Beyond these common elements, Porter highlights
the way the flow of innovation is shaped by specialized
inputs and knowledge, demand-side pressures,
competitive dynamics, and externalities across related
firms and industries; in contrast, the national
innovation systems literature stresses the role played
by a nation’s scientific and innovation-oriented institutions
and policies. Whereas idea-driven growth
and cluster theory focus on the economic impact
of geography (i.e. localized spillovers), the national
innovation systems literature focuses more on the
political implications of geography (i.e. the impact
of national policies and institutions). While all three
perspectives acknowledge the importance of both
political and economic factors, prior work has not assessed
how they interact in shaping the realized rate
of innovation at the economy-wide level. This paper
aims to contribute at this level, with an emphasis
on a connection between underlying microeconomic
forces and models of endogenous technical change,
in part responding to the call of Patel and Pavitt
(1994) for analysis that articulates “the essential
properties and determinants of national systems of
innovation”.