Fostering Innovation through Strengthening Institutional ......11 e 12 de Novembro, 2013 – Rio de...

Fostering Innovation through Strengthening Institutional Capacity:

The role of the government in Nuevo Leon

Danilo Chávez Rodríguez

[email protected]

EGAP School of Government and Public Policy Campus Monterrey

Resumo /Resumen

In this paper the author argues that for emerging regional innovation systems (RIS), institutional

capacity (IC) is one ingredient that should be strengthened. The case of the State of Nuevo Leon

and the role that the government has played towards the building and fostering of an emergent

RIS through the creation of specific institutions aimed to transforming this State into a

knowledge-based development perspective (2003-2012). The role of government in fostering

and encouraging innovation activities might vary from reducing risk, by collaborating strategies,

and by using incentives or regulation. Since capacity seeing as the ability to improve

performance, institutional capacity is the ability of the government to improve performance

within the system. In this work it is proposed a model to understand the interaction between

users, producers of knowledge and four IC of the government (normative, building of incentives,

STI local organization and STI infrastructure) focusing at the organizational level based on the

interactions of subsystems proposed by Autio (1998). Through a deep case study using

documental review and semi structured interviews it is identify key STI organizations for the

State of Nuevo Leon and the factors upon which the strength of their IC depends upon.

Palavras Chaves / Palabras Claves: innovation; institutional capacities; emergent innovation

systems; Mexico

.

mailto:tredicinov:@gmail.com

Conferência Internacional LALICS 2013 “Sistemas Nacionais de Inovação e Políticas de CTI para umDesenvolvimento Inclusivo e Sustentável”

11 e 12 de Novembro, 2013 – Rio de Janeiro, Brasil

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1. INTRODUCION

The role of public sector (government) in fostering innovation processes has been

acknowledgesince the early works on systems of innovation (Nelson, 1988; Lundvall, 1992;

Cooke, 1993); and has been mentioned and described for the Latin-American case at national

(Dutrénit et al. 2012; Cassiolato and Lastres, 2010; Niosi, 2010; etc.), regional and sectorial level

(Niosi, 2010; Uriona, 2012; etc.) in several works explaining the performance and characteristics

of the IS . However, the attention to its implications at the regional level is still a subject of

analysis especially in developing countries.

Government intervention in promoting and creating a system/ecosystem for innovative

activity can be explained by its capacity of action at the organizational and individual levels.

At the organizational level, “Government has an important role as the only agency responsible

for the overall coherence of the national system of innovation as well for the cohesion of the

social system as a whole” (Lundvall et al., 1992, p. 305). Government provides certainty for the

interactions of economic, political and social actors, by setting rules, creating institutions,

detecting problems, designing and implementing policies, selecting policy instruments and

having the capacity to solve those problems (Edquist, 2011). The concept of national and

regional system of innovation becomes useful for understanding the capacity of government in

fostering innovation.

In developed countries, and particularly in the European Union, the above has been

widelydiscussed. At the theoretical level, some implications of national policy suggest to focus

on interaction within firms and the economic infrastructure. Lundvall (1992) pointed out, the

importance of focusing on the wider setting of the system where macro infrastructure, social

realm, and other factors can be improved through the establishment of institutions that foster

innovation processes. Other studies have focused on systemic failures (Carlsson and Jacobson,

1997; Smith, 2000), the rationales of innovation policy (Chaminade and Edquist, 2006; Bergek

et al., 2010), the designing of innovation policy and policy instruments (Edquist, 2011; Nadal,

1977; Borrás and Edquist, 2013). Some other studies have focused on the regional policy level

(Cooke, 1997; Oughton et al., 2002; Tödtling and Trippl, M. 2005) and the rationales for

intervention (Laranja et al., 2008; Chaminade, Vang 2010) through case studiesthat explore the

role of regional governments.

In Latin America such is Mexico, the implementation of innovation policies emerged on

the national and regional agenda. However, during the last three decades the level of

implementation, monitoring and evaluation represents a challenge. The OECD (2009) made an

evaluation of the RIS in 15 Mexican States where some of the main questions were: how



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national policies are able to support the development of RIS? And how these policies are

supporting to low developed regions in order to decrease the gap between the level of income

and productivity among States?

According to that evaluation, Mexican regional development policies lack coordination

between the different levels of government (national, state and municipal); there is not an

effective investment in competitive regions, and there is a need to create links between foreign

direct investment (FDI) and regional policies. Therefore the RIS approach in developing

countries is considered as emerging RIS due to its low level of innovation performance (Padilla-

Perez et al., 2009).

In this paper the author focuses on the subnational (State) government. The institutional

capacity will be understood as the ability of the state for fostering innovation processes in the

RIS. Section two refers to the theoretical approach where is analyzed the RIS and IC literature.

The third section refers to the model proposed and the description of four main institutional

capacities. The fourth section describes the depth study case based on Nuevo Leon where

documental research and semi structured interviews where held to main actors within the system.

The period of study is from 2003- to2012 were mayor changes to the RIS has happening.

2. APPROACHES

There is a consensus that economic development is based on the capacity to generate and

absorbinnovation processes (Cimoli, 2000). It becomes relevant to master the use of knowledge

in science and technology from external sources. Learning processes depend on the role between

institutions related to science, technology and innovation (STI) and appropriate policy

framework to foster business

relationships (Niosi, 2010).

2.1. The Regional Innovation System approach: a need for regional policy analysis

The literature in RIS is extensive and has gained great recognition in developed and

developing countries. Factors that influence regional innovation include: the presence of local

public research institutions, large dynamic, industry clusters, venture capital, an environment

conducive to business creation and infrastructure for science, technology and innovation, vertical

and horizontal links in the clusters, the human capital endowment, the orientation to export

markets, the role of the State (Cooke and Memedovic, 2003; Niosi, 2005; COMECYT, 2011;



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Padilla-Pérez et al., 2009) among others. The regional level began to gain more attention from

scholars and policy makers. They began to focus on the particular combinations of political,

cultural, and economic structures (Cooke, et al., 1997). The RIS approach emphasizes external

economies are generated by strong companies, a stock of labor

capacities, network of suppliers, and local based knowledge (Malecki, 1997).

The concept of RIS turned relevant due to the implementation of policies at regional and

state level that are concerned with the growth of specific region mobilizing players in specific

areas (Chaminade and Edquist, 2010). Porter (1990) showed that competitiveness and innovation

are explained in the existence of innovation systems based on local and regional clusters. The

regions thus seek to build and enhance their competitive advantage in given institutional and

government or local press for them (Cooke and Memedovic, 2003).

Innovation systems are defined by regions of economic activities and depend largely on

the emergence of intermediate organizations (Casalet, 2005) based on the work of the actors and

their networks. The competitiveness and sustainability of the countries and regions depend on its

ability to attract, capture, generate and exchange knowledge, eventually joining in their value

chains. Governments in developing countries have a critical participation in the support of

existing RIS or the emerging of ones, providing the means to learn by public investment in

education of novelty, preserving knowledge and keeping technological options open, financing

STI and telecommunicationsinfrastructure, providing regional budgets (Cooke et al. 1997).

Autio (1998) developed a framework to study RIS capturing the main characteristics and

relationships of a RIS operating at different levels of government such as local, national and

international level. It is distinguished two subsystems that constitute the main building blocks of

RIS:

a) the knowledge application and exploitation sub-system and b) the knowledge generation and

diffusion sub-system. Both sub-systems co-habit in a socioeconomic and cultural context. The

main external influences on RIS take the form of NIS institutions/organizations, policy

instruments, other RIS and international organizations and policy instruments, which also

interact and shape the role of an RIS.

The components of the structure according to Autio (1998) are in the two subsystems

mentioned and its division also corresponds to a distinction between public and private sectors,

and between commercial and noncommercial activities. In this way there is a reference to a

bidirectional flow of knowledge and the interaction of resources and human capital.

Autio’s (1998) model provides an approach to the RIS relations taking into account user

and producer of knowledge, both seen as subsystems with bidirectional relationship through the



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exchange of flows of knowledge, resources, and human capital in an environment where shared

social, economic, political and cultural characteristics, which in turn are influenced by national

and international external environment.

Regions are privileged context to develop competitive environments because of its

factors of learning through interaction, geographical proximity, the generation, use and

dissemination of knowledge (Niosi, 2010). RIS’s approach emphasizes the systemic dimensions,

the propensity of interaction between actors in innovation processes.

The evidence suggests for regional contexts in developing countries some features:

weakinternal governance institutions, financial conditions are not found at the regional or

national level rather outside of the country, shortage of local resources of knowledge, human

capital challenges companies to improve their skills to add value to their products and processes,

lower degree of integration and interaction and dependent on a flow of knowledge and

technology primarily from outside (Padilla-Pérez, et al. 2009; Cooke and Memedovic, 2003).

A question regarding the RIS in developing countries is whether they can support the



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improvement of technological, scientific and innovation of organizations in the region and the

system itself. The purpose of innovation policy is to improve the performance of the creation,

acquisition and retention of technological, scientific and innovation and the dissemination of

knowledge among RIS actors.

Although given a strong role for the government to promote regional, depend on the

degree of autonomy of the same in the application of these mechanisms (regional policy

instruments). Regional authorities do not have access to large-scale policies focused on

innovation as opposed to national authorities. Another aspect is the extent to which regional

authorities have implemented long-term policies focused on innovation. It has also considered

the degree of association and linkage within the RIS stakeholders (Cooke and Memedovic, 2003).

In other words to have the institutional capacity topromote activities that foster innovation

processes.

a) The government’s role in regional innovation systems

The concept of innovation has permeated not only the traditional areas of business,

science and technology, but also has captured the attention of stakeholders such as policy makers.

Governments focused on the design of innovation policy as a way to promote sustained

economic growth (Lundvall and Borrás, 1998). Innovation policy “implies the creation of a

climate and certain attitudes that enable coordination’s between agents directed to achieving

innovation” (Sweeney, 1995 in Cooke et al. 1997, p.488) and is the public actions that influence

innovation processes (Edquist, 2011). This direction was developed initially in developed

countries, where industrial, technology and science policy have focused their guidelines to

promote innovation activities (such as product and process) and the

strengthening of its components. The globalization process has highly influenced the design and

implementation of these policies.

Studies reveal the importance to identify systemic problems and their causes-through

diagnostic analysis. This public action needs to focus on the adaptability of innovation systems,

with the aim of generating a national or regional framework conducive to the adaptability of

businesses and their efficient exploitation of opportunities offered in a global context (Edquist,

2011).

Traditionally the role of government has responded to the provision of an educational

system, to provide incentives to businesses, and regulation by establishing “rules of the game”

through laws and policies. To be considered in the context of innovation systems, by the role of

government we mean public actions for promotion and interaction with private actions and



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reactions that are changing the basic structure of societies (Nelson and Winter, 1993). Public

policies arise in response to changes, demands and opportunities of the interaction of different

actors. The interactive relationship between micro-and macro-structures reflects systems as

complex entities characterized by inertia of co-evolution and self-governance (Lundvall, 2007).

From an evolutionary perspective the policy approach refers to the search of learning and

innovation in the public and private sectors, strengthening technology diffusion, introducing

socially responsible practices in public and private organizations (Niosi, 2010) and stimulate

adaptability constant innovation systems (Lundvall, 1992).

The government’s actions are not only in activities related to the generation of

knowledge (R&D funding, capacity building through individual skills), also promotes other

activities relating to the application, as is the provision of business services including basic

elements (Edquist, 2008). The activities in innovation systems are the determinants of the

development and diffusion of innovations, some of the main activities were identified by Edquist

(2006; 2011) regarding the provision of knowledge inputs, the demand side activities, the

provision of constituents for system of innovation and the support services for innovating firms.

Cooke and Memedovic (2003) mention three areas in which public authorities should advocate

for the development of RIS: a) the RIS approach enables policy makers on the current strengths

fit your industry and develop future strategies; b) provides a systemic and integrated approach

from the business side and the demand side as a contribution to a coherent design of an

innovation strategy for public policy, and c) The concept of systems allows to clarify what type

of support is policy requires at local / regional / national / transnational and possibilities of inter-

regional cooperation.

According to the literature in RSI, government role in innovation we suggest to consider:

1) the capacity to develop a normative framework; 2) the capacity to provide incentives for

firms; 3) the capacity to create organizations related to STI; and 4) the capacity to provide a

proper infrastructure of communication and information support.

b) Delimitation of a RIS

Cooke et al. (1997) states that regions can be view as a regionalism or regionalization

phenomena. The first type involves a set of characteristics such as culture ties, language, and

common customs. The second type has to do with political boundaries such as a municipality,

province, State, Nations. In the literature can be found several examples of successful RIS such

as Silicon Valley, Route 128, etc. Other studies suggest that RIS are more frequently found

within cities or metropolitan areas. Some regional differences in innovation performance are



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identified (Todtling and Trippl, 2005) between old industrial regions, metropolitan regions, and

peripheral regions. Zucker et al. (1998) suggest that most knowledge externalities and venture

capital activities take place within maximum o 50-100km. Subnational jurisdictions in USA and

Canada are far too large for most externalities to

occur homogeneously across their territories (Niosi, 2000).

In the general definition RIS will be define as regions where innovative activities takes

place (Niosi, 2000). In that sense will be considered the RIS as an urban agglomeration. The

metropolitan city of Monterrey in this case will be considered as a RIS where the Nuevo Leon

State government has the competence to establish normative framework through policies,

incentives, and regulations.

2.2. Institutional Capacity

The Systems of Innovation approach has described as a set of structures where private

and government entities interact under regulated institutional frameworks, incentive mechanisms

and restrictions for operation. The key factors are knowledge products and learning processes

between producers and users of knowledge, who will act in accordance with the conditions and

capacities of the actors involved in the systems.

This section aims to discuss the concept of institutional capacity, highlight the

importance of the institutional capacities of sub-national government for innovation in order to

establish a framework that can help us understand the role of institutional capacity of a

government supporting innovation activities in a regional context (system innovation).

Institutional capacity is a concept integrated with two sub concepts; institutions and

capacity. The use of the term institution has become widespread in social science research. The

importance of the study of institutions highlights how these mechanisms are necessary for the

understanding of the nature, origin, function and implications in human behavior and the

characteristics of organizations, societies and the performance in the economies. Recognition of

the role of institutions in human interaction /social is structured in terms of explicit or implicit

rules (Hodgson, 2006; North, 1990).

a) Institutions

A broad definition of institution is all that is "a system of established and prevalent social

rules that structure social interactions-for example, language, money, law, the system of weights,

businesses and other organizations" (Hodgson, 2006, p. 2). For North, institutions are "the rules

of the game and the humanly devised constraints that structure political interaction, economic



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and social" (North, 1990, p. 3). An institution "regulates the behavior or a rule that is generally

accepted by members of a social group, which specifies behavior in specific situations, and that

is either self-monitored or monitored by an external authority" (Rutherford, 1994, p .182).

The rules are subject to be codified. Members of a community share explicit and tacit

knowledge of these rules. The rules can be consciously designed as formal political rules

(constitutions, regulation), economic rules (property rights) and contracts (agreements binding

rules embedded inproperty rights) and informal rules (norms, conventions, codes and mores)

North (1990, p. 3).

Communities share and understand the rules that are involved. For Hayek (1967) the rule

is any provision of behavior, including instincts and habits, which can lead to a regulation of the

behavior of ndividuals.

In economics, institutions can be seen as a market, in a setting where established players

follow rules and define the behavior, patterns, routines, norms, shared expectations of

individuals including some rules of economic behavior such as the rights of property (Edquist

and Johnson, 1997). In public policy, institutions are seen as the context in which policy and

decision-making is created, shaped and changed. For the study of innovation systems,

institutions are relevant for understanding innovation processes, this perspective assumes the

concept of institutions understood as individual entities and organizations that are directly

involved in industrial innovation as companies and organizations support (technical universities,

industrial research centers, R&D departments, consulting agencies, patent offices, technological

service institutes and other intermediary organizations) and as elements that

influence and shape behavior as routines, rules, policies etc. (Edquist and Johnson, 1997; Nelson

and Rosenberg, 1993). One of the important roles of institutions in a society is to reduce

uncertainty by establishing a stable structure to human interaction.

The study of institutions opened institutionalism approach that focuses on companies,

institutions, actors, regimes, rules and resources. Society complexity increases according to the

characteristics of its components. At the same time, institutionalism focuses on the interaction

between individuals and institutions, through the coercive power and influence of the latter on

the conduct and behavior of the first, but also how they can alter their institutional values. The

incentive structure, rules, norms, behaviors that are maintained over time, gives certainty is the

relevance of the relationship between the actors, which is the main function of institutions.

The discussion of why some countries or entities have a level of development more than

others has been widely questioned and is an active topic of research in several disciplines. The

focus on improving performance to deliver better results has a resonance also active in research



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areas ideological, political, social, technological, cultural, and economic. Cities are a privilege

place where innovation takes place, due to it's an urban conglomerate where (positive or

negative) outcomes like patents grow at an exponential level (Badger, 2013). This allows us to

link the concept of capacity on the ability to improve a condition or set of circumstances or

understand the existence of these practices challenges.

b) Capacity approach

The term capacity is matched to the skill, and the potential availability of performing,

producing and developing improvements. This term applies to governments, public institutions

and communities involves the level of achievement of these entities, in addition, assets and/or

powers to achieve the objectives (Hall, 2002, p.24).

The term capacity is discussed from the point of view of the government's ability to carry

out the function to promote innovative activities within a regional context. To define what is to

be understood by the institutional capacity in this study, first we name how the concept has

developed andthen focus on the conceptual approach of organizational capacity, develop by

Susana Borrás (2011) in the context of policy learning in innovation systems.

The concept of capacity refers to the ability of its individuals, organizational units and

institutions to carry out their functions effectively, efficiently and sustainably. Capacity involves

the active use of a continuous process, where people are the central factor in capacity building in

all areas. Also defined as "the ability of a context in a set of entities operating under a common

purpose according to certain rules and processes" (UNDP, 1997, p. 121).

One aspect to consider is measuring the concept of capacity. Intrinsically, the ability

refers to resources and their allocation. Requires an agreement and the mapping of the agents

involved. Grindle (1997) suggests that capacity development initiatives in the public sector must

be seen in three dimensions: human resource development (focus on providing professional and

technical personnel), management systems development organization (to improve the

performance of specific tasks and functions, micro-structures), and institutional reforms

(institutions, systems and macro-structures).

In this study, institutions are both concrete entities such as organizations and elements

that change and shape the relationships among economic, state organizations and companies,

among others. Then, institutional capacities are the ability of the state to enforce the board sets of

rules that govern economic and political interactions (Grindle, 1999, p.9).

The concept of institutional capacity (IC) has expanded and has been approached from

various perspectives, some authors understand it as an input (in-put), a process, as a result



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(Morgan, 2006) and institutional quality (Fukuyama, 2004; Israel, 1987), as an attribute of

governance, governance (Grindle, 1997), as an organizational feature (Tolobem, 1992; Morgan,

1997), or as an element that enhance thei ndividual (Sen, 1999). In addition, it has been used as a

synonym for quality management, organizational performance, efficiency, management or

training (UNDP, 2009:49). Nelissen (2002) suggests that the capacity can be of two types:

indicated when government bodies have to perform a certain task, or it can be effective in terms

of performance of the capacity of local government to act and the context in which it occurs

action.

c) Organizational capacity for policy learning

Most of the literature devoted to IC has centered in the performance of government or

international organizations that provide work and services to attend public goods. The issue of

IC becomes relevant in the nineties due to the adoption of state reforms in the second generation

in developing countries. These reforms promoted a series of administrative measures within the

same structure to achieve efficiency in service delivery and strengthening the conditions for

private sector development and public. Measures were a development of strong institutions as

the government body began to reduce their action and their influence on public affairs. The

process and experience of capacity building in developing countries has varieties of successful

and unsuccessful outcomes(Grindle, 1995).

The need to improve the management and state action through the use of their capacities

and immersion raises reforms both internally and externally. Concern for capacity building has

to do with: improve function and solve public problems, b) moving or adapting institutions to

address public problems, and c) develop, implement, coordinate, monitoring, evaluating and

reporting accounts under a government system (Huerta, 2008, p. 121).

Under the system of innovation perspective a methodological model was proposed by

Borrás (2011) about learning in organizational capacity. This model offers a framework to study

policy learning and organizational capacity. Takes into account a dynamic process of policy

learning in orderto induce and stimulate constant adaptability innovation systems (Lundvall,

1992, in Borrás, 2011, p. 725). Policy learning is understood as a "lasting alteration of thought or

behavioral intentions that result from experience and/or new information having to do with the

production or revision of policy

objectives" (Sabatier and Jenkins-Smith, 1999, p. 123, in Borrás, 2011, p. 727).

This approach recognizes the multiple actions of governments in relation to other actors,

and the capacity of the state and its bureaucracy to produce/use/accumulate knowledge and



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experience in the processes of political change (Borrás, 2011, p. 726). The policy change has

been seen as a process of historical transformation in the direction, content and patterns of

specific areas of public action, as an agency and representative of interests and the institutional

path dependency (Sabatier 2007 in Borrás, 2011, p. 727).

Borrás’ model is based on Bennett and Howlett work (1992, p. 278) and refers to

learning as "the general tendency for policy decisions to be taken on the basis of decisions based

on knowledge and future expectations". Learning involves an unintended consequence to the

resolution of problems. These authors suggest three levels of learning, look who learns, what is

learned and the effects of education in terms of change from: a) learning of the government

(officials, the policy-making processes and the generation of organizational changes), b) lessons-

in-picture (policy instruments generating networks and changes in the policy program), and c)

social learning (for learning policy communities about the ideas and the generation of the policy

paradigm shifts).

The three levels of policy learning and policy change effect, argues that each has an

impact on the innovation system and are related to specific organizational capabilities for each

level (Borrás, 2011, p. 728). The government case of learning has to do with the business,

administrative capacity as "the ability to develop, manage and control the resources to support

the implementation of public policy and program responsibilities" (Donahue et al, 2000, p. 384,

in Borrás, 2011, p.729). The second level is about the political network and corresponds to

stakeholders and government actors; this level of analysis requires the ability to monitor the

market failures and policy instruments. The third level is considered broader learning as it relates

to social level (communities of socio-economic actors), organizational capacity is diffuse,

involves thinking skills in a broader framework of actors, their ability to communicate and create

a collective sense of understanding (Borrás, 2011, p.729).

In this work we are interested in the level of government learning (organizational level)

where administrative capacity is “the ability to develop, direct, and control resource to support

the discharge of public policy and programme responsabilities” (Donahua et al. 2000, p. 384 in

Borrás, 2011, p.729) and the “set of rules, procedures and resources governing administrative

action and designed to improve performance” (Hou et al., 2003, p. 300 in Borrás, 2011, p.729). It

is use interchangeable the terms of administrative capacity and institutional capacity. New

modes of governance are characterized in the innovation theory, practice and policy regarding

the role of government. It is also recognized that knowledge and learning are largely integrated

in institutional practices and policies and are important

conditions for policy transfer.



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2.3. Putting it together: a model to study institutional capacity for innovation

Starting from the generic elements of Autio’s model and understanding the relationships

between actors and functions, we propose a structure that involves the relationship of the two

original subsystems: the one in charge of the generation and diffusion of knowledge, the one

refer to the application and exploitation of knowledge, adding the regional policy subsystem

presented in Figure 2 as the elements and structure of a RIS to study. The regional policy

subsystem, compose by the governmental body has 4 main functions based on the literature

review about the role of the government in regions. These functions are: 1) the creation of formal

institutions such as laws; 2) provide support services for firms (approach from the business side

and demand side); 3) the creations of organizations related to STI; and 4) to provide a proper

infrastructure of communication and finance support.

Source: Author’s own elaboration adapted from Autio (1998).

The diagram outlines four subsystems mentioned that make up RIS. Also that there are

external sources that influence a region such as organizations and institutions of the NSI, policy

instruments from the national level, international and other RSI, and intermediary organizations.

Adapting Autio´s (1998) model and reconfiguring RIS elements within the subsystem of

knowledge generation and diffusion consists of 4 elements: public research organizations,

universities or academic institutions (public and private) human capital and intermediary

organizations.



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Within the subsystem of application and exploitation of knowledge is simplified the

constituent elements proposed in Autio (1998), taken as generic companies and industries, which

interact with customers, producers and suppliers, among which there are horizontal and vertical

relationships.

The regional policy subsystem is an active element in a RIS but other studies refer to this

element as a macro and contextual factor. In this work we distinguish four functions in terms of

institutional capacity: 1) the capacity to develop a normative framework; 2) the capacity to

provide incentives for firms; 3) the capacity to create organizations related to STI; and 4) the

capacity to provide a proper infrastructure of communication and information support. These

dimensions are selected according a review of the literature as factor explaining the performance

of government in a region.

It’s been outlined the implications of innovation activities, from the conceptual

framework of innovation systems, arguing the case study for a regional approach. Also described

the basic elements of the role of government in promoting these activities. The literature review

shows an evolution in the study and design of policies concerning an innovation system. But in

turn, the most exploited context has been cases in developed countries (NIS) and examples for

RIS. This review also reflects the importance of the study and systematization of experiences in

terms of the interaction between knowledge’s producers and users as these relationships

generates learning processes and the generation

of innovations.

These studies conclude that the work of sub-national governments is critical because is in

the State that relies the legal framework, institutions and public organizations that provide the

“certainty” in their process of discovery. Although there is still a way to go in terms of public

policy studies: from policy mechanisms (instruments), incentives, and institutional capacities.

That is, where case studies highlighting the role of government originally encompassed the

subsystems of generation and exploitation of knowledge on the part of producers and consumers

of it.

Some studies have supported these dimensions as the case Edquist and Chaminade

(2010) whom highlights the importance of addressing from the perspective of innovation

systems major innovation activities should encourage by the government. Studies also Edquist

(2011) regarding the design of innovation policy through diagnostic analysis, in order to identify

systemic problems. Borrás (2011) analyzed from the perspective of policy learning a

methodological approach to organizational capabilities regarding innovation system. Also Borrás

and Edquist (2013) refer to three types of policy instruments in order to give attention to the



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activities of innovation. A fair amount of literature in this regard is also generated by

government bodies responsible for science and technology policy in the case of Mexico:

National Council of STI, Consultative Forum, Ministry of Economy, the State Councils for

Science, Technology and Innovation, The Innovation and Technology Transfer Institute in

Monterrey (I2T2) and work by researcher and scholars.

3. METHODOLOGICAL NOTES ON THE FRAMEWORK

The framework is proposed to analyze a specific metropolitan area located in the State of

Nuevo Leon. Government’s competences differ by the type of level of governance: federal, state

and municipality, understand at some point the capacity to support innovation policies.

Case studies under systems of innovation approach suggest policy implications for their

sector or region of study. However, the policy process especially in developing countries is still

a challenge. The process of decentralization allows power of decision and the use of economic

resources at the subnational level. In countries such as Mexico whom the three levels of

government share the competence to provide support for innovation, the effort is doubled or

sometimes tripled due to this competence overlap and the consequence may be an inefficient

implementation of policy instruments.

Policy makers cannot just plan systems of innovations from scratch. A learning process

needs to be generated from the design and implementation of public policy. Policy instruments

are important in order to evaluate how government´s capacity deals to solve systemic problems.

Hence the importance of an institutional capacity framework is to strength the four regional

policy functions cited to foster innovation (see table 1).



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Source: Own elaboration

Government intervention should happen when uncertainty and risk are very high and

private actors do not find the incentive to invest in those high-risk products or new activities.

Such intervention “needs to be selective, focusing on specific products, activities or technologies

that better fulfill the (economic, social, environmental, etc.), objectives of the government”

(Chaminade and Edquist, 2010, p.106).

A diagnostic was conducted to describe the RIS in Nuevo Leon through a documental

analysis looking for insights in the periods of 2003 to 2012. The purpose of the diagnostic is to

highlight how an emerging RIS has been developing through the years. Also fourteen interview

were held to important

actors within the RIS

4. INSTITUTIONAL CAPACITY FOSTERING INNOVATION IN NUEVO LEON

The city of Monterrey it is the capital of the State of Nuevo Leon (NL), located at the

Northeastern region of Mexico (see figure 3); Monterrey is considered the most important

financial and industrial center, as well as port of entry for the commercial exchange between the

Northeastern Region of México and the United States (OECD, 2005) and the most innovative

city according to IMCO (2010). Also, it has been characterized for its industrial wealth and

progress and as a competitive economic region.



16

Since the beginning of the twentieth century the city of Monterey became a leader in

national and international activities such as, steel, beer, glass, cement, ceramic products,

chemical and metalworking and other manufacturing (IDB, 2009).

In the last decade the government of the NL (two governmental party periods 2003-2009

and 2009-up to this date), has set strategies and policies to put the Metropolitan city and their

region (State) in the international spotlight not only in terms of commerce and industry. One of

its main pillars for economic development is the strategic program “Monterrey International City

of Knowledge”, which is based on an alliance between government, higher education institutions,

and industry, also known as the Triple Helix, to promote growth through innovation (OECD,

2009, p.192).

In the beginning, the project followed some basic strategies which included revising

educational contents and methods, the incorporation of technology specialists for industry,

increasing the number of researchers and public research centers, promoting business incubators,

and strengthening the city’sinfrastructure. To strengthen the alliance, several clusters were

initiated in sectors including : automotive, IT, medical services, life sciences, agro, nanotech and

biotech, accompanied by public and private research centers, innovation and intellectual capital

for each sector (OECD, 2009).



17

a) Regional Innovation System of Nuevo Leon

i) Knowledge generation and diffusion Sub-system

This subsystem is composed by public and private organizations, also local and national

and international entities. According to the definition provided for the knowledge generation

subsystem, its elements are research institutions, universities and technical, human capital and

intermediate organizations.

Intermediate organizations are entities involved in business support and their regular

activities, which operate at national, regional or local level. They are also identified as

facilitators of other actors within the RIS. These organizations within the subsystem are those

disseminators of knowledge and serve as a liaison between buyers and sellers of products and

services involved in the STI.

From the fourteen public research centers established in Nuevo Leon (2003-2012) ten are

located in the Research of Innovation Technology Park (PIIT) -opened in 2005. In 2013 two

centers have already built and will start operation. The remaining four centers belong to the

Autonomous University of Nuevo Leon (UANL); three of these centers are located within the

premises of the University and the other one near the airport of the city.

Regarding private research centers (PRC) detected in the document review. There are 19

PRC dedicated to scientific research and technological development. It uses the same criteria and

frames their role with respect to the three functions of the ICC. Twelve of them located at the

PIIT. These centers belong to private university, regional companies and multinationals such as

Motorola. The seven remaining centers, six belong to the ITESM and one to the University of

Monterrey them are located in respective of their campus facilities. It is noteworthy that the TEC

has three centers began operating in the late nineties and in the following decade and constituted

strengthened. The rest of the PRC have been incorporated from 2005 onwards.

ii) Knowledge application and exploitation Sub-system

The subsystem of application and exploitation of knowledge is characterized by

producers, suppliers and consumers in general. Monterrey firm system has been characterized for

it entrepreneurial activities in manufacturing. Historically, Monterrey has been considered

the industrial capital of Mexico. In its metropolitan area is San Pedro Garza Garcia, one of

the municipalities with the highest human development index for the Americas and the world

(0.8) PNUD (2012).



18

The city is home to major Mexican industrial and financial groups from abroad also

found several international consulting firms.

ii) Regional Policy Sub-system

The regional policy subsystem is characterized by governmental regional entities, public

administration, a normative set of framework, and policy instruments.

A central administration, a semi-public administration and the government office

compose the State´s Government of Nuevo León. The central administration has fourteen central

offices such as the Education, Security, Economic Development, Social Development, among

others. Six administrative unites such as public relations, international affairs, and a

representative office in Mexico City.

The Secretary of Economic Development is in charge of policy instruments from external

source (National System of Innovation) can be mentioned intergovernmental coordination Mixed

Funds (FOMIX) contemplated in Article 35 of the Law of Science and Technology. FOMIX

supports the scientific and technological development in municipal and State governments,

through a sum of contributions from the State Government or Municipality, and the Federal

Government, through CONACYT. It has three main objectives:

• To allow the State governments and municipalities to allocate resources for scientific research

and technological developments, aimed at solving strategic problems, specified by the state itself,

with the sharing of federal resources.

• Promote the development and strengthening of scientific and technological capabilities of states

/ municipalities.

• To distribute economic resources to assist in the development of the entity through scientific

and technological actions.

Another tool that promotes the development of STI capabilities to the states is the

Regional Institutional Fund for Development Science, Technology and Innovation

(FORDECYT). Its objective is to promote scientific activities, technology and innovation as well

as the formation of high-level human resources, collaboration and integration of regions and

regional systems strengthening science, technology and innovation.

Another major player in the governmental side is the State Council of Science and

technology. The name of these organizations is Innovation and Technology Transfer Institute

(I2T2). This organism has an autonomous characteristic among the Public Administration. Three

advisory councils compose it: academic, firms and citizen. Its internal configuration composed



19

by directors of planning, education and promotion of new firms to foster innovation activities in

the metropolitan area and the State.

b) Institutional Capacity of Monterrey

Monterrey has maintained in recent years the top competitiveness in Mexico (OECD,

2009). The competitiveness of the city is based on the ability to attract, retain and develop

human talent and investment to produce goods and services of high value added to generate

gainful employment and quality of life for its habitants.

The Institutional framework that the NL government has established includes policies

oriented towards better and effective interactions between de triple helix components. The

science, technology and innovation public policy issue is set in a fast technological development

environment, and the composition of various actors taking part of it. There is an evolution in the

STI policies in legislation in Mexico and in the State of NL, taking the development of scientific

knowledge as an engine of development.

The actions of a government are provided within a planning framework. This process is

important because it is represented by a plan that includes explicit and consistent decisions to

allocate resources to predetermined purposes. Thus it is important to know the regulatory

framework and the establishment of rules.

In the NL case, the efforts of the government have able to support the emerging RIS and

create from bottom-up a set of policies. Which was reflected in the NL 2004-2009 and 2010-

2015 State Development Plan. This Plan established the relevance of the interaction among

government, industry and academia for economic development through initiatives that involve

these actors.

In this period of government there was a strategic administration supporting a long term

concept where a “Knowledge city” can mean for the State of NL (Ciencia, Conocimiento y

Tecnología, 2010).

These initiatives seek to stimulate these interactions primarily through: 1) establishing

the institutional settings for knowledge transfer, 2) creating the environment for attracting

industry, and 3) strengthening and developing clusters in the state.

In 2003 the State Congress approved the Law for the Promotion of Knowledge-based

Development. This led to the creation of the Coordinating Office for Science and Technology

(COCYTENL) in 2004 with the purpose of bringing together all actors of S&T in NL

(Coordinacion de Ciencia y Tecnologia de Nuevo Leon, 2010) and creates the Program of

Monterrey International City of Knowledge (MICK).



20

In 2005 the Law was reformatted and create the Institute for Innovation and

Technological Transfer (I2T2) replacing the COCYTENL. The I2T2 it is an agency of the State

Government of NL, ewith the authority to sign agreements and allocate financial resources to

programs and projects of innovation, science, and technology. The Institute administrates the

program MICK (I2T2, 2005). MICK revolves around seven basic strategies: 1) redesigning the

agenda for the education system; 2) attracting new research centers and technology-based firms;

3) promoting innovation in firms, universities, and research institutions; 4) creating new

innovation firms; 5) widening urban and cultural infrastructure; 6) diffusing a new

entrepreneurial culture; and 7) improving instruments that support innovation (MICK, n.d.).

The promotion of knowledge-based activities is also anchored in the national STI

instrumentssuch as the Mixed Funds CONACYT-Nuevo Leon, in addition to other programs

designed by the NL government aimed at promoting the creation of new firms. The number of

approved projects through the mixed funds as well as the amounts has been quite varied, and

they include industrial development and the creation of a scientific and technological

infrastructure (FCCyT, 2009).

The I2T2 is in charged to monitor and evaluate the evolution of 1) the develop of a

mayor cluster of researchers in the state, 2) to build of technological infrastructure, 3) to foster

graduated programs in insert into international networks, 4) to promote and attract Foreign

Direct Investment (FDI), 5) to impulse to Nuevo Leon's exports, 6) to accelerated education of

human capital (Specialists and Technologists), 7) to linkage and to make alliances between

companies and academic institutions, 8) to incorporate of Science & Technology to basic

education, 9) to patent technology developments and transfers, 10) to incorporate R & D in the

companies, 11) to create business incubators and venture capital (Parada, 2009; Ciencia,

Conocimiento y Tecnología, 2010).

5. FINAL CONSIDERATIONS

The RIS approach highlights the role of subnational government in supporting innovation

activities. This paper has argued that in developing countries there is still a changing process in

the public sector and the policy process itself for innovation policies. External to this the public

administration is changing from the new public management adopted during the 90s and the first

decade of the new century, towards a Strong State in some countries; from centralization to

decentralization activities; from the involvement of government in providing public goods to

private and public partnerships; from transparency, accountability to open government; from

pyramidal structure of organization to new types of governance.



21

The performance of government through innovation policy can be measured by its

capacity to fulfill the objective for what the policy has been designed and implemented: to foster

and support innovation processes. The review of the literature allows setting four elements where

institutional capacity can be measured in ranges from advance, intermediate to basic capacity.

From a public policy perspective the regional policy is itself a sub-system that interacts within

the RSI and with external sources.

With the framework proposed RIS and Institutional capacity the organizations at

governmental level can be track and see how some strategies and the implementation of policy

from local o federal level foster innovation activities and foster the building of an emerging

innovation system. This paper is a first approach to a doctoral dissertation work on institutional

capacity in fostering innovation activities. The diagnostic presented here is not finished due to

many components need to be describe. As well in the upcoming weeks interviews will be made

to a major public administration actors.

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