Innovation Policy in a Global Economy: Patterns of national specialisation in the global competitive environment

Introduction National environments differ in their capability of stimulating, facilitating or preventing innovative activities of firms, and historically national economies and their institutional set-up have had a considerable influence on the firms' competitive success. A vast recent literature by formulating the concept of the ‘national system of innovation’ has confirmed that the structural characteristics of a national economy, such as its specific production structure, its technical infrastructure and other institutional factors, can strongly influence firms' innovative performances (Freeman and Soete, 1997; Lundvall ed., 1992; Nelson ed., 1993; Edquist ed., 1997). It has been shown that differences in national systems are particularly important between the United States, Japan and the EU, and between the European countries themselves. The concept of national specificities determining national performance, however, has been recently challenged on the grounds that the current wave of globalisation and sophistication of financial markets are aligning national economies. The growing role of transnational corporations (TNCs) in the current global competitive phase, as many point out, is changing the face of the world economy in the direction of standardisation and convergence of national structures and performances. A few even predict that the nation state will soon be obsolete and that national diversities, that were very important in the past, are likely to disappear in the near future. The limiting case would be of a fully transnational economy without any residual disparities across countries (Ohmae, 1990). This chapter assesses the issue of the linkage between globalisation and national specificities by looking at the dynamics of world trade and trade specialisation of major economies. It is divided into four sections.