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1.3.1 Innovation studies and the accumulation of technological capabilities
An obvious problem in trying to relate innovation studies in industrialized countries to technology policy issues in developing countries is that comparatively little technological innovation is taking place in developing countries, especially if innovation is defined strictly as the first commercial introduction of a product or process in the international economy.
It is, however, a rather limited view of innovation theories that they are, or should only be, concerned with the initial introduction of products or processes. Clearly, the imitative phase is important too in any industry where innovation appears. There are two reasons for this. First, the behaviour of innovative firms is importantly influenced by expectations about the likely speed of imitation: innovators might seek to preempt imitation by strengthening their appropriation of the new technology. Thus, a convincing theory of the innovative firm, and particularly one which purports to explain intersectoral differences in innovative behaviour, must grasp the objective conditions determining imitation. Second, a theory of innovation must surely reach beyond explanations of the behaviour of individual firms, to consider the implications of innovation for industrial sectors, especially for market structures. Here too, the story will be incomplete without a reasoned consideration of imitation and of other processes that might be involved in the diffusion of innovations. At the level of industrial sectors, a theory of innovation must include a theory of imitation17 if it is to be complete, though the relative scarcity of empirical work on imitation might lead one to believe otherwise.
It is probably sensible to assume that the skills commonly associated with innovative capability are to a large degree relevant as well to imitative activity-or, perhaps more precisely, that the skills needed for imitation are essentially a subset of those needed for innovation. To see this, recall the discussion of the main characteristics of innovative firms. The studies we have reviewed emphasize the localized, and cumulative, processes whereby firms build technological knowledge which ultimately becomes the source of new technologies. These capabilities, it is argued, are built around the methods of production in use [i.e., around 'previous choices of technique' as Paul David (1975) puts it]. But whilst this accumulation of partly explicit and partly tacit knowledge is argued to be a necessary condition for success in innovation, it does not follow that its existence in a firm is sufficient to ensure that the firm will innovate. More importantly, nor does it follow that firms pursue this accumulative (and costly) process solely for innovative success. For some firms at most times, and for all firms at some times, this capability may be as important for the purposes of effective imitation of technological leaders as for originating innovations.
As a corollary, it is possible that capabilities built through successful imitation become the base from which innovative capability finally emerges. It has been argued that there is a progression, in which skills initially applied to what might be termed 'sub-innovative' technological activities, like imitation or simply incremental improvement of productive efficiency, eventually become the foundation for true innovation. Such a progression is probably part of the historic experience of many firms.18
Chris Freeman (1989, pp. 169 95.) helped to make this point in his analysis of firm strategies towards innovation. Freeman distinguished five types of strategy: offensive, defensive, imitative, dependent, and traditional.19 The first two are concerned primarily with the early, if not always initial, introduction of new technologies and differ mainly in their timing tactics; imitative firms, in contrast, are 'content to follow way behind the leaders in established technologies' (p. 179). Imitative firms, Freeman argues, need compensating advantages to deal with this lag. These may vary from control over a captive market to decisive cost advantages. Firms following the 'dependent' strategy are mainly small sub-contracting enterprises, whose technology is usually determined (and often supplied) entirely by customer enterprises. Finally, the 'traditional' strategy is essentially non-innovative: firms do not change their products in technically significant ways because markets do not require them to do so.20 The particularly interesting point here about Freeman's categories is his analysis of the technical functions (or types of technical skill) associated with each of them. He discusses a number of these technical functions, ranging from R&D functions, through design, quality control and technical services and on to patenting and scientific and technical information. These skills are expected to be needed to some degree in all strategies, though at different intensities (op. cit., Table 8.1, p. 171). It is not difficult to see how firms might progress from one strategy level to another through an historic learning process in which they strengthen particular learning functions. It is also clear that skills associated with imitation can reasonably be described as a subset of innovative skills.
The usefulness of these approaches to the understanding of circumstances in developing countries is suggested by three lines of analysis: (1) by extending Freeman's discussion of innovation strategies [and linking it to Pavitt's (1984) analysis of sectoral differences] and relating this conceptualization to the types of technology transfer used by enterprises in developing countries; (2) by considering how the account of localized, cumulative technology learning processes offered by 'innovation studies' relates to the knowledge we have of learning processes in firms in developing countries; and (3) by reexamining the concept of 'accumulation of technological capabilities', which has become so important in technology policy in developing countries, in the light of what we can learn from innovation studies.
First, then, we consider the question of innovation strategies used by firms in developing countries. An obvious point of departure is that for the most part even the most technologically advanced firms in developing countries are committed to be imitators in the Freeman sense. This is partly because of their limited technical resources, and partly because of their comparatively limited production experience. The terms under which imitation processes take place in developing countries are essentially mediated by the ways in which technology is 'transferred' from industrialized countries. Literature on developing countries customarily distinguishes two main 'mechanisms' of technology transfer: 'direct' transfers, which involve transactions with machine suppliers, engineering consultants, and other agents in industrial countries; and 'indirect' transfers, done by licensing agreements with innovative firms in industrialized countries that have successfully appropriated relevant segments of the production technology.21 Indirect transfers may or may not involve foreign direct investments.
Whilst both groups of technology recipients are imitative, they are sharply differentiated in other ways. Recipients of direct transfers are 'supplier dominated' under Pavitt's categorization. They imitate earlier adopters in supplier-dominated industries in industrial countries. Recipients of indirect transfers on the other hand mainly operate in what Pavitt calls 'production-intensive or scale-intensive sectors', or even in science-intensive sectors, which are associated with relatively high R&D intensities in industrialized countries. Both of these latter types of sector in the industrialized countries themselves generate most of the technologies they use. In these sectors, therefore, new imitative entrants can generally access the technology they need only by contractual arrangement with the innovators.
This analysis suggests, interestingly, that there are a priori grounds to expect the imitative lag and associated competitive disadvantages faced by recipients of direct technology transfers to be less onerous than the circumstances facing recipients of indirect transfers. The reason is simple. Direct transfers centre mainly around the importation of innovative equipment from suppliers of capital goods, though they may require support from suppliers of other technological skills, such as engineering design and consultancy firms, or plant contractors. However, regardless of the complexity surrounding the process of transfer, none of the agents involved has a vested interest in delaying the imitative process. Suppliers of innovative machinery, in particular, are particularly interested in selling the machinery, regardless of the location of the customer. In partial contrast, indirect transfers involve supplying enterprises which agree to license the technology only when it is in their own strategic interests to do so. This often means, in effect, that they license only when a particular market is closed to other forms of exploitation, or when the firm's direct interest in exploiting that market directly is small. In particular, licensors will be concerned to avoid creating future competitors.22 It follows that licensed technology transferred indirectly will, other things being equal, involve a greater imitative lag than technology transferred directly. This hypothesis is plausible, at least for policy research, and it may be particularly relevant to sectoral choices for export promotion in developing countries.
Following Freeman (1989), imitative firms in developing countries would be expected to have found other advantages to allow them to compensate for the competitive disadvantages arising from these imitative lags. Thus, if our hypotheses about the relative lags associated with indirect and direct transfers are correct, it must follow that, on average, the compensating advantages required are greater for firms receiving indirect transfers. The existence of these compensating advantages in import-substituting economies is all too obvious: they take the form of effectively captive markets. Extending this argument, whilst keeping in mind Marshall's warning on such matters,23 a proportionately greater reliance on direct transfers would be expected in open economies with successful development of industrial exports-and this will have a significant effect on the sectoral pattern of exports.24 These assertions await empirical research. They are researchable by relatively simple means and they have a significance for policy.
This discussion demonstrates that interesting points and suggestive hypotheses do emerge when we confront the established approaches to technology transfer in the Third World with the conceptualizations of innovation theory.
The second line of analysis is best formulated as a question: Are there similarities between the cumulative, localized learning processes described by innovation theory, and the learning processes which actually happen within enterprises in developing countries? As a first step, note that the types of imitative activity we associate with firms in developing countries-that is imitation in 'supplier-dominated' sectors and imitation via licence agreements in other sectors-are normally accompanied by cumulative learning processes when they take place in industrialized countries themselves. This is very clear in the case of licensee firms in industrialized countries. It is however, less clear in relation to supplier-dominated firms. On this question, Dosi et al. (1990) say that supplier-dominated firms (within industrialized countries)
are generally small and their in-house R and D activities ... are weak.... They appropriate less on the basis of a technological advantage than on the basis of professional skills, privileged access to a resource, ... trademarks and advertising.
(op. cit., pp. 92-93)
At the same time, though, Dosi et al. stress the need for technological capability even in firms that obtain their new technology from outside equipment suppliers.
The process of diffusion of an innovation (say a new machine) in a user sector is, in essence, a process of innovation for the user itself.... An important consequence is that the process ... is also affected by the technological capabilities, ... and forms of production organisation of the users.
(op. cit., p. 119)
Thus, in industrialized countries, even firms that acquire new technologies by buying machinery which embodies it need certain critical technological capabilities. The question we wish to address is whether such capabilities are also encountered in firms in developing countries.
The answer comes in two parts. The first part is a tentative 'yes'. Firm-level studies of learning processes in developing countries are unfortunately rather few. Honourable exceptions are the case materials referred to in Katz (1987), and related work such as (inter alia) Dahlmann (1978), Maxwell (1977), and Katz and Albin (1979). These, like the work of Lall referenced earlier (note (2) and see Lall, 1987), reported firm-level studies which confronted and substantially dismissed the negative predictions about learning and technological development advanced by theories of technological dependency. Subsequent studies on the newly industrialized countries (NICs), particularly South Korea,25 have shown evidence of learning processes which could readily be described in terms similar to those used in 'innovation studies'. We are plainly dealing with very similar phenomena in developing countries and in industrialized countries as far as intrafirm learning processes are concerned.
The second part of the answer refers to the failure of learning to occur in certain cases (especially Dahlman and Westphal, 1982; Bell et al., 1982; and Dahlman et al., 1987). The authors referenced above all emphasized that learning is not 'automatic', as implied in the theoretical discussion by Arrow (1962). In fact, learning requires a conscious allocation of resources within the firm, and careful organization. In the absence of these, there may be no learning process at all. Furthermore, in the absence of appropriate external institutional conditions, learning processes may also fail to appear. An influential study on the failure of learning, based on case materials from Thailand, was done by Bell et al. (1982). Failure of learning processes in developing countries is in fact quite common. It is reflected in what is often called a 'black box' approach to production technology: firms in developing countries that receive technology via licence agreements are quite often unconcerned about how the technology works, provided only that they are able to produce with it. There are also reasons to expect that firms in developing countries may underinvest in learning processes (Cooper, 1980 amongst others). In short, whilst the cumulative learning processes associated with innovation and related activities in industrialized countries are reproduced in industries in developing countries, this is not automatic. Learning probably breaks down in developing countries more often than in industrialized countries. An interesting question is whether innovation studies can suggest ways in which this situation might be improved by policy.
The third line of analysis suggested above concerns the relationship between the processes described in the literature on innovation, and the 'accumulation of technological capability' as it is described in the development literature. Can innovation studies help to clarify the process of accumulation of technological capabilities? They probably can. One strength of innovation studies is that they are firmly based on clear ideas about institutions, whether these are the firms which do the innovation or the network of public and private agencies to which these firms relate. This perspective has often been lacking in the discussion of technological capabilities in developing countries, though the omission has been clearly recognized by some. For example, Bhalla remarks,
In addition to macroeconomic policy instruments, both governmental and nongovernmental institutions play a crucial role in the accumulation of technological capacity over time.... Yet few institutional studies have been carried out.
Enos (1991) in an important study, makes the following point (p. 2):
There are three fundamental components of technological capability-the individual constituents, their organisation and their purpose.... Technological capability resides in individuals ... operating singly in a technologically complex environment individuals can produce little.... They need to be brought together within an institution ... which ... may be a capitalist firm, a family enterprise ... a state-owned company.
In identifying the sorts of institution within which technical skill reside the difficulty is not in enumeration but in making some sense of the list.... Contributions to the absorption of technology can be expected from technical schools and professional faculties of universities, from producing firms, from their suppliers, customers and sub-contractors, from government departments, from consultants and laboratories, from specialised companies providing process and equipment design ... (etc).
One important contribution of the emphasis innovation studies place on both intrafirm skills and the institutional environment has been to distinguish the different roles these kinds of institution play in their relationships to industrial production and to 'make some sense of the list'. A valuable set of international comparative studies is given in Nelson (1993).
This brief consideration of institutional matters suggests another way that innovation studies may help us understand technology policy issues in developing countries. This involves analysis of differences in technological capabilities between firms. These are of two main types:
(1) differences in capabilities that are seen as path dependent, that dependent on a firm's history, especially its technological history; and
(2) differences in strategies employed to respond to technological competition, even in firms with similar technological histories.
These differences are likely to induce different firms to respond differently to policy interventions aimed in favour of technological change. To date, interfirm differences have not received much attention in empirical research or in policy design. However, they help to explain the emphasis on selective policies, such as selective infant industry protection, in some NICs.
1.3.2 Trade and technology
This section discusses how the approach to trade issues associated with innovation studies relates to developing countries. It has three parts. The first deals with background. It recalls that development economics has always been concerned with relationships to the international economy as a central theme, and that many influential approaches to economic development have incorporated important assumptions about technological factors, albeit implicitly.
The second part argues that the shift from import-substituting industrialization to more open-economy models of development, has made innovation studies more relevant to industrialization policies in developing countries. The third part sets out a rough and ready typology of the technology policies which accompany industrialization in an open-economy context.
22.214.171.124 The background: technology factors in industrialization theories
Development economics is characterized by concern with changing the relationship of countries to the international economy. The transformations required have often been 'technological'. For example, learning curve arguments were implicit in List's espousal of the infant industry argument as a basis for protectionist policies (List, 1844). Preobrazhensky (1926) addressed this issue during the course of the Soviet Debate on Industrialization in the 1920s. In discussing the choice between importing the means of production or making them at home, he refers to the possibility of 'improving and cheapening our own products' (Preobrazhensky, 1926).
Similarly post-war writers on development frequently rationalized their underlying dissatisfaction with traditional trade patterns by appeal to 'technology' arguments. Rosenstein-Rodan's 'big push' (Rosenstein Rodan, 1943) and the Nurkse formulation of 'balanced growth' (Nurkse, 1958, Chapter 1), were both in essence responses to problems of technological economies of scale. Prebisch (1950, inter alia) was less specifically concerned with infant industry arguments, but technological factors played a major role in his terms of trade analysis. Prebisch believed that the welfare gains from technological change in the world economy would mainly benefit the centre (i.e., the industrialized countries). Thus, increasing productivity in the oligopolistic industrial sectors at the centre would result mainly in increased profit margins and increased real wages in the centre's industries; whereas technological change in agriculture and primary production, where producers are inevitably price-takers, would benefit consumers and user industries mainly in the centre economics. Differential direct impacts of technological change also played a more direct role in the alleged tendency of the terms of trade to turn against the periphery, through product innovations (like the development of synthetic materials) which substituted for periphery exports.
The Prebisch inheritance passed to the Latin American dependencia school, which criticized Prebisch for failing to see that protected industrialization in the periphery would produce new patterns of technological dependency in the protected industries of Latin America. Technological dependency ensured that the biased distribution in gains from trade which had concerned Prebisch would simply be replaced by a biased distribution of gains from technological change, because of appropriation of technologies of production by industries in the centre. Furthermore, according to the technological dependency school, there were reasons to expect that these tendencies would be self-perpetuating (see for example, Cooper and Sercovich, 1971). There were different ways to account for this tendency. A purely descriptive approach, which had little to offer from the normative point of view, simply listed the different ways in which availability of centre technology would substitute for development of domestic technological capability. A more normative approach (surveyed in Cooper, 1980) focused on reasons why market forces and the institutional context in the periphery would likely result in sub-optimal investments in local technology. Both lines of argument were subsequently overshadowed by empirical research which showed the existence of considerable domestic technological capability in circumstances where dependistas had predicted that it would be absent (e.g., Katz, 1987 and Lall, 1984a).26
It is probably fair to say that the early post-war intellectual history of development economics was characterized by a series of swings from interventionist, 'delinking' ideas, to liberal open-economy proposals with occasional attempts at superordination and reconciliation of the need for growth and accumulation,27 and the exigencies of short-run allocative efficiency. In these arguments, the technology factor came in repeatedly mainly on the side of intervention and infant industry. In fact, many of the arguments that appear today in the innovation studies literature have long been present in the writings of development economists.
126.96.36.199 The shift from import substitution to export promotion
Despite the repeated use of technological factors to justify various types of import-substitution policies, the approach to technology policy associated with import substitution was in many ways essentially defensive. The case of Indian technology policy in the 1960s and 1970s gives a reasonably representative picture of the way technology policy was approached under import-substituting, closed-economy conditions.28 In particular it illustrates the relatively limited concern with technological change, which was common at the time.
From the late 1960s Indian technology policy-makers were increasingly seized with two main ideas: first, that innovative technologies licensed to Indian producers were often the source of monopolistic advantages to the licensers (a straightforward extension of the Schumpeterian innovative monopoly to international markets); and second, that ready availability of technology on licence would simply substitute for the development of technologies at home, and thus 'perpetuate technological dependence'. The response to the first issue was to set up a control system, which was largely bureaucratic, and involved the scrutiny of all proposals for technology licensing to see that the payments proposed under various headings (royalties, expatriated profit, input prices, and technical assistance) were within acceptable limits.
The second issue was less amenable to bureaucratic solutions. It was dealt with by requiring various Indian state industrial laboratories and other authorities to guarantee that no alternative Indian technology was available. Furthermore, there were checks to prevent 'repeated' technology imports, that is importation of the same or similar technologies by more than one Indian firm.
Whatever the conceptual background of Indian policy, it was unsatisfactory in important ways. There may have been some success in controlling various types of monopolistic pricing, but if so it came at the cost of long bureaucratic delays in processing technology agreements through the various Ministries. It is not clear whether the attempt to encourage the development of Indian technological capabilities worked at all. In any case, it is likely that it was wrongly directed: the key objective is to encourage development of technological capability within firms, so as to support their ability to compete in innovative sectors, and it is not clear that this would be facilitated by preventing importation of foreign technology in areas where Indian substitutes exist. On the contrary, there is growing empirical evidence of complementarities between importation of technology and development of local technological capabilities. Restrictive policies probably had the main effect of slowing importation of foreign technology just at the time when India was concerned to develop technologically intensive producer goods industries. It is curious that the objective of industrial self-sufficiency, which was dominant at the time, gave priority to producer goods industries, which were bound to depend importantly on imported technology, since they do so even in highly industrialized countries. It could be argued that there is an incipient contradiction between an industrial policy directed towards increasing autonomy and the simultaneous search for greater 'technological independence'.
The main point about the Indian case is that the approach to technology policy was very limited. It was concerned in the main with limiting the damage which might result from rent-taking by foreign enterprise, and only to a limited extent with the development of local capability. In practice the bureaucratic devices designed to protect domestic technological capability had very little effect. Much the same point could be made of many Latin American technology policies during this period.
As far as import-substituting economies were concerned, the shift towards open-economy industrialization and export orientation radically changed the terms of reference for technology policies, and added new relevance to the findings of innovation studies in the industrial economies. There were two key changes.
First, export orientation implies that industrialization policy must help firms in the home country to enter global markets, which in many sectors are oligopolistic. There is no need to underline in general what a radical change this is from the circumstances of import-substituting industrialization. A particular implication is that in the context of export-promoting policies monopolistic control of information by technology suppliers, whilst still often a reality, does not necessarily lead to the transfer-pricing practices which were so much a characteristic of the import-substituting case. At the least licensees- the recipients, or purchasers of technology-have much stronger incentives to avoid conditions which permit transfer pricing. Under import-substituting regimes, licensees in highly protected markets can afford to accept conditions that facilitate transfer pricing by suppliers, since all that is involved for them is a smaller share in the monopolistic rents accruing to an enterprise with unique advantages in a protected market. Provided they get some of the rents, they are likely to improve their profitability. But there is no such cushion of rents under the more competitive conditions of global markets. Consequently, one of the major concerns of policy under the import substitution regime is no longer relevant.
Second, when firms seek a place in a global industry they need to be concerned with more than just the problem of initial entry. They also have find ways to sustain themselves in markets where, in varying degrees depending on the sector, there is innovative competition. This usually means that they must have access to relevant technological capabilities to cope with continuing innovation in the international market. Of course, this situation simply does not arise under import-substituting conditions, where the need for technological dynamism was generally much less pressing. From what we know of about situations in countries that have succeeded in manufacturing export markets-Japan in an earlier period, the Southeastern Asian NICs more recently-policies in each case have focused on using technology transfer arrangements with foreign enterprises in ways which help to cumulate relevant technological skills in the local firms. Not surprisingly, concerns with the costs of technology, in the forms of monopoly rent, have been of secondary importance.
188.8.131.52 Broader implications and a typology
In the open economy context, issues of innovative competition and imitation have direct implications for industrial policy.
The starting point is the observation that the incidence of innovative competition varies between sectors-and also varies within sectors, since older products sometimes remain in competition to serve lower income segments of the market. These inter- and intrasectoral differences are of considerable importance. Entry into international markets where there is some degree of innovative competition requires that firms should be able to meet some fairly exacting conditions. They must have sufficient technological capability to obtain access to the technologies required; and they must be able to build on these capabilities sufficiently to keep up with subsequent process and product changes. The fact that conditions of innovative competition, are less present or less exacting in some sectors or parts of sectors than in others means that entry opportunities are not limited to firms, or countries with the best endowments of technological capacity, but that opportunities exist for less well-endowed firms. Tentatively we might distinguish three scenarios for countries attempting export-oriented industrialization.
1. Some countries have started industrialization in technologically undemanding sectors, and then, after accumulating a wider range of capabilities, have moved up to technologically more and more advanced sectors characterized by increasing intensity of innovative competition. The clearest example today is South Korea; Japan went through a similar cycle. China, or at least parts of China, may be starting such a pattern. Korea illustrates the potential of this stepwise process: over the 20 years from 1969, exports by volume grew at an annual rate of 15%. Real wages grew at 7% per annum, as did real value added per worker. Thus, profit's share in value added was more or less constant. The increase in labour productivity was facilitated by a shift from low to high value-added types of production, characterized by increasing degrees of innovative competition.
2. Other countries have entered manufacturing trade successfully, but have not achieved the step up to higher levels of innovative competition that Korea has managed. They have kept up with international technological change. Exports have grown but less rapidly and less sustainedly than in Korea. Hong Kong is a case in point. There has been a much less spectacular growth in productivity and also in real wages. Wage pressure on profits' share has been a problem from time to time. There have been periods when real wages in Hong Kong have fallen, probably in response to a slow down in productivity growth.
3. In yet other countries, the large majority of developing countries in all probability, where entry into manufacturing trade has been in sectors or subsectors with a low degree of innovative competition, competitiveness is based on low real wages and relatively low rates of productivity growth are required. Many countries have shifted into a pattern of this kind after adjusting out of the import-substitution policy. Chile seems a particularly clear example. Entry on these terms is evidently much less demanding in terms of technological capability than in the preceding cases, but the economic and social outcomes are less favourable.
This differentiated pattern of entry is not stable. In a world of innovative competition matters do not stand still for long. There is a tendency for areas of production which were hitherto calm backwaters of steady technology and fairly predictable price competition to be caught up in new rounds of innovative competition. When that happens, success depends on whether existing producers possess the technological capabilities needed to imitate process and product innovations. If they do not, they may be forced out of international markets, or they may hang on by cutting costs through real wage reductions. This pattern seems to be present in a number of low-wage sectors in developing countries. Successful industrialization depends increasingly not only on efficient production at today's technology and relative price patterns but also a capacity to keep up with an often unpredictable pattern of technological change. The success with which countries do this affects importantly the welfare implications of export-oriented industrialization. High rates of technological change permit increases in real wages without adverse implications for profitability and the incentive to invest. Lower rates often imply that the only way to succeed internationally is by forcing the real wage down, and turning the functional distribution of income against labour.
Plainly what is in question is a specification of conditions for industrialization which go considerably beyond the relative factor availability conditions of Hecksher-Ohlin. There have indeed been attempts to expand that standard framework - for example by including 'human capital'. But the impacts of technology go much further than the human capital concept and cannot be contained in it without losing the essential point. What is needed is a wider framework that includes the standard Hecksher-Ohlin conditions at one end of the spectrum and the conditions of entry under innovative competition at the other. The Hecksher-Ohlin conditions would apply in sectors where technologies are more or less stable. Proposals along these lines have been made by Dosi et al. (1990).
1.4 Concluding remarks
1.4.1 The relevance of innovation studies
1.4.2 Some general issues
This chapter has been concerned with the relevance of 'innovation studies' in the industrialized economies for technology policies in the developing countries. Innovation studies usually take Schumpeterian hypotheses as their point of departure; they are characteristically strongly empirical; and they frequently (but not unfailingly) take the innovative firm within the innovative industry as the object of analysis. In this section we draw conclusions about their relevance for industries in the Third World. The section is in two parts. The first gives a listing of six main conclusions on the relevance of innovation studies; the second takes up three key issues which cut across the points of relevance.
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