ABSTRACT
Upgrading and catching up are and have long been central themes in economics and development studies (Belussi 1996; Schmitz 2006; Kaplinsky 2006; Pietrobelli and Rabellotti 2006). The field is, however, currently being challenged by the rapid growth of certain Asian countries, clusters and regions 2 which are not only catching up but becoming technology leaders in certain fields. 3 The phenomenon is so new that little is known about the factors underpinning this rapid growth. Little attention has been paid to how the challenges in moving from competing on costs to competing on knowledge creation are affected by the firms’ embeddedness in local innovation systems and clusters and how the relationship between the firm strategy and the local innovation system evolves over time.
