HOW GLOBALIZATION RESHAPES THE GEOGRAPHY OF INNOVATION SYSTEMS. Reflections on Global Production Networks in Information Industries

An important weakness of innovation system theory is a neglect of the international dimension. A central proposition rests on dynamic agglomeration economies: interactive learning requires co-location, hence a preference for national linkages. The analysis focuses on adjustments of national economic structures and institutions that are necessary to cope with the accelerated pace of change and the increasing uncertainty that result from globalization. Very little empirical and theoretical research has been done on the way globalization has extended learning and knowledge creation across national borders, and how such international linkages affect national innovation systems. This paper provides a new analytical perspective on this issue, by integrating theory and policy-oriented empirical research. We analyze the tension between globalization and innovation systems in information industries, a set of highly knowledge-intensive and globalized industries. We demonstrate that globalization gives rise to the international integration of geographically dispersed, yet concentrated and locally specialized clusters into global production networks (GPN). We ask how this affects the agglomeration economies argument and address the following puzzles: cross-border dispersion occurs despite the advantages of colocation; agglomeration economies are no longer restricted to the home country basis, giving rise to concentrated dispersion; and co-location can occur at different locations. We document how GPN in information industries enhance the migration of knowledge across firm boundaries and national borders. The paper also addresses possible explanations for the spatial impact of globalization. The principle of circular causation is used to account for trade-offs between conflicting determinants. A stylized model of globalization drivers captures the combined impact of institutions, technology and competitive dynamics that gives rise to GPN. We argue that, as a result, globalization fundamentally reshapes the geography of innovation systems: the centre of gravity has moved beyond the national economy. It is no longer possible to treat national innovation systems as if they were closed. The dynamic coupling of domestic and international knowledge linkages is of critical importance for economic growth in a globalizing world. International linkages can recharge domestic knowledge creation, provided appropriate policies and firm strategies are in place.