Since innovation is central to the success of firms in the 21st century, policymakers in many countries try to achieve sustained competitive advantage by promoting technological innovations. However, achieving this goal requires coordination of all actors in the economy including governments, industries, and national institutions. Although each individual actor has unique capabilities and strategic resources, how well the economy performs depends on the strengths of the network as a whole. National Innovation Systems (NIS) approach considers all these interdependent actors within a country to increase national competitiveness. A good example in this regard is South Korea, an innovation leader, which could be a role model for developing countries with its well-established NIS. This chapter studies the elements of the NIS of this country and compares them with that of an emerging economy, Turkey, by using data from the Global Innovation Index and the Global Competitiveness Index. The analysis reveals the strengths and weaknesses of Turkey and helps to draw concrete policy conclusions.
TopIntroduction
National innovation systems (NIS) approach depends on understanding the relationships between performers of innovation in order to promote economic development and growth (Freeman and Soete, 1982; Lundvall, 1992) and thus, has attracted the attention of both researchers and policymakers (Rakas and Hain, 2019). Innovation performers/actors include universities, firms, private or public research institutes, and the government. Unlike the linear model of innovation, the national innovation system is a very complicated and interrelated system (Figure 1). In knowledge-based societies, these actors contribute to achieving countries’ innovation performance targets. For example, universities conduct research, commercialize the results and also educate people. The role for the industry is to transform ideas and inventions. And finally, the government's role is to set policies and provide the necessary funding for investments (Wilson et. al. 2020).
Figure 1. Components of NIS (Adapted from Betz et al., 2016)
The core of the NIS consists of firms. In the wider setting, the education system, labor market, financial market, macroeconomic conditions, and government policies are included in the system since the performance of firms depends on these socio-economic conditions within a country (Lundvall, 1992). To understand the relationships between firms and institutions, Lundvall (2016) proposes a 4-step method. The first step involves analyzing the organizational structure and human resources in a firm with the consideration of sector specialization. In the second step, linkages of firms to each other (at both national and international level) and to knowledge infrastructure is analyzed. In the third step, characteristics of socioeconomic conditions that are peculiar to the nation are determined. The final and fourth step involves identifying the performance of the NIS based on firm organization and global network positioning.
South Korea is one of the leading performers of the NIS approach. In its development process, the country heavily invested in R&D, science, technology, and education. Today, the country is one of the world’s major economies. On the other hand, Turkey, which had similar levels of per capita gross domestic product (GDP) as that of South Korea in the 1980s, is still a developing country, with a per capita GDP of $9370 (Figure 2).
Figure 2. GDP per capita (current US$) (1960-2018), World Bank
For developed countries like South Korea, the NIS helps to maintain national competitiveness, while for developing countries like Turkey, the NIS approach can be used as a means of ‘catching up’ (Wilson et.al., 2020). Therefore, the purpose of this study is to examine the NIS of Turkey and South Korea in order to draw implications for innovation policy in Turkey.
To this end, we will use data from the Global Competitiveness Index (GCI) and the Global Innovation Index (GII) pillars to identify the strengths and weaknesses of Turkey in terms of its national innovation system. Our analysis reveals that macroeconomic stability, institutional quality (business environment, political stability, and safety), lack of innovation linkages and knowledge diffusion and are among the major weaknesses. As for strengths, Turkey is doing better than South Korea in terms of labor market policies, business dynamism (attitudes toward risk, willingness to delegate authority, FDI new inflows), and market sophistication (measured by applied tariff rates and complexity of tariffs).