Local Advantage in a Global Context
New Horizons in Regional Science series
Edited by Charlie Karlsson, Börje Johansson and Roger R. Stough
Chapter 5: Innovation in Low and Medium Technology Manufacturing
5. Innovation in low- and mediumtechnology manufacturing – the role of networks and non-R&D inputs Juan Julio Gutierrez This chapter explores the determinants of three innovation outputs in lowand medium-technology (LMT) manufacturing establishments located in a group of four lower-middle-income countries (El Salvador, Guatemala, Honduras and Nicaragua) participants in the Central American Free Trade Agreement with the USA. Two outputs were laid out in Schumpeter’s fivecategory typology (1934): (a) new products; and (b) new production processes. The third one, (c) improvements in existing products, is drawn from Kline and Rosenberg’s (1986) insight that innovation implies not only the creation of completely new products or processes but incremental changes in product performance that may later have major technological and economic effects. The theoretical base for identifying the determinants of innovation outputs stems from two bodies of literature. First, innovation is dependent on the establishment’s network of relationships, both internal and external. The internal network is equated to intrafirm cooperation, which encompasses the relationship of foreign-owned establishments with their headquarters. The external network is divided between interestablishment/firm relationships and institutional interactions (Zanfei, 2000). Second, as Kline and Rosenberg (1986) identified, other innovation inputs are: (a) adaptation and development within the establishment; (b) acquisition of machinery and equipment; and (c) human capital. The previous analytical framework is then applied to a cross-country establishmentlevel database of LMT manufacturing industries in Central America. The results support the idea that external networks, mainly interaction with universities and with local clients, and purchasing of foreign licences constitute...
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