ABSTRACT
Over the past decades, the concept of innovation systems (IS) has been well developed and adopted in Western countries to account for the role played by the institutions and organizations that systematically interact in technological change as a key to competitiveness (Lundvall 1992; Nelson 1993). However, it has been criticized for neglecting the international or trans-local dimension (Bunnell and Coe 2001; Fromhold-Eisebith 2007). The trans-local linkages of the innovation dynamics are particularly crucial given that frontier innovation is rarely achieved in less developed countries (LDCs) and that most technology has to be imported. Technology transfer through foreign direct investment (FDI) has long been treated as a major engine of technological upgrading in LDCs. Governments in many LDCs, for example China, expect that advantageous technological knowledge embedded in FDI can drive technological upgrading. However, increasing numbers of developing countries have started to question the effectiveness of the FDI-led technological upgrading strategy and have called for more emphasis on indigenous innovation as a driver of developing indigenous technological capabilities (Fu and Gong 2011). Increasing attention has turned to assessing the major drivers of technological upgrading in developing countries, especially indigenous or foreign innovation efforts, and evaluating whether developing countries can rely on foreign technology to catch up with industrialized countries (Fu and Gong 2011). The debate on the importance of foreign versus indigenous innovation efforts is inconclusive (Fu and Gong 2011: 1213).
