economies activities against the integration of other economies. The importance of clustering has being linked up to high tech industry and to knowledge based industries. The need for development of innovation in the agglomeration theory is the vast uncoordinated and unified theories by early classical scholars on this field. A KNOWLEDGE-BASED THEORY SPATIAL CLUSTERING
Malmberg Anders and Maskell Peter (2001) developed a theoretical approach in analyzing industry agglomeration, otherwise referred to as spatial clustering. The development of innovative in spatial clustering for these scholars came against the background of their criticisms against the lack of unified theoretical structure adequate in analyzing spatial clustering. Besides these, numerous theoretical concepts on spatial clustering have a sharp contrast with the general lack of work aiming to validate empirical mechanism for spatial clustering, as found in work of scholars on this concept.
As a way to find a solution to the lack of unified theoretical structure for industry agglomeration, the innovative work of Malmberg and Maskell (2001) “investigates the nature of cluster from a knowledge creation or learning perspective”. In this regard, they argue that there should be a need to put in place specific theory of cluster through learning as the major focus. Thus, two significant component of this knowledge-based spatial clustering is that there must be an explanation for the existence of the clustering, and an explanation of the internal organization’s structure.
The knowledge-based theory on agglomeration arises from the relations that exist between firms in a cluster setting, in such case this relationship stimulates and encourages the exchanges of information and knowledge. The competition among firms in the same industry tends to prompt the processes that create changes and flexibility, which results in organization learning, and the strategizing to bring about innovation in operations of the firms. This invariably leads to the adoption of new technology resulting from changes in business operations.
According to Alvsatm (1998), cited in Malmberg and Maskell (2001) the impact of spatial clustering on the learning and innovation prowess of firms and economic geography have in contemporary times pose a useful way to harness the interactions between scholars of social science in their study of firm competitiveness their learning process and innovation. The difference of the knowledge-based cluster theory, from other from of agglomeration theory, is in its position on the vintage point of upholding the long-term competitiveness among firms.
This is determined by the theory ability to capture innovation and engages its processes in continuous learning. Other previous agglomeration theories have taken the part of historical exploration and others the advantages in localization of firms. Spatial closeness of firms have being seem to encourage and make it easy for knowledge spread out and interaction which form the basis for innovation and learning. This creates a context that makes enable analyses for spatial clustering.
The criticism on other clustering theory is the difficulties they have in attempting to identify explicitly, empirically and theoretically, the localization economies that account for the existence of clustering. “…they do not contain any theory specifying how the territorial configuration of many co-localized firms in related industries would be able to create knowledge in ways not equally available” (ibid). The development of innovation through clustering theory is argued against in its inability to commence its analyses through identifying how knowledge is shares and how technology is transferred to encourage firms’ competitiveness.
Another shortcoming of cluster theory is in its lack of systematic effort to examine empirically the actual mechanisms outlining the enormity of localization economies. Past efforts have based their empirical study on case study. The problem here is intensified by the fact that biased selections of case study are conducted, which is based on high tech industries and on regional successes of clustering of firms. Furthermore, the elusive nature of former theory on the concept of localization of firms gives the knowledge-base theory a plausible stand.
The innovation in knowledge-base spatial cluster theory, as purported by Malmberg and Maskell (2001) is to make the theory more satisfactory in brining better explanation to spatial clustering than previous theories. As Maskell (2001b), argued a reasonable theory of spatial clustering must include a clarification for the presence of the cluster. In this case, it should specify the processes that prompt similar firms to cluster in a particular area. A theory must contain explanation for the internal organization of cluster.
Furthermore, an explanation should be given for those advantages that are accrued to firms concentrating as cluster in a particular location. Finally, the theory should be dynamic in such a way that it encompasses the eventually rationale for decline in the success of clusters. The knowledge-based spatial cluster theory for it implementation to be useful dispersed knowledge need to be gathered and reassembled for learning among the clustered firms.
This should be subject to prior to the period before knowledge-bases of firms has grown enough outside the interaction to implement learning, and the ceiling period when cognitive distance becomes very large for firm to collapse together. “The innovative capabilities of firms are enhanced because co-location can provide them with an arsenal of instruments to obtain and understand even the most subtle, elusive and complex information of possible relevance developed because they were separate firms pursuing their individual agenda” (ibid).
The point of departure of knowledge-based agglomeration theory from the other theories is that other theories focus primarily on the formal institutional structure, cultural and linguistic aspects of firms in a cluster setting. The knowledge-base theory focuses on the business transactions between related firms, and through this, accurate analyses based on information from these transactions are generated.
The reliance on ordinary analyses based on institutional structure such as cultural and linguistics aspects of firms’ concentration this will be good for a local innovative system learning process. However, the exchange of information and ideas associated with the frequent contact and learning derived from business transactions will be a right basis for creating new ideas and innovation. The thrust of the knowledge-base agglomeration theory argument is that spatial clustering should play down on cost efficiencies in favour of concentrating on ways in which clustering enhances knowledge creation.
This is a departure from the research argument on spatial clustering, where it highlights the implication of propinquity and distance, institutional structure and local setting on economic processes. RELATIVE SIGNIFICANT OF KNOWLEDGE-BASED AGGLOMERATION THEORY TO SPATIAL CLUSTERING FIELD The knowledge-based theory is widely adopted in recent research on spatial clustering and economic geography on agglomeration. According to Dahl (2001), the conception of knowledge has strong impact on the connection between innovation and geography.
This is because of the social interaction that is germane in knowledge dissemination that is important knowledge in innovation process. Firm’s agglomeration is thus, link to their quest to access tacit knowledge in specific areas. Knowledge creation process can be accessed through planned resource generating institutions, such as education system, universities, public research centres, and research and development department in firms. Secondly, knowledge is generated through firm learning processes in firms. Learning forms an important feature in innovation process.
This attribute the significance the knowledge-base theory is in National System Innovation, as pertaining deriving the economic benefit of firm’s agglomeration. “A significant amount of innovation and improvements rely on individual learning process or learning by using processes from firms” (ibid). The difficulty associated with transferring knowledge from a firm to another, requires face-to-face interactions for knowledge transfer to be effective. This is a reason why firm concentrate and cluster in an area for exchanges and knowledge gaining.
Thus, this result in clustering firms who are in competitions and their suppliers in a location. Getting information on ways an organization rivals operate tends to give the organization the means to formulate strategy to make it compete favourably in the industry it operates. Firms that are located somewhere else may be tempted into relocating to another area where it perceive it has the advantage of getting better access to local based knowledge or supply or customers (Maskell & Kebir 2001).
Knowledge based theory in clustering is also significant in the sense that it promotes national growth through research and development utilized for planning in information derived from firms operations within a clustered location. Technology- based firms locating in geographic proximity have utilized the advantage in localization to higher educational institution to benefit from technology transfer and spill over which culminate in economic growth for the region (Audrestsch 1998 et al, cited in Biron & Malone 2007).
Knowledge spillover is a part of firm agglomeration that makes the phenomenon beneficial in the exchange of knowledge. Efficiency of firm in a clustered relationship has being linked to knowledge spill over. The growth of firms in an agglomerated setting leads to backward and forward linkages as advantages derived from the consolidated workforce with specified skills and knowledge spillovers (Athreye, 2000). The knowledge spillovers may come in form of sharing of information on new technologies in informal meetings among staffers of different organizations in the same locality.
Thus, the knowledge-base cluster theory has significantly given explanation to the existence of cluster, its extension, and exhaustive argument on firms’ agglomeration. CONCLUSION National System Innovation is a process of developing innovative pattern of operating in a state. There are regional and local versions of system innovation. Looking at the agglomeration theory, it is perceived as a theory that goes to show how clustering of firms tends to bring about economic development and internal development for the firms.
However, the uncoordinated and ineffective way of explanation the existence, extension and arguments on the concept lead to the innovation of another method of analysing agglomeration of firms. The previous economic innovations and the historical and cultural trace of analysing spatial cluster in firm has being criticised based on the aforementioned criticisms ambiguities, unifies theoretical structure. The knowledge-base theory, as an innovation in the traditional and classical method tends to give explicit explanation to clustering through the exchanges of information among firms in a clustered stetting.
This comes in the study of business transactions among firms that result in knowledge spill out. This knowledge spillouts usually does not only take place in formal meetings but through informal interactions among workers of different firms in the same locality. Knowledge-base cluster theory tends to show how firms in a cluster environment operate and compete through learning processes derived from the agglomerated existence.