By Bolanle Solomon-Adewusi (NigeriaLics Activity Committee)
Webinar highlights
About the speaker: Dr. Rasmus Lema is Associate Professor at the Department of Business and Management at Aalborg University, Denmark and Senior Visiting Associate Professor at the University of Johannesburg, South Africa. He also a member of the AfricaLics and Globelics Scientific Board. This third Edition of NigeriaLics Network Webinar was held on the 23rd October 2020.
The speaker reflected on innovation trajectories in developing countries and the co-evolution of global value chains (GVCs) and innovation systems (IS). He discussed Globelics’ research agenda by reflecting on how best to combine two knowledge fields: innovation systems and global value chains. Developing countries are faced with challenges in building relevant skills, deepening innovation capabilities and strengthening the related supporting institutions and both perspectives are important. However, from his previous research, Scientometric Analysis, showed very little interaction between the two research communities.
This prompted some key questions being asked about developing countries with respect to innovation systems and gobal value chains:
- Whether and under what circumstances globalisation (with GVCs) will create or hinder new learning and innovation opportunities?
- Can GVCs and Innovation System approaches in combination help to foster an understanding of trajectories of learning and innovation?
- What are the conditions and dynamics involved?
GVC focus on upgrading the firms and upgrading suppliers through various methods. Also, opportunities to build innovation capabilities in domestic enterprises can be structured by GVC governance patterns. However, the GVC approach could have limitations, such as little attention to understanding the upgrading process itself and methods that will be used to access knowledge. Other limitations are; appropriate ways to make the firms in GVCs learn and innovate and whether or not the lead firms hinder/foster suppliers’ learning. Also, less attention to the institutional framework that structure opportunities for upgrading is another limitation.Governance may not be the only method to utilize for upgrading and innovation in GVCs. Building up capabilities at the firm-level and learning mechanisms through the market and non-market interactions can also achieve upgrading and innovation.
The innovation Systems Framework focuses on how interactions among enterprises, institutions, research bodies, and policy-making agencies can contribute to firms’ learning and innovations. The density and quality of relationships among enterprises and between supporting institutions can determine the innovative capacity of firms. The IS approach has limitations, which could be less attention to external linkages for generation and diffusion of knowledge and innovation, focusing on mature innovation systems in developed countries and poor understanding of systems building and dynamism.
Looking at the two approaches (GVCs and NIS), they are different in terms of input, operating methods and expected results. While GVCs focus on learning from lead firms and buyers, NIS focuses on local interactive learning. Also, the disciplinary foundation of GVC is Economic Sociology, while that of NIS is Evolutionary economics. “There is need for developing countries to combine IS and GVC to improve firm’s learning processes and innovation capability building”, Dr. Lema reiterated. Therefore, combining these two approaches will lead to changes in how lead firms interact with domestic suppliers and how firms generate demand for different types of knowledge, resources, services, and training to enhance their capabilities. Developing countries can connect IS and GVC as firms whose GVC and IS have disjointed or ineffective interactions tend to experience stagnating or declining trajectory.
Recommendations
- Recommends GVCs and IS interactions within firms as both complements each other. A co-evolutionary relationship will enhance the speed and direction of innovative capability accumulation at the firm level;
- There is need for strategic intent and effort. GVCs participation needs to interact with firm-level efforts and IS support as this does not occur automatically.
- Developing countries need more research on trajectories in different sectors, local contexts and countries at different development levels – it is an emerging research track.
- A new role for policies in this regard is required. It is not enough to assume an automatic and positive effect of GVC involvement for learning and capabilities building.
To leverage on the co-evolution of GVCs and IS, developing countries must leverage on:
- Relationship building within and between firms, institutions, buyers and suppliers in the global economy.
- Use of (technological) capital goods and creation and diffusion of technology.
- Upgrading GVCs and building IS.
Further reading:
Lema, Rasmus, Carlo Pietrobelli, and Roberta Rabellotti, ‘Innovation in Global Value Chains’, in Handbook on Global Value Chains, ed. by Stefano Ponte, Gary Gereffi, and Gale Raj-Reichert (Cheltenham: Edward Elgar Publishing, 2019), pp. 370–84 https://doi.org/10.4337/9781788113779.00032
Lema, Rasmus, Roberta Rabellotti, and Padmashree Gehl Sampath, ‘Innovation Trajectories in Developing Countries: Co-Evolution of Global Value Chains and Innovation Systems’, The European Journal of Development Research, 30 (2018), 345–63 https://doi.org/10.1057/s41287-018-0149-0
Jurowetzki, Roman, Rasmus Lema, and Bengt-Åke Lundvall, ‘Combining Innovation Systems and Global Value Chains for Development: Towards a Research Agenda’, The European Journal of Development Research, 30 (2018), 364–88
https://doi.org/10.1057/s41287-018-0137-4