A Tripartite Innovation Framework in Small Firms in Developing Countries: Key Issues for Analysis and Policy

This paper analyses the issue of innovation in developing countries with reference to local production systems populated by small enterprises. In these contexts innovation may result from imitation and from spillovers from foreign direct investments; however, the literature shows that these opportunities frequently find serious obstacles and are less fruitful than expected; for this reason we suggest a third way that result from the adoption of a specific theoretical and policy approach. We identify three concepts that represent basic principles in the definition of this framework; clusters (as well as other territorial agglomerations and networks), innovation systems (national, regional and local) and learning (of codified and tacit knowledge through absorptive and adaptive capacity). We argue that these three kinds of concepts taken together may help creating the necessary dynamism to produce innovations in developing economies, thus raising their competitiveness. A section on policy implications is finally drafted to specify possible functional, horizontal and vertical programs that policy-makers may design to promote the innovation capacity of local production systems in developing countries.