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Knowledge Flows and National Innovation Systems

National innovation systems are built on the assumption that understanding the interconnectedness of the actors engaged in innovation is crucial to enhancing technical performance. Innovation and technological advancement are the outcomes of a multifaceted network of connections between actors who produce, transmit, and consume various types of knowledge (Maloney 2017). The manners in which these actors interrelate with one another as components of a social system of knowledge consumption and generation, and also the technology they employ, have a significant influence on a country’s creative performance.

The most prevalent actors are public research institutions, universities, and commercial enterprises, as well as the individuals who work for them. Equipment acquisitions, cross-patenting, personnel exchanges, joint research, and a number of other methods can be used to establish links. There is no widely agreed definition of a national innovation system (Arranz, Arroyabe and Schumann 2020). 

Due to these three factors, the national innovation system approach has gained analytical significance in the technological sphere:

  1. The acknowledgement of knowledge’s economic worth
  2. Greater application of system-based techniques
  3. A rising number of knowledge-creation institutions (Fagerberg, Lundvall and Srholec 2018)
The Role of Education and Research and Development Activities in National System of Innovation

The analysis of national innovation systems emphasis on knowledge flows. The focus of analysis is increasingly on enhancing performance in “knowledge-based economies”; economies that rely solely on the application, dissemination, and creation of information and knowledge (Kolomytseva and Pavlovska 2020). Knowledge, as evidenced by technology and human being and, has always been critical to economic progress. However, its relative significance has only recently been known, and this relevance is expanding. The development of high-tech enterprises and the increasing need for extremely qualified personnel show that economic activity is becoming more and more knowledge concentrated. Knowledge investments such as creative work methods, training and education, and research and development, are regarded as critical to economic success.

Furthermore, R&D operations have contributed significantly to the commercialization of new goods and services by a diverse spectrum of corporations and organizations. The amount of resources dedicated to R&D operations by organizations of a country is an indicator of the readiness of the national system for innovative and creative activities. National traditions and taxation have an impact on the volume and breadth of R&D (Gulyamova 2019).. One of the indicators used to gauge the degree of R&D operations in a country is the % of gross domestic product exhausted on R&D.

The approach to national innovation systems represents the rising emphasis on the economic value of knowledge. The emphasis here is on “mapping knowledge flows” as an adjunct to tracking knowledge investments. The flows, especially those of “codified” knowledge in patents, papers, and other sources, are growing and becoming more visible, owing mostly to advances in information technology (Anisimov et al. 2017). The goal is to examine and assess the primary national knowledge transfer routes, determine bottlenecks, and offer policies and techniques to increase their fluidity. Simply put, this means tracking the links and exchanges that exist between academics, government, and industry in the advancement of science and technology. This sort of study might eventually result to the ability to quantify a national innovation system’s “knowledge diffusion capacity,” which is thought to be a predictor of competitiveness and growth.

A dynamic collection of artefacts, activities, and actors and the interactions such as alternative and complementary relationships, which are required for a population of actors or actors’ inventive performance, constitutes an innovation ecosystem. The media, mentors, entrepreneurs, foundations, private investors, venture capitalists, start up accelerators, businesses, government, and universities are all part of an innovation ecosystem (Granstrand and Holgersson 2020).

Each contributes significantly to the development of value in the wider ecosystem by bringing creative ideas to fruition via contact and financial commitment. Federal, state, and local governments may and must all play a role in environmental development. Understanding development, affordable, transit, energy, and water housing are all crucial to growth, as our public-sector partners are well aware (Smorodinskaya et al., 2017).

By supporting the active flow of information and resources, innovation ecosystems enable ideas to become a reality. With these ecosystems, a mechanism is established that will enable more entrepreneurs and innovators to design and deliver solutions to real-world problems more quickly (Oh et al. 2017). This method fosters competence in new industries, aids in economic diversification, and enables enterprises to reach out to clients no matter where they are. An innovation ecosystem also fosters resource sharing and economic stability.

Further, the start ups are generating employment and possibilities. However, it must not be neglected that they are also developing new technologies that are applicable to a wide range of sectors and audiences (Smorodinskaya et al., 2017). They are communicating with everyone in the ecosystem, finding essential partners, and transforming in-kind and monetary donations into physical products which will change the way everyone lives.

The innovation ecosystem’s value may be found in the availability of resources for start ups as well as the exchange of knowledge among ecosystem players (Smorodinskaya et al. 2017). The information flow opens up new investment potentials for the appropriate institutions by connecting them with the appropriate ideas for their portfolios and businesses for the correct reasons and at the appropriate time.

Closed innovation is based on the concept that internal expertise shared with an iterative method for controlling that expertise may lead to the sustainable growth of new enterprises. Information is retained within the firm and is not shared with anybody outside of the organization (Ahmed, Halim and Ahmad 2018). As a result, it seems like the funnel on the left, with solid walls representing the confined but secure internal development process.

 Open vs. Closed Innovation

Figure 1: Open vs. Closed Innovation

Open innovation, is relied on the idea that creative and knowledgeable individuals outside of the organization may further contribute to the fulfilment of strategic goals, and that sharing intellectual property in both directions benefits numerous stakeholders in a variety of ways. The more details acquired, the better informed the final decisions will be. The open innovation funnel seems like a cross between a funnel and a sieve since the growth method is not restricted to employees in the enabling organization (West and Bogers 2017). Additionally, the number of concepts has grown. Since not every piece of information could be exchanged with the outside world, having thousands of consumers’ feedback could lead to a considerable competitive edge.

The Importance of Innovation Ecosystems

Netflix introduced the Netflix Prize, open innovation challenge in 2006, which was available to anybody in the general public who was not professionally allied with Netflix. The competition’s goal was to develop a filtering system that enhances series suggestions or user movie by 10 per cent over the present one. Netflix guaranteed the sweepstakes winner a grand prize of USD $1 M, assuming a winner could be found (Bogers et al . 2017). More than 40,000 teams from 186 nations have participated in the tournament in just over a year.

Due to the swiftly growing complication of value chains and global markets, manufacturing firms' unwillingness inability or to follow strategies which create the operational capabilities required for innovation to offer both growth and profitability, positioning the issue as a modern phenomenon. Furthermore, even when they are no longer competitive or lucrative, companies prefer to adhere to established practices and paradigms.

  1. Creating an innovation strategy, framework, and set of tools
  2. Create a unique culture, separate sets of regulations, and assign suitable leadership in all sections of the company, ensuring that both are governed in primarily different ways (Gao, Hsu and Li 2018).
  3. Companies must translate their operations over time if their current and future efforts are to be consistent with their past.

An innovation strategy is described as a unified innovation mission and a thorough plan aimed at creating new value that clients are prepared to pay for. It is made up of a collection of norms or behaviours that are intended to aid the organization's future development (Sharmelly 2017). Culture is essentially the total of an organization's incentives, structures, beliefs, habits, procedures, practices, and, of course, people.

Apple is well recognised for its technological accomplishments in services, software, and hardware. The associated leadership approach and organizational architecture which have been critical to the success of the company in innovation are far less well recognised. When Steve Jobs returned to Apple, the business had a conventional arrangement for a organization of its multitude. It was broken down into corporate divisions, each with its own “profit and loss statement” (Podolny and Hansen 2022).

Management were vulnerable to squabbling with each other, as is normal in decentralized business units, especially for transfer costs. Steve jobs in the initial year as a CEO, fired up the company’s general managers of all corporate divisions

In his first year back as CEO, Steve Jobs fired the general managers of all business units, combined the disparate functional departments of the corporate divisions into one functional firm, and consolidated the whole business into one single profit and loss account, considering the fact that conventional management had stifled innovation (Podolny and Hansen 2022). Adapting a functional structure was almost certainly inevitable for a firm of Apple's multitude at the timeframe.

The dedication of Apple to a functional organization does not mean that its system is set in stone. The organization has grown in relevance as the importance of artificial intelligence and other developing sectors has grown (Prud'homme van Reine 2017). Apple's functional structure is one of the most unconventional, if not the only one, among large organizations. It disagrees with well known management philosophy that states that when a organization develops in size, it must be divided into corporate divisions and units. However, with the transition to corporate division, a crucial component is mislaid, then the arrangement of decision rights and knowledge.

An innovation culture is described as an organizational culture which appreciates and encourages invention, allowing individuals to bring it to reality. A company's imaginative culture is defined as regular, visible patterns of activity (Villaluz and Hechanova 2018).

Innovation leadership is a concept and practice that unites many leadership styles in order to persuade people to develop new products, and services and ideas. In the tradition of innovation leadership, the role of the innovation leader is critical. As an organizational growth strategy, innovation leadership may help an organization or group achieve its goal or vision (Colovic 2022). Firms must think creatively about new technology and methods to ensure long-term competition and success.


Ahmed, S., Halim, H.A. and Ahmad, N.H., 2018. Open and closed innovation and enhanced performance of SME hospitals—A conceptual model. Business Perspectives and Research, 6(1), pp.1-12.

Anisimov, A.Y., Kostyukhin, Y.Y., Skryabin, O.O., Zhaglovskaya, A.V. and Androsova, I.V., 2017. National innovation system as a model of economic development. International journal of advanced biotechnology and research, 8(3), pp.2075-2082.

Arranz, N., Arroyabe, M.F. and Schumann, M., 2020. The role of NPOs and international actors in the national innovation system: A network-based approach. Technological Forecasting and Social Change, 159, p.120183.

Bogers, M., Zobel, A.K., Afuah, A., Almirall, E., Brunswicker, S., Dahlander, L., Frederiksen, L., Gawer, A., Gruber, M., Haefliger, S. and Hagedoorn, J., 2017. The open innovation research landscape: Established perspectives and emerging themes across different levels of analysis. Industry and Innovation, 24(1), pp.8-40.

Colovic, A., 2022. Leadership and business model innovation in late internationalizing SMEs. Long Range Planning, 55(1), p.102083.

Fagerberg, J., Lundvall, B.Å. and Srholec, M., 2018. Global value chains, national innovation systems and economic development. The European Journal of Development Research, 30(3), pp.533-556.

Gao, H., Hsu, P.H. and Li, K., 2018. Innovation strategy of private firms. Journal of financial and quantitative analysis, 53(1), pp.1-32.

Granstrand, O. and Holgersson, M., 2020. Innovation ecosystems: A conceptual review and a new definition. Technovation, 90, p.102098.

Gulyamova PhD, G., 2019. Features of formation of the concept of the national innovation system. The Light of Islam, 2019(4), p.38.

Kolomytseva, O. and Pavlovska, A., 2020. The role of universities in the national innovation system. Baltic Journal of Economic Studies, 6(1), pp.51-58.

Maloney, W.F., 2017. Revisiting the national innovation system in developing countries. World Bank Policy Research Working Paper, (8219).

Oh, D.S., Phillips, F., Park, S. and Lee, E., 2016. Innovation ecosystems: A critical examination. Technovation, 54, pp.1-6.

Podolny, J. and Hansen, M., 2022. How Apple Is Organized for Innovation. [online] Harvard Business Review. Available at: <> [Accessed 24 April 2022].

Prud'homme van Reine, P., 2017. The culture of design thinking for innovation. Journal of Innovation Management, 5(2), pp.56-80.

Sharmelly, R., 2017. Crafting a winning innovation strategy. Strategic Direction.

Smorodinskaya, N., Russell, M., Katukov, D. and Still, K., 2017, January. Innovation ecosystems vs. innovation systems in terms of collaboration and co-creation of value. In Proceedings of the 50th Hawaii international conference on system sciences.

Villaluz, V.C. and Hechanova, M.R.M., 2018. Ownership and leadership in building an innovation culture. Leadership & Organization Development Journal.

West, J. and Bogers, M., 2017. Open innovation: current status and research opportunities. Innovation, 19(1), pp.43-50.

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