The Danish Model
New Horizons in the Economics of Innovation series
Chapter 3: The Innovation System
The general background for the concept ‘innovation system’ is the comprehensive theoretical and empirical research on technical innovation that took place in the 1970s and 1980s. The most important result of this research was a rejection of a linear understanding of the innovation process, in which it was assumed that basic research was automatically converted to new technology and new technology was converted to innovation. On the contrary, the new research showed that innovation is generally an interactive process in which later steps in the process are linked back to earlier ones. Also, innovations are not usually singular events that result from the genius of individuals. Rather, innovation comes about as the result of a social process involving an interplay between many individuals and organizations over a longer period of time in which cumulative learning processes take place. The fact that innovation is a cumulative and interactive process means that the ability to innovate will reflect the relations and the interplay that exists between individuals, organizations and institutions. This shift in the understanding of the innovation process made its first policy breakthrough in 1992, when the OECD published the TEP (Technological and Economic Policy) report (OECD 1992). The term ‘innovation system’ was introduced in 1985 in Lundvall (1985, p. 55) as referring to the interplay between firms and institutions involved in knowledge production. The main theme of that paper was the interplay between producers and users in connection with the development of new products. The term ‘innovation system’ aimed at...
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