The Regional Economics of Knowledge and Talent
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The Regional Economics of Knowledge and Talent

Local Advantage in a Global Context

Edited by Charlie Karlsson, Börje Johansson and Roger R. Stough

The distinguished contributors advance the current research frontier in three novel directions which focus on: the role of human capital and talent for creativity, entrepreneurship and regional development; the role of institutions for the behaviour of firms and entrepreneurs; and the influence of the global context on the location, export and innovation behaviour of firms in a knowledge economy.
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Chapter 5: Innovation in Low and Medium Technology Manufacturing

Juan Julio Gutierrez


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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