National, sectoral and regional innovation systems: their interactions and influence on suppliers' strategies

Publication Type:

Conference Paper


Attila Havas


Gerpisa colloquium, Kyoto (2014)


automotive suppliers, innovation strategies, innovation systems (national, regional, sectoral), types and sources of innovation


Automotive industry has traditionally been a front-runner in globalising its activities, originally in the forms of trade and licensing agreements, as early as the beginning of the twentieth century, and then in the form of cross-border investment projects. The main drivers for the major automotive firms are cutting costs via re-location of production, and gaining access to new markets in emerging economies. (Dicken, 2003; Frigant, 2004; Frigant and Lung, 2002; Henderson et al., 2001; Humphrey et al. (eds), 2000, Humphrey and Memedovic, 2003; Lung, 2002, 2004) They have become quite active in Central Europe, too: practically all major automotive groups, both assemblers and component manufacturers, have already set up their operations in Central Europe. (Havas, 2000, 2004, 2007; Dyker, 2006, 2007; Nunnenkamp, 2005, 2006; Pavlinek, 2002a, 2002b, 2003, 2005, 2006, 2008; Pavlinek et al., 2009; Pavlínek and Ženka 2011; Radosevic and Rozeik, 2005; van Tulder R, 2004, 2008) Given these strategic moves, the Central European automotive industry has been radically re-shaped: new products are manufactured by new entrants or fundamentally transformed incumbent firms, using new production and management techniques, and serving new customers.
The aim of this paper is to shed some light on this sweeping re-structuring process, focusing on the role and impacts of production networks, co-ordinated by major foreign firms, that is, the so-called sectoral innovation system; and policies and factors affecting the strategies and performance of automotive firms, that is, national and regional innovation systems. It is based on a literature survey, interviews with managers, both at foreign-owned and domestic firms, and simple sectoral statistical analyses. The paper are organised as follows. Section 2 discusses the relevance of the systems of innovation approach, that is, national, sectoral and regional systems of innovation and production (Dosi et al. (eds), 1988, Freeman, 1955; Lundvall (ed.), 1992; Malerba, 2002, 2005; Nelson (ed.), 1993) as a theoretical framework to analyse the dynamics of automotive industry, and especially the impacts of foreign-owned companies on domestic ones. Analysing historical trends can help in achieving a better understanding of current developments. Therefore, Sections 3 summarises the evolution of the automobile and auto parts industries in Central Europe. The role and interaction of sectoral, national and regional innovation systems are then discussed in Section 4. Theoretical and policy conclusions are drawn in Section 5, and two of them are summarised below.
Innovation systems, on the one hand, have major impacts on firms’ strategies and performance, e.g. via providing human resources with different level of education, investment incentives, environmental, safety and labour regulations, clusters of potential suppliers, potential partners for R&D and innovation activities. On the other, in small or medium-sized, open economies both sectoral and national innovation systems are strongly influenced by the strategies of foreign firms operating in these host countries. Accordingly, the conceptual framework for analysing innovation systems, originally developed in the context of large(r), advanced economies, has to be amended to grasp the important aspects of internationalisation in this different milieu. Further, internationalisation has to be understood in terms of the interplay between national, (multi-country) regional and global innovation and production systems. Central European countries, characterised by a significant weight of foreign firms in automotive (and in some cases more generally in manufacturing industries, too) both in terms of production or exports, can be regarded as a ‘living laboratory’ in this respect. An important research question remains, though, namely to disentangle the characteristics of small or medium-sized, open economies, in general, and those of small or medium-sized transition countries, in particular.
Notwithstanding the huge importance of foreign firms’ strategies and other aspects of globalisation, various elements and dynamics of national innovation systems still do matter. Highlighting just one of them, that is, government policies, a major lesson can be drawn by comparing general and industry-specific schemes. It is more fruitful to create an attractive, favourable environment for R&D and innovation – e.g. by maintaining a sound, well-performing higher education and research system, providing the necessary physical and institutional infrastructure, facilitating industry-academy co-operation and other forms of networking – than focusing on the promotion of industry-specific R&D and innovation activities. It is also of crucial importance to co-ordinate investment, trade, competition, regional development, employment, education and innovation policy aims and tools to enhance competitiveness.

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