Edquist, Charles, ‘ Systems of Innovation: Perspectives and Challenges’, in Jan Fagerberg, and David C. Mowery (eds), The Oxford Handbook of Innovation (2006; online edn, Oxford Academic, 2 Sept. 2009), https://doi.org/10.1093/oxfordhb/9780199286805.003.0007, accessed 16 Jan. 2024.

1. Origins and Definitions of National Systems of Innovation (NSI): The term NSI was first used by Freeman in 1987 to describe a network of public and private institutions that initiate and diffuse new technologies. Key works on NSI by Lundvall (1992) and Nelson (1993) adopt different approaches, with Nelson focusing on empirical case studies and Lundvall emphasizing theoretical development and interactive learning.
2. Key Aspects of Systems of Innovation: Lundvall identifies production structure and institutional setup as critical dimensions of innovation systems. Nelson and Rosenberg focus on organizations supporting R&D as key innovation sources. The SI approach is broad, including economic, social, political, and other factors influencing innovation.
3. Diversity in Definitions: Both Nelson and Lundvall define NSI in terms of determinants or factors influencing innovation processes but with different focuses, reflecting the lack of a universally accepted NSI definition.
4. The Role of Institutions in SI: The SI approach highlights the significance of institutions in innovation, though there is no consensus on the precise meaning of ‘institutions’.
5. Conceptual Challenges: The SI approach suffers from conceptual vagueness, especially regarding the term ‘institution’, which is used variably across different contexts.
6. What Constitutes a System?: The general systems theory suggests that a system includes components and relations among them, serves a function, and has identifiable boundaries.
7. Main Components and Activities in Systems of Innovation (SIs): Systems of Innovation are primarily composed of organizations and institutions. Key activities within SIs include R&D, competence building, market formation, quality articulation, organizational change, networking, and innovation financing. Each of these activities contributes to various aspects of innovation, from knowledge creation to market application.
   • Relationship Between Components and Activities: This chapter emphasizes the significance of “activities” in SIs while acknowledging the importance of “components” (organizations and institutions) and their interrelationships. Organizations and individuals perform activities, while institutions provide incentives or obstacles influencing these activities. Understanding innovation processes requires examining the relationships between activities and components.
   • Variability of Activities Across NSIs: The setup of activities in NSIs is relatively consistent, but there is variability in the organizations performing these activities and the institutions influencing them. For instance, research activities are typically carried out by research institutes, universities, or research-oriented firms, but the exact nature and efficiency of these activities can vary greatly among NSIs.
   • Importance of Interactions: The SI approach stresses the significance of interactions among components in SIs, including market and non-market relationships. Empirical studies, such as the Community Innovation Surveys, have demonstrated that collaboration and interactive learning among organizations are common and crucial for innovation processes.
   • Empirical Support for Interactive Learning: The importance of user-producer interactions, a central element of the SI approach, has been empirically validated through studies in various countries, illustrating the dynamic nature of this research field.
   • National Innovative Capacity: The concept of national innovative capacity, which is the ability of a country to produce and commercialize new technologies, is partly based on the NSI approach. This concept considers factors like R&D inputs, policy choices, and the country’s existing knowledge stock.
   • Mutual Embeddedness of Organizations and Institutions: There is a complex, reciprocal relationship between organizations and institutions in SIs. Organizations are shaped by institutions, and institutions develop within organizations. This mutual embeddedness influences the operation of SIs and the innovation process.
   • Creation and Interaction of Institutions: Some organizations create institutions that influence others, such as setting standards or formulating innovation policies. These institutions can also lead to the establishment of new organizations, like patent offices.
   • Interrelations Among Different Institutions: Different types of institutions can support, reinforce, or conflict with each other. Understanding these relationships is crucial for analyzing the complex dynamics within SIs.
   • Conceptual Clarity for Analysis: To analyze the relationships between organizations and institutions effectively, it is important to conceptually distinguish between the two. This distinction is vital for understanding the intricate relations characterized by reciprocity and feedback within SIs.
   • Main Components of SIs: In SIs, organizations (formal structures with explicit purposes) and institutions (norms and rules regulating interactions) are considered main components. Key activities in SIs include R&D, competence building, market formation, quality articulation, organizational change, networking, and innovation financing.
8. Learning Types in SI: The SI approach focuses on three types of learning: innovation, R&D, and competence building, occurring in different organizations and leading to the creation of structural and human capital.
9. Research Gaps and Opportunities: There is a need for a comprehensive innovation concept, including non-technological and intangible innovations. More empirical studies on SI determinants and activities are required, with a focus on case studies and comparative analyses.
10. Empirical and Conceptual Development: The SI approach has often been used superficially in studies. Conceptual clarity and empirical studies are needed to develop the SI approach further, including formulating and testing hypotheses.
11. Future Directions: The SI approach could evolve towards a ‘Systems of Learning’ model, emphasizing the relationship between R&D, innovation, and competence building, and considering different learning types and their interconnections.