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Livro GLOBALIZAÇÃO E INOVAÇÃO LOCALIZADA: EXPERIÊNCIAS DE SISTEMAS LOCAIS NO MERCOSUL Disponível para download em Innovation systems: city-state, national, continental and sub-national Chris Freeman 1. INTRODUCTION This paper discusses variations over time in rates of growth of various economic regions and the extent to which these variations may be attributed to innovation systems. There has been a rapidly growing literature on this topic during the 1990s (see, for example, Lundvall, 1992; Nelson, 1993; Mjøset, 1992; Villaschi, 1993; Humbert, 1993; Freeman, 1996; Burger and Dore, 1996; Reinert, 1997). Much of this literature (see especially Hu, 1992; Porter, 1990; Patel, 1995; Wade, 1996) insists on the central importance of national systems but a number of authors have argued that globalisation has greatly diminished or even eliminated the importance of the nation-state (notably Ohmae, 1990). Other critics have stressed alternatively (or in addition) that sub-national entities, such as provinces, industrial districts, cities or Silicon Valleys are becoming, or have already become, more important than the nation-state (see, for example, debresson, 1989, 1991). Unfortunately, at least in the English language, the same word Regional is often used to describe two entirely different phenomena, viz: 1) Geographical areas embracing several nation-states and even entire sub- Continents the Pacific region, East Asia, Eastern Europe, Central America, etc. etc. 2) Geographical areas which are smaller sub-divisions of nation-states, e.g. states, urban areas, countries, rural areas, etc, etc. This can be a source of confusion, so for this reason, this paper refers to the wider areas as Continental or sub-continental and the smaller areas as subnational. 109 The inter-continental variations in growth rates are indeed very wide, as illustrated in Table 1, but the variations between countries have of course been even wider. In particular, a group of countries, today referred to as developed or industrialised drew far ahead of the rest of the world (later known as underdeveloped ) during the last two centuries (Table 2, Columns 5 and 6). Abramovitz (1986) coined the expression social capability to describe that capacity to make institutional changes which led to this divergence in growth rates. He was himself one of the pioneers of growth accounting but, as he cogently pointed out, the accumulation of capital and increase in the labour force are not in themselves sufficient to explain these varying rates of economic growth. The huge divergence in growth rates which is so obvious a feature of long-term economic growth over the past two centuries must be attributed in large measure to the presence or absence of social capability for institutional change, and especially for those types of institutional change which facilitate and stimulate a high rate of technical change, i.e. innovation systems. As we shall see, attempts by Krugman (1994) and others to go back to the quantitative accumulation of capital and labour as the main explanation of the East Asian Miracle are very unconvincing. Institutional changes were essential for the accumulation of capital itself. Many historians and economists had of course always emphasised the importance of technical and institutional change, as for example, Landes (1970) or Supple (1963). Indeed, going back to the early development of economic theory, Friedrich List (1841) had strongly criticised Adam Smith and other classical economists for what he perceived as their neglect of technology and skills. In fact, Adam Smith did recognise the great importance of science and technology but did not consistently give it the prominence which List thought that it merited. The main concern of List was with the problem of Germany catching up with England and for underdeveloped countries, (as the German states then were in relation to England), he advocated not only protection of infant industries but a broad range of policies designed to make possible or to accelerate industrialisation and economic growth. Most of these policies were concerned with learning about new technology and applying it and many of them were applied in catching up countries over the next century and a half (see Section 5). After reviewing the changing ideas of economists about development in the years since the Second World War, the World Bank (1991) concluded that it is intangible investment in knowledge accumulation, which is decisive rather than 110 physical capital investment, as was at one time believed (pages 33-35). The Report cited the New Growth Theory (Romer, 1986; Grossman and Helpman, 1991) in support of this view but the so-called New Growth Theory has in fact only belatedly incorporated into neo-classical models the realistic assumptions which had become commonplace among economic historians and neo-schumpeterian economists. Indeed, it could just as well have cited Friedrich List (1841), who in criticising a passage from Adam Smith said:... Adam Smith has... forgotten that he himself includes (in his definition of capital) the intellectual and bodily abilities of the producers under this term. He wrongly maintains that the revenues of the nation are dependent only on the sum of its material capital. and further: (page 183) The present state of the nations is the result of the accumulation of all discoveries, inventions, improvements, perfections and exertions of all generations which have lived before us: they form the intellectual capital of the present human race, and every separate nation is productive only in the proportion in which it has known how to appropriate those attainments of former generations and to increase them by its own acquirements. (page 113) List s clear recognition of the interdependence of domestic and imported technology and of tangible and intangible investment has a decidedly modern ring. He saw too that industry should be linked to the formal institutions of science and of education: There scarcely exists a manufacturing business which has not relation to physics, mechanics, chemistry, mathematics or to the art of design, etc. No progress, no new discoveries and inventions can be made in these sciences by which a hundred industries and processes could not be improved or altered. In the manufacturing State, therefore, sciences and arts must necessarily become popular. (page 162) 111 The recent literature on national systems of innovation could be described as an attempt to come to terms more systematically with these problems of social capability for technical change. List s book on The National System of Political Economy might just as well have been entitled The National System of Innovation since he anticipated many of the concerns of this contemporary literature. The main purpose of this paper is to discuss the relevance of systems of innovation to economic growth rate over the last two centuries. A long-term historical approach is essential for this purpose because of the very nature of technical and institutional change. The enormous gaps between different parts of the world took decades or even centuries to open up and the efforts to close them have also taken many decades. The analysis starts with the case of Britain in the eighteenth century because Britain was the first country to open up a major gap in productivity, in technology and in per capita incomes, compared with all other nations and city states. However, before turning to the British industrial revolution in Section 3 this paper first discusses the differences between the city state innovation systems of Renaissance Italy and the British national system. The British case is discussed at some length both because it was the first and also because it serves to introduce some basic problems in the theory of innovation systems - notably the complementarity (or lack of it) between various sub-systems of society: science, technology, economy, politics and culture, and the complementarity between national and sub-national systems. The British slow-down and falling behind in the 20th Century also illustrates the relative rigidity of some organisational structures compared with informal institutions, a point emphasised by Edqvist (1997a and 1997b) in his thorough review of national systems theory. Following this discussion in Sections 2 and 3, Section 4 then takes up the second major example of a national system forging ahead of the rest of the world - the case of the United States in the second half of the nineteenth and first half of the twentieth century. The remainder of the paper then discusses the innovation systems of catching up countries, which have been discussed by Viotti (1997) in an excellent dissertation as learning systems. He makes an interesting distinction between active and passive learning systems and applies this distinction to the example of Korea and Brazil, an example which is reviewed in Section 5. A very different example was that of the former Soviet Union and other East European countries which were catching up in the 1950s and 1960s but falling behind in the 1980s and 1990s. This case is reviewed in Section Finally, the concluding Sections of the paper speculate about the possible course of events in the next century, taking up the question of globalisation and convergence and drawing some conclusions about the role of innovation systems in future economic growth. 2. CITY-STATE SYSTEMS OF INNOVATION BASED ON TRADE AND THE TRANSITION TO THE BRITISH SYSTEM BASED ON INDUSTRY In his brilliant essays on Competitiveness and its predecessors - a 500 year cross-national perspective and on The Role of the State in Economic Growth, Reinert (1995, 1997) has shown that already in the 15th Century during the reign of Henry VII, Britain began a policy of deliberately promoting the woollen industry, placing an export duty on raw wool and an import duty on woollen manufactures, and encouraging the immigration of skilled craftsmen. Furthermore, some Italian city-states, especially Venice, already had established policies to promote invention and learning (Table 3). Reinert shows that Italian economists, especially Antonio Serra (1613) had already propounded ideas reminiscent of later theories on national systems of innovation and he is therefore justified in dating the origin of national systems to the Renaissance period. However, this paper takes the British Industrial Revolution as its starting point for reasons which will be explained in this Section. The capacity for technical and social innovations did of course strongly influence economic life before nation-states became the dominant form of political organisation. Although Adam Smith s book was entitled The Wealth of Nations and his main concern was to explain the different progress of opulence in different nations he nevertheless included a long discussion of The rise and progress of cities and towns since the fall of the Roman Empire. The contemporary discussion is therefore certainly not entirely new: changing forms of political organisation and territorial boundaries necessarily changed the nature of the debate. For Adam Smith, it was the widening gap in living standards and in manufacturing industry between Britain and other political units in Europe which most intrigued him. Some of these were powerful nation-states, such as France and Spain, others were still city states or small principalities and still others were Empires. In their fascinating account of the history of naval power, Modelski and Thompson (1993) suggest that one of the main determinants of commercial prosperity for a thousand years was the capacity to innovate in navies, in shipping, 113 in foreign trade and in finance. They maintain that China lost the technological leadership which it had enjoyed well into the second millenium AD, because the old South China (Sung Dynasty) leadership in foreign trade and naval power was overturned by a shift in the focus of power in China to Northern Chinese and Continental interests. Following the loss of Chinese dominance in trade and technology, it was, according to their account, those Mediterranean city-states which organised and led the trade with Asia which then became the most prosperous parts of the world. They were responsible for the main innovations in ship-building, in naval ordnance, and in the organisation, provisioning and finance of trade and shipping (Table 4). Britain became a great trading nation already in the fifteenth and sixteenth centuries and the dominant naval power with the defeat of the Spanish Armada (1588), the Dutch fleet (1650s) and the French fleet at Trafalgar (1805). A good case can be made therefore for dating the British national system of innovation much earlier than the eighteenth century. However, in this account a line has been drawn across the middle of Table 4 to indicate the new period ( Britain II ) which began with the Industrial Revolution. This is intended to mark the transition from policies which were mainly concerned with the promotion and protection of trade, with the finance of shipping, trading posts and cargoes, with the ship-building industry and naval power to policies which were mainly concerned with manufacturing industry. The city-state innovation systems and the national systems of Spain, Portugal and the Netherlands belonged to the first category and so did the British system up until about the time of Adam Smith. The transition can be clearly seen in the birth of classical economics. Of course, trade was still extremely important for them and for the British national system but the distinctive feature of their work, compared with the mercantilists, the French Physiocrats and the earlier Italian economists, was the emphasis on investment in manufacturing. Smith s polemics against the mercantilists were often unfair (Reinert, 1997). They were not blind dogmatists wanting simply to accumulate gold and silver, as they were often portrayed, but they were more concerned with trade and its regulation than with industry. The Physiocrats maintained that the growth of manufacturing could actually endanger prosperity which depended in their view on agriculture. The city-state innovation systems of the Renaissance had many remarkable achievements in craft industries as well as in financial systems, shipping, the arts, medicine and science. We have nevertheless, started this account with eighteenth 114 century Britain because this was the time when Britain diverged from its great trading competitors in Spain, Portugal and the Netherlands and when the embryonic innovation systems which had grown up in the period of the Renaissance developed into something new, associated with the predominance of capitalist industry. A distinction has been made (Lundvall, 1992) between narrow definitions of national systems of innovation (Table 5) and a broad definition (illustrated in Table 6). The narrow approach concentrates on those institutions which deliberately promote the acquisition and dissemination of knowledge and are the main sources of innovation. The broad approach recognises that these narrow institutions are embedded in a much wider socio-economic system in which political and cultural influences as well as economic policies help to determine the scale, direction and relative success of all innovative activities. The decisive changes which came about in seventeenth and eighteenth century Britain and later in the United States and other European countries, were the elevation of science in the national culture, the multiplication of links between science and technology and the systematic widespread embodiment of both in industrial processes in the new workshops and factories (Table 6). The cultural changes associated with the Renaissance were pushed even further in the direction of secular instrumental rationality and its application to industrial investment. 3. THE BRITISH NATIONAL SYSTEM The decisive differences between the city-state innovation systems of the Mediterranean and the British national system were in the role of science and the role of industry. The role of science is still disputed by historians. Some accounts (e.g. Greenwood, 1997) argue that science in Britain in the eighteenth century lagged behind other European countries, especially France and that it was not particularly important for the success of the industrial revolution. What these accounts tend to misconstrue is that it was not the location of a particular scientific discovery which mattered. These may have been more frequent outside Britain. What mattered for the industrial revolution was the prevalence of a scientific culture. The treatment of Newton in Britain compared with the treatment of Galileo in Italy exemplifies this point. Newton was revered in Britain by both state and church while the fate of Galileo was altogether different. Francis Bacon (1608) had already proposed an integrated policy for science, exploration, invention and technology at the beginning of the 17th century. There was an exceptionally fortunate congruence of science, culture and technology in Britain which made it possible to use science, including Newtonian mechanics, on a significant scale in 115 the invention and design of a wide variety of new instruments, machines, engines, canals, bridges, water wheels and so forth. For example, the British Industrial Revolution depended on water power (not on steam power) for over half a century. It was Joseph Smeaton in his papers and drawings presented to the Royal Society in the 1770s whose experimental work made possible a scientific and technological breakthrough in the design of water wheels more than doubling the productivity of water power. The use of iron rather than wood, first of all for the gears and later for the entire water wheel, was made possible through Smeaton s work as a consulting engineer for the Carron Iron Works, by then already the largest iron foundry in Europe. This is only one example, although a very important one, of the positive interplay between science, technology, culture and entrepreneurship which characterised the British national system of innovation. The congruence of these four subsystems of society extended also to the political sub-system, which promoted all of these. According to many accounts (e.g. Needham, 1954) it was the failure of the Chinese Empire to sustain congruence between these sub-systems which led to the failure of China to sustain its world technological leadership. The conflict between church, state and science (e.g. Galileo) hindered a more fruitful development of both science and technology in the Italian city-states and elsewhere in Europe. The different role of science in Britain and Italy has been especially well documented by Margaret Jacob (1988). This was not the only factor which weakened the city-state innovation systems. Even more decisive were the scale economies made possible by factory production, capital accumulation and specialised division of labour. It was an Italian economist, Antonio Serra (1613) who first recognised the extraordinary importance of increasing returns to scale but he died in prison whereas Adam Smith was honoured by the British Prime Minister ( We are all your pupils now ). Enterprises and workshops were still very small in eighteenth century Britain but the shift from cottage industry to factory production and the constant improvements in machinery were still enough to confer a huge advantage on British manufacturing firms. Nowhere was this more obvious than in the cotton industry (Table 7) where the combination of technical inventions, investment in machinery, factory organisation, and entrepreneurship in ever-wider markets (facilitated still by naval power) opened an enormous productivity gap between Britain and all other producers. Some enterprises in the two leading industries, cotton and iron, already deplo
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