A Taxonomy of National Innovation Systems:

Lessons from an exercise comprising a large sample of both developed, emerging

and developing countries

Manuel Mira Godinho, Sandro F. Mendonça, Tiago Santos Pereira

1. Introduction
The aim of this paper is to put forward a taxonomy of national innovation systems
(NISs). With that purpose in mind we will first implement a technique for mapping
innovation systems that was developed by Godinho et al. (2003). Such mapping allows
one to compare directly different NISs, by visualizing in bi-dimensional space the
graphic pattern of the relevant dimensions of each innovation system. Next the
quantitative output of this NISs mapping will be used as the basis for performing a
cluster analysis in a second step. The resulting country groupings will be analysed for
identifying the major factors separating different NISs types. This will be the basis for a
definition of a possible NISs taxonomy.

In the paper eight major dimensions along which innovation systems develop are
highlighted. These dimensions include market conditions; institutional conditions;
intangible and tangible investments; basic and applied knowledge; external
communication; diffusion; and innovation. For materialising such eight NIS dimensions
29 individual indicators were selected for a total of 69 countries. These countries range
from the most developed and largest economies in the world, through the emerging
economies, to the less advanced developing countries. For each of the 8 relevant NIS
dimensions between 2 and 6 of these 29 indicators were allocated. The definition of the
NIS dimensions and the selection of indicators tried to respect theoretical and logic
criteria of organization of the data.

Overall the data basis that was developed and the methodological steps that were taken
represent a unique attempt to cover such a large and diverse number of countries with
the aim of analysing their behaviour in terms of creating, consolidating and advancing
their national innovation systems. As it will be shown, the resulting outcomes of this
paper have empirical, theoretical and normative potential.

Following this introduction the paper is divided into five main sections. Section 2
presents the conceptual context of the mapping and taxonomisation exercise that will be
carried out. In section 3 the method followed is described, with information about the
observed NIS dimensions, about the variables aggregated into each of those dimensions
and about the economies that were selected as well. Next section 4 presents the results
of the empirical analysis, by concentrating first on the mapping of the individual NISs
and then on the structure that stems from a cluster analysis. The clusters that emerged
are observed in section 5, providing an interpretation for the contrasting positions of the
different countries involved in this exercise. Finally, the concluding section attempts at
a generalization based on the analyses of the previous sections, suggesting a possible
taxonomy of national innovation systems.

1
2. The NIS perspective
The NIS concept has been used as a “focusing device” in bringing forward the
interdependent and distributed features of innovation. The concept was developed in the
1980s and has since had a very significant impact, both in innovation studies and in
policy arenas.

This section explores the NIS concept by analysing its evolution since the 1980s. The
understanding that emerged in the innovation literature is discussed, and the barriers
that still restrain its translation into quantitative analyses are considered. Finally, the
adequacy of using it in the context of less developed economies is discussed, namely
taking into consideration the profusion of recent work in this perspective in many
developing countries.

2.1 The qualitative dimensions of innovation

In the economics of technical change the acknowledgement of the systemic nature of
the innovation process represents a key claim in favour of considering the interactive
and historical nature of the innovation phenomenon. Such claim however embodies a
methodological option. The systems approach assumes that the appreciation of the
evolution of countries’ technological capabilities and performances makes these quite
complex objects of analysis, one cannot understand the picture without the detail.
Consequently, this stands in contrast with traditional growth accounts, which take
statistical aggregates as the privileged source of empirical information. The NIS
approach follows an alternative path, the awareness of concrete institutions and varieties
in macroeconomic environments are at the centre stage.

This NIS concept was initially put forward as a qualitative concept for describing the
technological, economic, social and institutional dimensions of innovation in advanced
economies. Freeman (1987) deployed it in his discussion of the Japanese innovation
system, while Lundvall (1985, 1992) and others firstly applied it in connection to the
empirical observation of the interactions and institutional framework that support
innovative activities in the Scandinavian economies. From these initial applications, the
concept was rapidly generalised to all the most advanced economies, being Nelson’s
1993 book a good example of this.

In spite of a relative variation in the definition of NIS (see Niosi, 2002) the major
contributions are convergent in highlighting the interactions between firms and
institutions as well as noting the path-dependent character of those relations. Further,
that variation can even be justified for ontological reasons: the historic nature of the
object does not allow for a single definition of innovation system. As claimed by
Lundvall (2004) “to develop ‘a general theory’ of innovation systems that abstracts
from time and space would therefore undermine the utility of the concept both as an
analytical tool and as a policy tool”.

Assuming that variation on the understanding of ‘innovation system’, the approach has
developed significantly since its inception, and several associated concepts have
emerged stressing different aspects of the innovation systems dynamics. Some of these
derived concepts refer to sub-national realities, such as in the work of Saxenian (1994)
that dealt with the local conditions in Massachusetts’ Route 128 or in Silicon Valley, or
in the work of Cooke (1998), Braczyk (1998), Landabaso (1995) or Asheim and Gertler
(2004) that refer to “regional innovation systems” in the European context. In contrast,

2
other approaches that derive from the initial NIS concept refer to realities which are
supra-national or that simply are not geographical in their nature. That is the case of the
“sectoral systems of innovation” approach (Breschi and Malerba 1997, Malerba 2004),
that stresses the opportunity and appropriability conditions in different sectors as key
factors in determining specific cumulativeness paths, or also the case of the
“technological innovation systems” approach (Carlsson et al. 1995 and 1997) that
focuses on generic technologies with general application over many industries.

All these developments of the original concept can be seen as evidence that research on
innovation has tried to capture the manifold dimensions of innovative phenomena.
However, in this paper our interest is not on how each of those derived concepts
developed and acquired its own place in the innovation literature. Rather we are interest
in the original concept and our analysis is centred on the national level, with the
objective of promoting a cartography of NISs development and characteristics.

In doing this we have to pay attention to the fact that the NIS concept was initially put
forward as a qualitative construction. It came somewhat before in time than many of the
most recent technological developments, but it is clear that it was already put forward in
connection to the central characteristics of the present competitive regime. It was not by
chance that the concept emerged in the late 1980s when the signs of a new techno-
economic paradigm were already clear, with a set of radically new technologies starting
to diffuse economy-wide (Freeman and Perez 1988, Freeman and Soete 1997). A key
feature that has differentiated the new paradigm from the previous ones is precisely the
permanence and ubiquity of innovation, which evolved from a relatively discrete and
limited occurrence to a much more pervasive aspect of economic life. In the new
paradigm firms must be involved, more than ever, in continuous innovation to remain
competitive. In this process firms allocate a greater share of their resources to the
internal production and combination of knowledge and to the external tapping of other
sources, including the research organizations and their competitors (Autio et al. 1995).
National governments have also been part of this process, by strengthening the S&T
infrastructure (Teubal et al. 1996, Rush et al. 1996) and by trying to improve the
regulatory framework and more generally the institutional conditions affecting
innovation. These developments have led to what many have classified as the
“knowledge based economy” (OECD 2000) or, in a relatively more dynamic
interpretation, to the “learning economy” (Lundvall and Borràs 1999, Gregersen and
Johnson 2001).

Summing up, innovation is central to understanding the competitive dynamics in

contemporary economies. It emerges from new combinations of knowledge and
depends on the institutional arrangements prevailing in each society, making it an
essentially qualitative process.

2.2 How far can we go in the quantitative analyses of NISs?

It is that qualitative nature of innovation that defies quantification. At least two recent
developments can be considered as weakening the barriers to a possible quantification.
Firstly, we might refer to the emergence and wide use of several new innovation
indicators and sources. As it is known significant advancements have been made in the
field of innovation measurement recently, through the implementation of a variety of
new indicators. This has happened since the early 1990s when a new generation of
innovation indicators has been established, adding to the classical “input” and “output”

3
indicators. A significant part of this new generation of indicators stems from the process
associated with the publication of the “Oslo Manual” (OECD 1992, Smith 1992) and to
the subsequent setting up of several innovation surveys, being the most prominent the
three CIS inquiries implemented by EUROSTAT in collaboration with several national
statistical offices. From the studies that have been produced with these CIS-based
indicators, it is clear that several dimensions of the innovation process which could not
be previously studied can now be approached and understood by using quantitative data
and analysis (Smith 2004, Evangelista et al. 1998). Another component of this new
generation of indicators is more recent yet, and relates to the establishing by the OECD,
the EU and other international organizations of statistics trying to reflect the diffusion of
ICTs and other related technologies. Besides this new generation the most recent period
has also witnessed to the creation and intense use, by both the academic and the policy-
making communities, of several other indicators built up from the more “classic”
bibliometric, patent, trademark and R&D statistics (Mendonça, Pereira and Godinho
2004).

The second recent development that can be seen as favouring the type of exercise we
will be undertaking in the following sections relates to a demand-side effect. Policy-
makers have been asking their advisers and researchers too for supplying them with
summary measures of their countries’ and regions’ relative innovation status. This is
part of a more general benchmarking movement, and in the area of innovation the most
notable result has been the production of “innovation scoreboards”.1 This type of
exercise has been criticized for tending to reduce the multidimensionality of innovation
processes to just one simple summary measure. Such scoreboards «can provide useful
information for macro level policies […], but a scoreboard is of less value as one moves
to the meso and micro level, where firms are active and where most policy actions
occur» (Arundel 2001). From this and other similar criticisms that have been put
forward we can conclude that while the summarizing need remains, excessive
simplification shall be avoided in the finding of solutions.

2.3. The NIS concept within the developing countries context

As pointed out above, the NIS concept emerged in the late 1980s and in the 1990s in the
context of research focusing on more advanced economies. More recently however this
concept has been applied more widely to the developing and intermediate economies
with several studies emerging focusing on different countries in Asia (China, e.g. Gu,
1997; India, e.g. Krishnan, 2003; Thailand, e.g. Intarakumnerd, 2004; or Vietnam, e.g.
Sinh, 2004) and Latin America (Brazil, e.g. Cassiolato et al., 2003; Mexico, e.g. Cimoli,
2003).

In a sense this new trend may be interpreted as a return to the origins. In the light of
pioneering material by Chris Freeman (2004) originally written in the early eighties but
only recently made available, the concept of national innovation system arose from the
analysis of the historical factors behind the stunning economic development of countries
like Germany and Japan that were well behind the technological frontier in the late 19th
and early 20th centuries. As Lundvall (2004) notes in his introduction to Freeman’s
paper, the Listian emphasis on governmental initiatives to build a technological
infrastructure as well as the importance attributed to the coupling between knowledge
1
In 2000 the EU Lisbon summit decided to develop a European Innovation Scoreboard, which is an
example of this approach.

4
institutions and firms represents the hallmark of modern research on innovation
systems,

This recent recovery of the NIS concept in the context of the analysis of economic
development raises however the methodological problem of knowing whether what was
learnt in the study of more advanced NISs is relevant for all sorts of economies
regardless the maturity of their actual innovation systems. Such question is particularly
relevant for countries in lower and intermediate levels of development seeking to
progress to more advanced stages of economic development based upon the promotion
of endogenous innovation. Through the technique that will be presented in the next
section, we can experimentally test the validity of applying the NIS concept to those
economies.

3. The method for mapping NISs

The technique we will deploy now is partially based on previous work of Godinho et al.
(2003). In that paper an exploratory exercise aiming at mapping different NISs was put
forward. Although simple in the steps it required to generate graphical representations
and quantitative indicators for each NIS that exercise showed that the method proposed
offered some interesting possibilities. The cartography generated by it allowed the direct
comparison of countries by visualizing in bi-dimensional space the graphic pattern of
the relevant dimensions of their respective NISs. In this way a comparative analysis of
weaker and stronger dimensions of each NIS was made possible. Further, as it was
shown this analysis could fruitfully be applied to both the more and the less advanced
economies. Now we will extend that approach to a much larger number of countries, 69
on the total, and in connection with this a set of 29 indicators will be processed. The
objective is moving on from an initial essentially exploratory stage to a more robust
work in terms of data collection, processing and analysis. This analytical quest has
practical importance for drawing normative implications, namely by illuminating the
cognitive and institutional factors that are more relevant for the economies aiming at
catching up. As stated above, the purpose of the analysis now is to identify what are the
common and differentiating factors of different types of NISs in order to propose a
taxonomy of innovation systems.

Next we will briefly describe in 3.1 the proposed technique and how it is based on the
decomposition of an innovation system in terms of a set of major dimensions. In sub-
section 3.2 we will present the indicators that were selected to represent each of those
major dimensions.

3.1. The NIS “dimensions” and the variables involved in the exercise
The “National Innovation System” concept is a complex model that grew out of the
1970s and 1980s innovation theory advancements that occurred as a reaction to the
archaic “linear model”. This means that many of the analytical perspectives stemming
from previous models of innovation, from the interactive vision of S&T-push and
demand-pull factors (Freeman 1979) to the chain-link perspective of innovation (Kline
and Rosenberg 1986) are now in practice part of the broader NIS theoretical framework.
However, the NIS model goes much further than these previous approaches, since it
concentrates not just on a few actors and local processes that lead to the emergence of
single innovations, but it proposes a much wider view of a system with a large diversity
actors, institutions and interactive arrangements that push forward structural change in
the economies and societies.

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This complex perspective enclosed in the NIS concept is at odds with many simplifying
graphical representations of the national innovation system that have emerged. Those
representations, by focusing just on the different types of actors and the possible
connections between them, overlook a multiplicity of other aspects that are enclosed in
the NIS theorisation.

The technique we are now employing will also generate a graphical representation of
NISs, but of a different sort. We will focus on four groups of aspects in the way to
mapping and measuring the overall performance of NISs. Those groups are as follows:
(i) preconditions for innovation;
(ii) inputs into the system;
(iii) structural organization;
(iv) system outputs.

In what follows we will elaborate on each of these groups, discussing the NIS
dimensions associated with each of them and presenting (in small boxes) the indicators
we consider most appropriate to stand for each dimension. In reading what comes below
one must be aware that these NIS dimensions necessarily emerge, in practice, as a
compromise between innovation systems theory and the indicators which may be
gathered to stand for the different dimensions that underlie the concept of “innovation
system”.

(i) Preconditions for innovation

We will consider two sorts of innovation preconditions: first market conditions and next
institutional conditions.

In principle, for producers of tradable goods the global market represents their potential
demand. But one knows that transaction costs and innumerable other frictions, related to
geographical distance, transport costs or the availability of adequate distribution
channels, limit a perfect access to global markets. So, and given the national logic of
transportation networks, the easiness of business contacts in national language, etc., the
national market still remains in many cases as the most important stimulus for
individual firms. One can therefore admit that the larger this national market is, in terms
of overall extension, affluence and sophistication, the greater will be the market
opportunities for firms to produce and innovate. This is certainly valid mostly for non-
tradable products firms, as it is the case of many service industries, but also for many of
those firms producing tradable products.

Also important in this view of market and demand conditions is the way consumers are
spread in the national space. A territory with low population density will be much more
difficult to serve than one where the population is more densely distributed.

Dimension 1 - “Market conditions”

- Income per capita
- Overall GDP size
- Population density

A second group of preconditions relates to “institutions”. As stressed above, this is a

fundamental insight of innovation systems theory: the historic evolution of social and

6
economic spaces shapes their institutions; these are relatively stable in time and modify
slowly; and the way economic agents behave depends largely on them. But, given their
nature, institutions are very difficult to represent by any sort of quantitative indicator.
We tried to deal with this by considering three sorts of indicators. Firstly, we took an
indicator of income distribution. The assumption is that a more even distribution of
income improves the capacity of larger segments of the demand to buy new products.
Further, lower values of such indicator might indicate higher levels of political stability
and social cohesion, which might be good for innovation to happen. Secondly, we
selected an indicator that combines the youth of the population with life expectancy.
The former indicates possible adaptability and flexibility in the social fabric, while the
latter indicates whether healthy conditions exist for both workers and consumers.
Finally, we selected a corruption index as an indicator of possible social and economic
(in)effectiveness.

Dimension 2 - “Institutional conditions”

- GINI index
- Youth of population
- Life expectancy
- Corruption index

(ii) Inputs into the system

A good supply of inputs is also a precondition for systems functioning well. So, in
connection with the contextual factors highlighted above, we will now consider other
two sorts of preconditions: “intangible and intangible investment” and “knowledge”.
The first of these factors might be seen as a primary input and the second as an
intermediary input (and therefore as an output of the system on its own right) of the
innovation system.

We will take three indicators for intangible investment: education expenditures, R&D
investment and investment in physical capital. All these indicators are well known but
they perform specific functions in our framework. Education expenditures stand for the
efforts in preparing younger generations for the future. Such efforts do not have an
immediate impact on innovation, tough their intensity provides a sign to innovators that
society has a more or less strong commitment in relation to basic knowledge
accumulation. The same happens with GERD, even tough in relation to this indicator
the impacts on innovation clearly happen in a more short-medium-term horizon. In the
sense they help promoting general and basic knowledge, both education and R&D
investments have a direct impact on the dimension we will be discussing next
(knowledge). Finally, the overall investment rate in physical capital has yet a more short
term impact, facilitating the penetration of innovation through the acquisition of capital
goods embodying new technology. This last aspect relates yet with another dimension
we will be discussing below (innovation diffusion).

Dimension 3 - “Intangible and tangible investment”

- Education expenditures as a percentage of GDP
- Education expenditures per capita
- GERD as a percentage of GDP
- GERD per capita
- Investment rate (GFCF as a percentage of GDP)

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“Knowledge”, like “institutions”, is another dimension that resists to quantification.
However it is such a critical dimension of a NIS that we can not avoid dealing with it.
Three knowledge levels might be considered: general knowledge, of the type that is
acquired through participation in the education system; scientific knowledge; and
technologic knowledge. For the first level an indicator of educational attainment was
selected. For the other two levels, three indicators were envisaged: scientific
publication; number of researchers in the labour force; and tertiary enrolments in S&T
subjects. The first indicates the country’s scientific output and provides information of a
possible longer term innovation potential. The second, the number of personnel
involved in research activities, is correlated to a previous indicator (GERD/GDP), but it
is used here in connection with both scientific and technologic knowledge. The last
indicator was selected given the difficulty found in identifying an appropriate measure
for technologic knowledge. But, in line with what is argued in Fagerberg & Godinho
(2004), we admit that the higher the proportion of tertiary students enrolled in technical
subjects the stronger the society orientation towards values and behaviours that favour a
dynamic technology base.

Dimension 4 - “Knowledge”
- Population with 2+3 Education as a percentage of total population
- Researchers as a percentage of labour force
- Scientific papers per Capita
- Tertiary enrolment in technical subjects as a percentage of the population

(iii) Structural organization

The structural analysis of economies tends to concentrate on the distribution of value
added and employment among different sectors. Also the analysis of countries’
competitiveness tends to emphasize the specialization composition in terms of the
sectoral origin of exports. Further industrial organization analysis focus on yet another
structural aspect, the degree of industry concentration, normally analysed in connection
to firm size distribution. All these structural levels are the outcome of dynamic
competition processes driven mainly by innovation and technological change.

It has been known for long now that the sectoral characteristics of an economy affect
the direction, nature and intensity of innovation (Pavitt 1984). To understand well an
innovation system behaviour it is pertinent to have information about how the economic
activity (production, exports) is distributed among sectors with different R&D and
knowledge intensities. In connection to this, and in conformity with the structural levels
highlighted in the previous paragraph, one also needs to have information about the size
distribution of firms in the economy. This is a sort of information that is very difficult
to find for a multi-country sample like ours given the diversity of classification practices
that statistical offices follow in relation to firm size. As a proxy we took the sales of the
home-based top global 500 R&D-performing companies as a percentage of GDP.
Empirical research has stressed the role of this sort of large multinational firms in
generating a greater share of global innovative activities (Pavitt and Patel 1988, Patel
1995, Zanfei 2000). Despite the increasing internationalisation of R&D that has gone
along the activities of these companies (Meyer-Krahmer et al. 1998) the fact is that they
still are the backbone of a great deal of the domestic innovative activities in the
countries where they come from.

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Dimension 5 - “Economic structure”
- Value Added in High-Tech & Medium High-Tech Activities (%)
- High-Tech & Medium High-Tech Exports (%)
- Sales of home-based top 500 global R&D companies / GDP

A second structural aspect that deserves attention when considering the organization of
a NIS has to do with the discussion of the frontiers of each national innovation system
and the way it relates outside the national space. It has been discussed whether in an era
of globalisation the national level of analysis retains the same relevance it had before.
As pointed out above, several arguments (transaction costs in international trade,
common infrastructure and culture, national policies…) show that the national level is
still relevant for economic and innovation analysis. But, despite that, it is also
acknowledged that external communication is essential for the vitality of the innovation
system. Such communication is a way of increasing the diversity of stimuli into the
innovation system and for bringing in key information and knowledge that lack
internally. A good connection to the outside world is therefore essential as a
complement to the knowledge generated domestically. The three indicators we propose
below provide an adequate account of this dimension.

Dimension 6 - “External communication”

- (Exports + Imports) / GDP
- (Inward + Outward stocks of FDI) / GDP
- Bandwidth in international connections (bits per Capita)

(iv) System Outputs

The major outputs of a NIS have naturally to do with the system’s innovation
performance but also with “diffusion”, i.e. with the circulation and spreading of
knowledge and new technologies among the different parts of the system. A major
theoretical point that the NIS approach brought to the analysis of the innovation process
has precisely to do with this redistributive power of the innovation system (David and
Foray 1995). Such power is a direct function of the collaborative arrangements and
relatively stable linkages that firms set up with a diversity of actors, ranging from their
suppliers (including finance providers), clients and competitors, to the R&D and
intermediate organizations that produce and transfer S&T knowledge to the economy. In
the absence of indicators that might provide an account of these interactive patterns in
the NIS, we have to rely on more classic indicators of the diffusion of specific
innovations. These indicators have however their own merits. The first three are
combined into an aggregate indicator of ICT diffusion. The fourth refers to a consumer
product technology. The fifth has not been much used, but it seems pertinent since
indicates the diffusion of a specific type of innovative practice within the different
economies.

Dimension 7 - “Diffusion”
- Personal Computers per capita
- Internet Hosts per capita
- Internet Users per capita
- Cellular Phones per capita
- ISO 9000 + ISO 14000 Certificates per capita

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Finally, we focus on the eight critical dimension to account for NISs dynamics:
“innovation”. The behaviour on this dimension results from the contextual conditions,
the resources mobilized and the overall organization of the system. We take here two
different indicators for innovation: patenting and trademark activity. The first is a well
established innovation indicator. It provides information about the sort of innovation
that derives and relates basically to technologic knowledge. The advantages and
disadvantages of this indicator are well known. We can admit that the total number of
patents granted to each country is a good indicator of innovation propensity and
potential performance.

The second indicator, trademark activity, has been recently argued for as an innovation
indicator (Mendonça et al. 2004). The idea is that this indicator provides information on
the marketing efforts that firms carry out to establish new and differentiated products in
the marketplace. The flow of new trademarks (as the flow of new patents) might
therefore be understood as an indicator of innovative efforts, in connection to the
approach of firms to the demand they are facing.

Dimension 8 - “Innovation”
- US Patents per Capita
- Trademarks per Capita

3.2. Data sources and the process for estimating the basic NIS dimensions
Having defined the eight basic dimensions of the national innovation system, we will
now describe briefly the data sources, clarify the construction of the indicators and how
they are aggregated into the different dimensions.

Table 1 below identifies the indicators that were kept as representing better each of
those dimensions and provides information about the sources and other details related to
each indicator. The sources of the data we are using are in almost all cases national and
international statistical and regulatory agencies. We sought to retain a diversity of
indicators, based on different types of variables (stock and flows, monetary and
physical) in order to provide appropriate information about the eight NIS dimensions.
We are aware that many of the selected indicators do not constitute optimal solutions
for portraying the different dimensions of a NIS. As stated above the selected indicators
are a compromise between innovation systems theory and available statistical data.
Thus we had to act pragmatically, choosing the indicators according to their
accessibility, reliability and adequate coverage of the period to be observed. Fortunately
the quantity of data we have now available has no comparison to what existed only 10
or 15 years ago. The Internet has played a fundamental role, making many international
statistics readily available on-line. Moreover, some large databases have also been made
accessible through other electronic supports such as CD-ROMs.

All together we are using 29 variables for 69 countries.2 The period to which the data
refers to is normally the years after 2000, with many variables referring to 2002 or
2003, even tough a few exceptions exist (for details see table below).

2
Amable et al. (1997) proposed an exercise with some aspects in common with the one we are
undertaking now. Their analysis involved a larger number of indicators, even tough for a much smaller
sample (only 12 countries, all of them belonging to the OECD).

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 Table 1
Variables and Indicators used to determine each NIS dimension

Variable/indicator name (V1-V30) Construction of

Code

NIS Dimensions (D1-D8) Source Year the Indicator

D1 Market Conditions

V1 Gross Income per Capita PPP(US$) 1/2/11/12 2001/2003

V2 Population Density per square km 2/3 2001/2003 LOG
V3 GDP (Millions of Dollars) 2/4/5/12 2000/2001/2002 LOG

D2 Institutional Conditions

V4 Gini Index 5/13/14 1992-2000 Inverse (1/Gini Index)

V5 Youth of the Population (Population Under 15 y.o.) 1/5 2002 % of Total Population
V6 Life Expectancy at Birth 5/10 2002 (Male + Female) / 2
V7 Corruption Index 6 2003 Score between 0-10

Notes: V5+V6 aggregated into a single indicator; In the Corruption Index 10 is given to the less corrupt countries

D3 Investment Climate

V8 Education Expenditures % of GDP 7/8/15 95-97/2001/2002

V9 Education Expenditures per Capita 3/7/8/15 95-97/2001/2002 Per Capita, LOG
V10 GERD % of GDP 5/8/14 2000/2001/2002
V11 GERD per Capita 3/5/8/14 2000/2001/2002 Per Capita, LOG
V12 Investment Rate % of GDP 2/9/4 2001/2002

Note: V8+V9 aggregated into a single indicator; V10+V11 aggregated into a single indicator

D4 Scientific Knowledge

V13 Population with 2+3 Education % of Total Population 8/14 2001/2002 2+3 / POP
V14 Researchers per Capita (per Million Inhabitants) 8/5/7/14/16/17 1990-2000/2001/2002
V15 Scientific Papers per Capita (per Million Inhabitants) 18 1998 (a)
V16 Tertiary Enrolment in Technical Subjects per Capita 19 1998 (a)

(a) or latest available year.

D5 Economic Structure

V17 Value Added in High-Tech & Medium H. –T. Activities (%) 19 2000 (b) (c)
V18 High-Tech & Medium High-Tech Exports (%) 19 2000 (b) (d)
V19 Sales of home-based Top global 500 R&D Companies/GDP 20/2 2001 (e)

Notes: (b) or latest available year; or latest available year; (c) For Hong Kong – values of 1998 and for D.R. of Congo
– values of 1990; (d) Share of medium and high-tech activities in Manufacturing Value-Added* share of
Manufacturing Value-Added in GDP; (e) Sum of the worldwide sales of the home-based companies that are part of the
ranking of the top 500 global R&D performers as a percentage of the GDP of corresponding country.

D6 Openness & Absorption

V20 (Exports + Imports) / GDP 5/14/27 2002 X+M

V21 (Inward + Outward stock of FDI) / GDP 21/14 2002 Inward+Outward
V22 Bandwidth (bits per Capita) 3/22 2002

(Table continues next page)

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 Table 1. (continuation from previous page)

Variable/indicator name (V1-V30) Construction of

Code

NIS Dimensions (D1-D8) Source Year the Indicator

D7 Diffusion

V23 Personal Computers per 100 inhabitants 3 2003

V24 Internet Hosts per 10000 inhabitants 3 2003
V25 Internet Users per 10000 inhabitants 3 2003
V26 Cellular Phones per 100 inhabitants 3 2003
V27 (ISO 9000 + ISO 14000 Certificates) / Population 23/3 2002 ISO 9000+14000/POP

Note: V23+V24+V25 aggregated into a single indicator

D8 Innovation

V28 US Patents per Capita 24/25 2003 (f) % of Total POP, LOG
V29 Trademarks per Capita 26 2003 % of Total POP, LOG

Note: (f) For countries with a very few patents an yearly average was calculated, normally between 1997 and 2003.

Other Variables (Auxiliary)

V30 Population 2000 (Millions) 3 2003

Sources:
1. IMD, World Competitiveness Yearbook 2004
2. World Bank, World Development Report 2003
3. ITU, World Telecommunication Development Report 2003
4. Taiwan Statistical Data Book 2001, Council for Economic Planning and Development, Republic of China
5. UNPD, United Nations Development Program Report 2004
6. Transparency International Corruption Perception Index 2003
7. World Bank, World Development Report 2002
8. UNESCO, Institute for Statistics
9. EIS, European Innovation Scoreboard 2003

10. www.indexmundi.com/taiwan/life_expectancy_at_birth.html
11. www.nu.hu
12. www.worldlanguage.com
13. www.phrasebase.com
14. www.nationmaster.com
15. www.business.nsw.gov.au
16. www.serenate.org
17. www.cepd.gov.tw

18. http://www.nsf.gov - Science and Engineering Indicators–2002

19. UNIDO Scoreboard Database, Industrial Development Report – 2002/2003
20. DTI - http://www.innovation.gov.uk/projects/rd_scoreboard/database/databasefr.htm
21. UNCTAD, United Nations of Trade and Development
22. www.uneca.org
23. The ISO Survey of ISO 9000 & ISO 14000 Certificates
24. OECD Patent Database, July 2003
25. US Patent and Trademark Office, March 2004
26. OHIM, Office for Harmonization in the Internal Market
27. www.mof.gov.tw

12
The 29 relevant variables/indicators listed above were transformed using a
standardization procedure. The next step was the aggregation of the variables into each
dimension. Similar weights were used for all the variables, with the exceptions noted in
table 1 above, of two or three single indicators being aggregated into another indicator.
In these cases the aggregated outcome counted as just one indicator. Overall 24
resulting indicators were aggregated into the NIS dimensions generating eight
composite indicators.

We must clarify that in general each variable/indicator covered all the 69 countries in
the sample, even tough in a very few cases the data base that was built presented
missing values. In those cases the composite measure of each NIS dimension was
calculated for the country whose data was missing on the basis of only n-1 (or n-m,
more generally) indicators.

In what regards country selection we tried to gather information covering both the
advanced economies (large and small) and the catching up and developing economies.
All the OECD economies were included, plus the EU members and candidate countries.
All the Asian “tigers” were included, even tough not all of them are properly “nations”.
For the rest, the criterion was that the selected countries should have at least 20 million
inhabitants. In this way we could assure that the analysis covered a great part of the
world population. On the whole these countries stand for approximately 87.4% of the
world population.

Having gathered, processed, summarised and critically observed all the necessary
information, we were able to represent the results for each dimension along eight axes,
using the so-called radar-type charts. We will present in subsection 4.2 below the
graphical results of the exercise.

4. Data analysis
This section starts with a presentation of a cluster analysis done on the eight NISs
dimensions for the 69 countries in the sample. Next those dimensions will be displayed
graphically for the different NISs in accordance to the cluster structure deriving from
the previous cluster analysis.

4.1. Cluster analysis

In the sequence of having mapped the National Innovation Systems of a sample of 69 of
the world’s largest and most innovative economies, we will now proceed with a cluster
analysis. The objective is to suggest a taxonomy of National Innovation Systems.

As it is known, cluster analysis allows for the identification of homogeneous groups of

cases in a given sample, through the simultaneous minimization of within-group
variation and maximization of between-group variation. Hierarchical clustering was the
procedure adopted to divide our sample into homogenous groupings. This procedure
starts by combining the two most similar cases into a cluster and proceeds by repeating
this step up to forming just one cluster. In this process one has to decide where to stop,
by defining what is the desired final number of clusters. Three alternative methods for
linking the different cases were followed: between groups linkages; within groups
linkages; and Ward’s method. Further three distance measures (Euclidean distance,
squared Euclidean distance and block distance) were used for each of those alternative
methods. All together nine clustering algorithms were therefore adopted for forming

13
clusters. This work was necessary because different methods of cluster analysis may
generate quite different results. By comparing the outcomes of running the different
algorithms, one can access how robust might be the cluster typology obtained. These
nine clustering algorithms were run by using as inputs the eight axes of the NISs that
were drawn from our dataset as explained above.

For each of those nine runs we analyzed the cases of 2, 5 and 9 clusters. These numbers
are not arbitrary. They stem from the observation of both the ‘agglomeration schedules’
and the ‘dendograms’ proceeding from the statistical analyses.3 The visual observation
of the dendogram allows one to infer when to stop the exercise of clustering. This shall
happen when the distance between the new formed clusters and the existing ones
increases significantly. The same inference might be made more precisely through the
analysis of the similarity coefficient in the agglomeration schedule. In our case, the
highest drop in the similarity coefficient happened, for most of the 9 runs, when two
large “megaclusters” arose. However important drops in that coefficient also happened
in most of the runs when reaching 5 and 9 clusters respectively.4 We will therefore
report next according to this 3-level structure (2, 5 and 9 clusters).

Cluster Analysis – Level 1

In all the nine runs that were carried out two large ‘megaclusters’ emerge (M1 and M2).
Each of them is composed respectively of about one-third and two-thirds of the
countries in the sample. We will call the first of these two groupings the ‘developed
NISs’ (M1) and the other ‘the developing NISs’ (M2).

The very important drop in the similarity coefficient that happened when this stage of
cluster analysis was reached means that: (i) two quite distinct groups of NISs exist;
while simultaneously (ii) each of them sharing a high degree of internal cohesion. This
allows one to infer that a significant divide separates the two major NIS types. Further it
suggests that an important qualitative and quantitative change might be needed in order
to jump the gap that separates M2 from M1.

By looking at the 9 runs of the cluster analysis that were performed, one concludes that
those two groups are relatively stable, with almost all of their respective members
remaining attached to each one of them all over the process (see table 2). However,
some marginal ‘noise’ arises, with a few countries moving between megaclusters or
eventually resisting integration in any of them. The most notorious case arises with
Hong Kong, that in 3 out of the 9 runs is not ‘attracted’ into any of the larger groupings,
while in the remaining six runs it is absorbed in equal proportions by M1 or M2. A
similar but less extensive situation arises with Luxembourg that in 2 out of the 9 runs

3
The ‘dendogram’ is a tree diagram that represents the sequence of mergers of cases into clusters and,
from a certain step on, between already existing clusters. It allows one to identify the clusters that are
formed in the successive steps, their membership as well as how relatively far (‘different’) are the new
larger groupings from the pre-existing clusters or cases from which they stem from. The ‘agglomeration
schedule’ provides information about the evolution of the proximity coefficient along the successive steps
of the cluster analysis. When using distance measures, low drops in the proximity coefficient mean that
the new cases being merged are rather alike, while big jumps indicate that the new mergers are rather
dissimilar from the previous ones. One has to stop the clustering process when the greatest increase in the
distance occurs between two successive steps (i.e. when the highest drop in the similarity coefficient
happens).
4
Detailed statistical outputs can be provided on request.

14
moves from M1 to M2. What happens with these two economies is not surprising,
probably stemming from an idiosyncratic nature of their respective NISs. Finally, an
interesting situation happens in 1 out of the 9 runs, when a group of 5 countries (Czech
Republic, Hungary, Malta, Portugal and Slovenia) moves from M2 to M1. This might
be seen as evidence that these countries are attempting to cross over the wide gap
identified above and that they will eventually catch up into a ‘developed NISs’ status in
a not so distant future.

Table 2
Megaclusters 1 and 2
M1 - Developed NISs M2 - Developing NISs
‘Permanent members’: ‘Permanent members’:
Austria, Australia, Belgium, Canada, Algeria , Argentina, Bangladesh, Brazil,
Denmark, Finland, France, Germany, Bulgaria, Chile, China, Colombia, Congo
Italy, Ireland, Japan, Korea (republic of), (D. R.), Cyprus, Egypt, Estonia, Ethiopia,
Netherlands, New Zealand, Norway, Greece, India, Kenya, Indonesia, Iran (I.
Singapore, Spain, Switzerland, Sweden, R.), Latvia, Lithuania, Malaysia, Mexico,
Taiwan, United Kingdom, United States Morocco, Myanmar, Nigeria, Peru,
Philippines, Poland, Russia, South Africa,
Slovak R., Sudan, Tanzania, Ukraine,
Pakistan, Romania, Thailand, Turkey,
Venezuela, Viet Nam
‘Non-permanent member’: ‘Non-permanent members’:
Luxembourg
 Hungary, Czech Republic, Slovenia,
Malta and Portugal
 Hong Kong

Cluster Analysis – Level 2

When one moves to a five cluster partition, the stability of the results decreases in
relation to the previous situation. This affects mainly the developed NISs megacluster
that despite having a smaller membership reveals a larger internal variation. In contrast,
the developing NIS megacluster shows greater consistency in the way it is divided into
different clusters and in the stability of their respective memberships. As a consequence
in 7 out of 9 runs, two clusters emerge within the developing NIS megacluster. One of
these clusters stays almost unchanged even in the remaining 2 runs, when megacluster 2
is divided into three clusters. That cluster, which we might call ‘unformed NISs’, is
comprised of 12 or 13 countries, 8 of them from Africa, 3-4 from Asia and one from
Latin America. In relation to the remaining countries of megacluster 2, which by now
we will call ‘structuring NISs’, they tend to cluster in one grouping, but in 3 of the runs
it breaks down into two smaller groupings5 (see table 3).

Table 3
A partition of the Developing NIS megacluster
Unformed NISs Structuring NISs
‘Permanent members’: ‘Permanent members’:
Algeria, Bangladesh, Colombia, Congo Argentina, Brazil, Bulgaria, China, India,
(D. R.), Ethiopia, Iran (I. R.), Kenya, Indonesia, Mexico, Peru, Philippines,

5
This happens when using Ward’s method for linking the different cases.

15
Sudan, Myanmar, Nigeria, Tanzania, Viet Russia, South Africa, Slovak R., Ukraine,
Nam Romania, Thailand, Turkey, Venezuela
‘Non-permanent member’: ‘Non-permanent members’:
Pakistan Hungary, Chile, Czech Republic, Cyprus,
(this country upgrades out of this group in 2 runs) Egypt, Estonia, Greece, Latvia, Lithuania,
Malaysia, Malaysia, Malta, Poland,
Portugal, Slovenia
(most of these countries move out of the above group in
2 or 3 runs, forming a third autonomous cluster, in one
run 5 of them upgrade to megacluster 1)

As stated above, the ‘developed NISs’ megacluster shows a larger variation when
moving to a thinner definition of clusters. The most frequent situation, however, is to
have 3 groupings, one containing just one NIS (Hong Kong), a second one clustering
together three small European economies (Belgium, Denmark and Luxembourg), and a
third one that reunites most of the countries in Megacluster 1. We will report further on
the divisions within megacluster 1 below, when analyzing the results for the 9 clusters
partition.

Cluster Analysis – Level 3

As hinted above, in general the Developing NISs megacluster is much more
homogeneous than the Developed NIS megacluster. As a matter of fact, even when
proceeding to the 9 clusters partition level, the overall lines of division that were found
for megacluster 2 in the former level of analysis stay relatively unchanged. In 3 out of
the 9 runs of the cluster analysis, however, M2 breaks down into a larger number of
smaller groupings. As these smaller groupings are clearly visible at thinner levels of
analysis, when 10 or more clusters are retained for the whole sample, it makes sense to
report on their membership.

Table 4 shows the 3 major groups of NISs that emerge within the Developing NISs
megacluster (G1, G2, G3) and the subgroups that emerge out of G2 (G2a, G2b, G2c).
The 3 major groups were classified as ‘Unformed NISs’, ‘Emerging NISs’ and
‘Catching up NISs’, names which correspond to their status and general characteristics
in terms of NIS maturity. It is interesting to notice how all the emerging economies
proper cluster within G2b. When comparing with NISs of economies with similar
economic development levels, these G2b NISs have in common the fact that they are
doing relatively better in innovation than in diffusion. This may suggest that a scale
effect may operate, leading these economies to perform relatively better in terms of
innovation.

Table 4
Further partition of the Developing NIS megacluster
G1 - Unformed Structuring NISs
NISs G2 - Emerging NISs G3 - Catching Up
NISs
‘Permanent ‘Permanent members’: Argentina, ‘Permanent members’:
members’: Algeria, Brazil, Bulgaria, Chile, China, Hungary, Czech
Bangladesh, Congo Columbia, Cyprus, Egypt, India, Republic, Malaysia,
(D. R.), Ethiopia, Indonesia, Mexico, Peru, Philippines, Malta, Slovenia,

16
Iran (I. R.), Kenya, Russia, South Africa, Romania, Slovak Republic
Sudan, Myanmar, Thailand, Turkey, Venezuela
Nigeria, Pakistan, G2a* G2.b* G2c* ‘Non-permanent
Tanzania, Viet Nam Bulgaria, Argentina, Chile, members’:
Colombia, Brazil, Cyprus, Estonia, Greece,
‘Non-permanent Indonesia, China, Greece, Lithuania, Latvia,
members’: Peru, India, Egypt, Poland, Portugal,
Colombia, Pakistan Philippines, Mexico, Latvia, Ukraine
Romania, South Lithuania,
Turkey, Africa, Poland,
Ukraine Thailand Portugal
*Note: G2a, G2b and G2c arise for the 9 cluster solution when Ward’s method for linking the different
cases is used. In these circumstances some NISs that were part of G1 or G3 are ‘captured’ into the larger
group of countries that made up G2.

As the Developed NISs megacluster is concerned, despite an overall smaller

membership, the situation is more complex. This reflects a larger heterogeneity among
the NISs that are part of this megacluster, suggesting that as the different NISs become
more developed they may probably evolve into more specific types of NISs. For the
sake of simplicity however, and in accordance to our interpretation of the existing
evidence, we will retain 4 major groups (G4, G5, G6, G7), or ‘types’ of NIS within
M1.6 These 4 groups were classified as: Natural Resources-Based NISs; Services-
Oriented NISs; High Tech Smaller NISs; and the Larger Developed NISs (see table 5).

Starting with G4, it integrates economies characterized by good natural resources

endowments (grazing land, oil and other minerals, sun and beaches...) and which
display an international specialization reflecting that fact. When comparing with the
remaining economies of M1, G4 NISs tend not to perform very well both on innovation
and diffusion. Next, G5 integrates 4 quite idiosyncratic economies which, as seen, in
two cases (Luxembourg and particularly Hong Kong) ‘flow’ sometimes to M2 or tend
to stay out of both M1 and M2. Those 4 economies tend to be very specialized in quite
different types of production, ranging from low to high tech, and their services sectors
play a very significant role in their international specialization. In relation to G6, the
NISs in this grouping share some characteristics with those in G5 (namely they are
small open economies with a high degree of specialization), but they tend to be much
more concentrated on high tech manufactures. Moreover they are doing very well in
both innovation, diffusion and intangible accumulation. Finally, G7 aggregates the
larger OECD economies (being Taiwan an ‘outlier’ in this regard). These NISs are
doing relatively better on innovation than in diffusion. This characteristic is shared with
the larger emerging NISs that make up G2.b, confirming that a scale effect might be
present in explaining a relatively better performance on innovation.

6
In several runs a larger number of clusters arise within M1. In the limit, in one run 7 clusters emerge.
That is when some of the catching up NISs move from M2 to M1.

17
 Table 5
A partition of the Developed NIS megacluster
G4 - Natural G5 – Services- G6 - High Tech G7 - Larger
Resources-Based Oriented NISs Smaller NISs Developed NISs
NISs
‘Permanent ‘More Permanent ‘Permanent ‘Permanent
members’: members’*: members’: members’:
Australia, New Denmark (8), Finland, Ireland, France, Germany,
Zealand, Norway Belgium (7), Netherlands Italy, Japan, Korea,
Luxembourg (6) Singapore, Sweden, Taiwan, UK, US
‘Non-permanent ‘Less permanent Switzerland
members’*: member’*:
Austria (4), Canada Hong Kong (3)
(4), Spain (4)

*Note: The numbers between brackets identify the number of cluster analysis runs (out of the total 9 runs)
in which those NISs came together.

4.2. Mapping NISs (dimensions, size, ranking)

Having gathered, processed, summarized and critically observed all the necessary
information, we are now able to represent the results for each NIS dimension along
eight axes, using the so-called radar-type charts. This sort of graphic representation has
many advantages. Information visualization is often a neglected aspect of academic
communication. However, from the point of view of social science users such as policy
makers, seeing information may allow clearer interpretation of trends, more effective
identification of anomalies and faster decision-making. With so many institutions
generating huge quantities of data, images actually constitute a easy way to absorb
information. Techniques for capturing vast amounts of information in one picture are
likely to be in great demand from individuals for which time and attention are the
scarcest of resources.

We could have presented the charts we will be now showing before the cluster analysis,
but we are doing it now because in this way we can compare countries in the same
cluster groupings. As an alternative, we might for example have presented countries
belonging to the same continent or economic region in different graphs.

The radar-type charts show the configuration of each NIS or group of NISs in
accordance to their respective performances along the eight axes. Each axis in the chart
varies around zero (e.g. between -3 and 3), being zero an equivalent to the standardized
means. The charts are illustrative of the relatively stronger and weaker points of each
system and the cluster groups they belong to. We are presenting below just a few charts
to exemplify the potentialities of the mapping technique.

18
 Emerging NISs (G2.b)
Axis1
0,5

AXIS8 0 AXIS2
China
-0,5
Mexico
-1 Thailand
AXIS7 -1,5 AXIS3 Brazil
Argentin
South Af
India
AXIS6 AXIS4

AXIS5

Russia
Axis1
1

AXIS8 0,5 AXIS2

0

-0,5

AXIS7 -1 AXIS3 Russia

AXIS6 AXIS4

AXIS5

19
 Catching Up NISs (G3)
'Permanent Members'
Axis1
1,2

AXIS8 0,6 AXIS2

0 Hungary
Czech Re
-0,6
Slovenia
AXIS7 -1,2 AXIS3
Malta
Malaysia
Slovak R
AXIS6 AXIS4

AXIS5

High Tech NISs Cluster (G6)

Axis1
2,5
2
AXIS8 AXIS2
1,5
Switzerl
1
Sweden
0,5
Netherla
AXIS7 0 AXIS3
Finland
Singapor
Ireland
AXIS6 AXIS4

AXIS5

The type of information presented in the previous figures allows one to estimate for
each NIS both its “size” and discuss its uneven vs. balanced nature. NIS size, or total
NIS dimension, might be calculated as the area within the line that represents each
country in the chart. However, a simpler way of doing this is by calculating the mean of
the values each country displays on the eight NIS dimensions. For the countries in the
sample the values stemming from this calculation have the same relative distribution

20
has the areas in the charts. A NISs ranking produced through these steps is presented in
table 6 below.

Table 6. NIS ranking

1. Switzerland 1,15 24. Hungary 0,27 47. India -0,39

2. Sweden 1,13 25. Czech R. 0,23 48. Turkey -0,42
3. Netherlands 0,91 26. Slovenia 0,23 49. Ukraine -0,43
4. Denmark 0,90 27. New Zealand 0,21 50. Egypt -0,43
5. Finland 0,90 28. Portugal 0,13 51. Romania -0,45
6. Hong Kong 0,90 29. Malta 0,05 52. Venezuela -0,52
7. United Kingdom 0,88 30. Malaysia 0,05 53. Bulgaria -0,56
8. United States 0,86 31. Slovak R. 0,00 54. Indonesia -0,58
9. Singapore 0,86 32. Greece -0,07 55. Morocco -0,59
10. Japan 0,85 33. China -0,10 56. Viet Nam -0,59
11. Germany 0,81 34. Estonia -0,11 57. Colombia -0,63
12. Ireland 0,81 35. Poland -0,12 58. Algeria -0,67
13. Korea (R. of) 0,67 36. Mexico -0,23 59. Peru -0,68
14. France 0,62 37. Cyprus -0,26 60. Iran (I.R.) -0,75
15. Taiwan 0,60 38. Thailand -0,26 61. Bangladesh -0,77
16. Austria 0,57 39. Brazil -0,27 62. Pakistan -0,82
17. Norway 0,51 40. Lithuania -0,29 63. Nigeria -0,89
18. Belgium 0,50 41. Chile -0,29 64. Kenya -0,94
19. Spain 0,50 42. Russia -0,30 65. Ethiopia -0,97
20. Canada 0,44 43. Latvia -0,30 66. Myanmar -0,98
21. Italy 0,44 44. Argentina -0,35 67. Tanzania -0,99
22. Austrália 0,40 45. South Africa -0,35 68. D.R. Congo -1,05
23. Luxembou 0,38 46. Philippines -0,36 69. Sudan -1,06

The discussion of the unevenness of the system can be done by simply observing the
charts to see whether the country has a regular shape with all eight dimensions showing
a similar length, or otherwise it can be calculated as the standard deviation of the
country’s values in each of the eight axes. We are not presenting here figures for this,
but in Godinho et al. (2003) we have exemplified this process.

5. Conclusion: Towards a NISs taxonomy

The analysis developed above will now be re-examined. First we will concentrate on the
method that has been suggested for mapping national innovation systems. Next we will
return to the results of the clustering exercise, which was carried out in order to helping
us to envisage a NISs taxonomy. Finally, we conclude with some remarks on the
normative implications and elaborate on further research needs in this area.

Some conclusions regarding the NIS mapping technique

The exercise that was carried out shows that the NIS mapping technique we have
deployed although simple in the steps it requires has significant analytical potential. In
what regards the analytical value, we are aware that different arguments may be raised
in relation to the process that led us to the identification of eight major NIS dimensions.
Even tough we think those dimensions are sound and credible, we think that what is
strategically more important is the process involved in their definition. This is so
beacuse by getting involved in that process one is forced to be specific about what

21
exactly is meant by “national innovation system”, concentrating on the aspects that
deserve to be analysed with greater attention. Such process might help the conceptual
work in this area to evolve further in the future, moving out of vague discussions to
more precise definitions of “NIS” and its components.

Main results from the cluster analysis

The cluster analysis that was implemented generated several major results.
A first result is that two quite distinct ‘megaclusters’ – the ‘Developed NISs’ and the
‘Developing NISs’, respectively – emerge. The algebraic distance between these two
groupings constitutes evidence of very important qualitative and qualitative differences
between them. This may be seen as indicating that the NIS concept has actually
different meanings when applied to countries at different development levels. Further
that differentiated nature suggests that important endogenous changes might occur in
the countries pertaining to the Developing NISs in order to jump over the huge gap that
separates the two megaclusters.

A second indication stemming from the analysis is that in the process of advancing from
lower to higher development status, the different NISs tend to evolve into a more
diversified pattern of NIS types. This may happen because higher development levels
might be associated with more specialized patterns of activity which generate greater
variety in NIS types.

A third possible conclusion is that when one speaks about the configuration of
innovation systems ‘size matters’. It seems that the larger economies perform relatively
better in innovation than in diffusion. This suggests that a scale effect might interfere in
the pattern of innovative activities of an economy.

Finally one concludes that both the patterns of specialization and the economic
structure, being them determined by natural resources endowments, historical
trajectories, or size and degree of external openness of the economy, seem also to affect
strongly the configuration of national innovation systems.

Normative implications and further research

In what concerns the practical policy-making dimension, the cartography of NISs that
was produced through the method put forward, together with its associated indicators
and the taxonomy we have drawn above, indisputably show high potential. In this
respect, it is clear that our work follows in line with some key recommendations of the
innovation systems research: «Concrete empirical and comparative analyses are
absolutely necessary for the design of specific policies in the fields of R&D and
innovation. The S[systems of] I[nnovation] approach is an analytical framework suited
for such analyses. It is appropriate for this purpose because it places innovation at the
very centre of focus and because it is able to capture differences between systems. In
this way specific problems that should be objects of innovation policy can be
identified.» (Edquist 2002, p. 22).

On the policy side we must also recall here the conclusions of a OECD project on
“Dynamising National Innovation Systems”: «the need to engage in effective learning
processes suggests that governments may benefit from intensified international
benchmarking of policy practices in this [NIS] respect» (OECD 2002, p. 81).

22
In conclusion, it becomes clear that the mapping tool that was implemented fits well
into the type of comparative and benchmarking analyses that have been sought both by
academics and policy-makers. This tool has the advantage of avoiding the
oversimplification that has been associated with many recent scoreboard exercises,
which have tended to sum up the analysis to single summary measures of innovation. In
contrast, our method allows for a clear identification of the weakest and strongest
dimensions of each NIS. Moreover, and as it was shown, this tool and the resulting
taxonomy have policy-making value for both the advanced countries, the intermediate
catching up countries and the developing economies as well.

To finalise with we must say that besides eventual disagreements that may arise in what
concerns the definition of the NIS dimensions etc., an aspect that we are aware is the
incompleteness of the present exercise in terms of several key indicators that are
lacking. Among others, there are three key areas in which indicators do not exist for
such a larger sample as the one we were dealing with. First, there is no comprehensive
and updated data for the nature of the R&D activities in many countries, detailing the
share of business in total GERD or identifying the relative weight of basic and applied
R&D. Second, the number of indicators regarding innovation we can mobilise for a
comparative exercise like the present one is still very limited. Surveys like CIS in
Europe must be promoted elsewhere to supply indicators about the outputs of the
innovation process. In Latin America a good deal of work on this has been done. This
together might be an impulse for a wider and globally more planned establishment of
innovation surveys. Finally, a third area in which we critically need information is about
the type and quality of interactions established within the innovation systems. Indicators
such as “Business funding of government and university R&D”, “R&D arrangements
between firms and university or Research and Technology Organizations”, or yet
“SMEs in cooperation to innovate” are critically needed so that a better characterization
of innovation systems might advance further.

23
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Appendix – Cluster Analysis: One of the 9 Dendograms

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