Parallel innovation policies to support firms with heterogeneous innovation capabilities in developing economies

Abstract

Recent research in understanding innovation policy practice in developing economies has revealed the need for different analytical perspectives. In considering the parallel presence of firms with highly diverse levels of innovation capabilities in developing economies, policy-makers must be keenly aware of the heterogeneous technological requirements of these firms. An analysis of the national innovation system of Sri Lanka reveals the presence of science-driven innovation policies which tend to benefit the firms that engage in in-house knowledge creation activities but only weakly support those engaged in strategic external technology acquisitions as a means of gaining a competitive edge. Taking this firm-centred view when considering developing economies such as Sri Lanka, we propose a pluralistic approach that takes account of internally created knowledge, externally sourced knowledge and firm heterogeneity for efficient innovation-based development. The implications for policy-makers in developing economies are on the need of different parallel systems and selective approaches that cater to the diverse technological requirements of local innovation actors to promote, nurture and create the desired technological change through optimal utilization of existing resources.

Keywords:

• firm heterogeneity
• innovation
• technological development
• national system of innovation
• Sri Lanka
• developing economies

Acknowledgements

We are indebted to the participants of GLOBELICS 2012 conference who provided critical comments on our paper that helped clarify the argument and to the two anonymous referees for their helpful suggestions for improvement.

Notes

1. According to the Central Bank of Sri Lanka, the average selling rate of 1 USD was 131.92 SLRS in the period of January – October 2014. Pls. see http://www.cbsl.gov.lk/.