National, sectoral and technological innovation systems: The case of Taiwanese pharmaceutical biotechnology and agricultural biotechnology innovation systems (1945 2000) Chao-chen Chung1 1manchester Business school, University of Manchester, Manchester, M13 9pl, UK.
Present address: 10f.7, No. 57, Ln. 136, Xuefu Rd. Tamsui Dist.,New Taipei City 251, Taiwan (R. O. C.;
Email: chaochen. chung@gmail. com This paper explores the dynamics of the configuration of the national,
the sectoral and the technological innovation systems and defines the configuration of these three innovation systems as the national, sectoral and technological innovation systems (NSTISS).
Through comparing the Taiwanese pharmaceutical biotechnology and agricultural biotechnology innovation systems we find that even within the same nation different NSTISS reveal different dynamics, in terms of actors and networks, the application of technology and knowledge and institutions.
We conclude that the new research, technology development and innovation policies should be customized according to the differing dynamics of the NSTISS.
Keywords: innovation system; Taiwan; biotechnology; pharmaceuticals; agriculture. 1. Introduction Over the last two decades scholars working on innovattio systems have established different ways in
which to analyze them. The national innovation system focuses on the innovation process within the geographical space of nations (Lundvall 1992;
Nelson 1993), while the sectoral innovation system emphasizes the innovation of a particulla set of products (Malerba 2002).
The technological innovation system uses a specific knowledge field to draw the boundary of an innovation system (Carlsson et al. 2002;
Bergek et al. 2008. The configuration of the differeen levels of innovation systems has been discussed to a certain extent (Markard and Truffer 2008.
However, until now the configuration has not been defined clearly and deliberately probed. Consequently, this paper discusses the configuration of innovation systems at three levels:
national, sectoral and technological. We intend to draw the boundary for the‘new'innovation system which is embedded in the configuraatio of the three innovation systems.
Moreover, to understand the evolution of the new innovation system we not only examine the components of the innovation system,
but follow Malerba's analysis (Malerba 2005) and explore the changes in the relationships between these components over time.
Since national institutions, as generally acknowledged by the literature about innovattio systems, play an essential role in shaping and fosteriin the development of an innovation system,
in this paper we will pay special attention to the role of national institutions in the development of new innovation systems.
Science and Public policy 39 (2012) pp. 271 281 doi: 10.1093/scipol/scs008 Advance Access published on 11 march 2012 The Author 2012.
Published by Oxford university Press. All rights reserved. For Permissions, please email: journals. permissions@oup. com The government's research, technology development and innovation (RTDI) policies,
(i e. pharmaceuticals and agriculture) provide an interesting case for our discussiion Historical records for the period 1945 2000 in Taiwan clearly show the process through which the three innovation systems,
which was composed mainly of local enterpriises that were small-and medium-sized enterprises (SMES), only adopted biotechnology after the 1980s.
and their networks constitute the national innovation system (Nelson and Rosenberg 1993). Through comparing the similarities
and mechanisms of a nation support technological and industrial innovattio within its borders (Nelson and Rosenberg 1993;
Edquist and Hommen 2008. From Freeman's perspective (1987) research, technology development and innovation (RTDI) policies extensively shape the national system of innovation.
The OECD (1999) also claims that RTDI policies should match the development of the national system.
The sectoral innovation system recognizes a system as a set of products which are developed in a global context.
as analyzed by Malerba (2004), should have a set of specific knowledge bases, inputs and demands.
National institutioons from the perspective of Malerba (2002), should match the sectoral innovation system within the national borders.
2002), within a particular knowledge field the actors, including the buyers and sellers, of a dynamic network interact in a specific economic or industrial arena
Jacobsson and Bergek (1998) concluded that national institutions, especiaall government policies, do influence the performance of a nation's technological innovation system.
2008) have specified only that a technological system may be a sub-system of a sectoral innovation system or may cut across several sectoral innovation systems.
Malerba (2004) 272. C.-C. Chung has tried also to link the relationships within a sectoral innovation system to a country's international performannce as well as a sector to the technological opportunities which can be mobilized to develop new products and processes for that sector.
Markard and Truffer (2008) made one of the first attempts to concretely show the configuration of the three innovation systems within one diagram.
Based on Markard and Truffer's diagram (Markard and Truffer 2008), we redraw the relationships of the three innovaatio systems (see Fig. 2)
2004), is developed the biotechnology in the post-genetic engineering era in the 1970s and comprised of a broad range of knowledge fields. 1 The biotechnology developed before the post-genetic engineering era is defined in this paper as traditional biotechnology.
While the majority of the existing literature on modern biotechnollog focuses on the empirical experiences of European countries and the USA (Mckelvey et al. 2004;
Brink et al. 2004; Senker 2004; Mckelvey 1996; Kaiser and Prange 2004; Geseisk 2000; Torgersen and Bogner 2005;
Boschert and Gill 2005), only a few papers discuss the develoopmen of biotechnology (both traditional and modern) in Taiwan (Dodgson et al. 2008;
Wong 2005. Indeed, the existing literature considers Taiwanese biotechnology to be a‘new sector 'which has emerged only in the last ten years
and is guided strongly by a‘set of'government policies. Nevertheless, as we will show in Section 3, Taiwan adopted traditional biotechnology before 1945 and adopted modern biotechnology as early as the 1980s.
Biotechnology is not a sector but a technology which is adopted by at least two sectors in Taiwan,
i e. pharmaceuticcal and agriculture. 2 Different sectors have their own unique history and use a unique mode to absorb biotechnollogy
which differs from the experiences of Western countries. Moreover the Taiwanese government has implemented not a‘set of policies'towards biotechnology,
but has adopted different sets of policies towards pharmaceuttica biotechnology and agricultural biotechnology. The evolution of biotechnology and the two sectors before 2000 in fact deeply influences the development after 2000.
Since the history of biotechnology and the two sectors in Taiwan is missing, we select Taiwan as our empirical case and focus on the development in the period 1945 2000.
By analyzing the historical archives, such as government documents and the historical records of the institutions embedded in the innovation systems,
we will discover how the technological innovattio system for biotechnology gradually emerged with the Taiwanese national innovation system,
as well as the sectoral innovation systems for pharmaceuticals and agriculture. Figure 1. Potential relationships between national (NSI) and sectoral (SSI) systems of innovation and a technological innovattio systems (TS.
Markard and Truffer (2008. Figure 2. Relationship of national, technological and sectoral innovation systems and NSTIS.
we particularly single out the years 1945 and 1982 as milestones. 1945 was the year when Japan returned Taiwan to the Republic of china (ROC).
3 After 1945 Taiwan started to have an indepeenden history. The Taiwanese government announced its first biotechnology policy, the‘Eight Key Industries'in 1982.
After 1982, Taiwan started to have a biotechnology policy. We discuss the evolution of the pharmaceutical biotechnology innovation system in Section 3. 1 and the evolution of the agricultural biotechnology innovation system in Section 3. 2. 3. 1 The evolution of the Taiwanese pharmaceutical biotechnology innovation system
3. 1. 1 Pharmaceutical companies: networks and knowledge base. Pharmaceutical technology was introduced originalll to Taiwan by Japan.
there were 312 factories all over the island (Zheng 2001: 195). ) The government of the ROC then unified the 312 factories into one national pharmaceutical company (Taiwan Pharmaceutical company.
Later, because of financial deficits, the Taiwan Pharmaceutical company gradually sold all of its factories to different private firms (DCB 2003:
After the Japanese colonization, some local private pharmacies started to use rough facilities to synthesize simple pharmaceutical intermediaries in their backyards (Zheng 2001:
some Chinese pharmaceutical companies also relocated their factories to Taiwan around 1950. Both the original Taiwanese companies and the newly arrived Chinese companies had limited numbers of employees and capital with
but they manufactured low-end intermediaries that were highly similar to each other (Ding 2001: 232). ) Besides manufacturing intermediaries, some local firms imported higher-end intermediaries from countries, such as Japan and Germany,
Even if modern biotechnollog was developed in the USA in the 1970s, these companies did not adopt any modern biotechnology in their products.
In 1982, to fit the new‘Good Manufacturing Practice'regulations announced by the government, the manufacturing facilities of local SMES were upgraded (Zheng 2001:
193,229. However, because of their small size, these companies were unable to innovate or to export their products.
Until 2000, knowledge transfer and collaboraatio between companies were minimal. Competition was the mainstream for the interactions between these companies (DCB 2003:
207). ) Multinational pharmaceutical giants who were attraacte by the government's policies of foreign direct investtmen (FDI)
and the low cost of manufacturing began to invest in Taiwan in the 1960s. Most of these multinational corporations (MNCS) were from Japan and the USA, such as Takeda pharmaceuticals (from Japan) and Pfizer (from the USA.
In the 1980s, with advantageous technologies and marketing capabilities, MNCS shared more than 50%of the domestic market (Zheng 2001:
) Nevertheless, since the 1990s, because of the rising cost of manufacturing in Taiwan and the policies of free trade in pharmaceuticals, pharmaceutical MNCS gradually sold their manufacturing facilities to local companies (DCB 2003:
Yet, as shown by the statistical data in 1995, the sales of local SMES only accounted for 31%of the domestic market,
%and the imported medicines had 31%of that market (Zheng 2001: 194). ) A very minor but important sub-sector of the pharmaceuttical was Chinese herbal medicine,
Later, these Chinese herbal pharmacies gradually set up their own herbal factories (DCB 2003: 219). ) Before the 1980s, the main business of the herbal factories was to use modern machinery to process the herbs to be customized into Chinese herbal medicines. 4 Herbs were decocted,
pounded and kneaded by modern 274. C.-C. Chung machinery. Several herbs were combined together in fixed proportions
and rarely exported their products (DCB, 2004: 100). ) Only after the 1980s, was modern biotechnology graduaall adopted by the companies producing Chinese herbal medicines.
While the majority of companies still focused on manufacturing and followed the Good Manufacturing Practice rules to upgrade their machinery facilities, in the 1990s,
some of these companies started to establish networks with academics in order to develop new herbaceeou medicines.
But no new herbaceous medicines were developed successfully before 2000 (DCB 2003: 224 7). 3. 1. 2 Universities and the accumulation of knowledge.
The main role of universities until the end of the 1980s was to train qualified pharmacists.
some Taiwanese universities also set up locally. 6 Until the late 1970s, there was a total of six pharmaceutical colleges in the universities of Taiwan (Zheng 2001:
3). However, their main purpose was to train qualified pharmacists. Pharmaceutical research in universities was rare,
such as National Taiwan University, did some initial research into chemical medicines and Chinese herbal medicines (National Taiwan University 2000:
) Only in the early 1990s, with the gradually developed environment for pharmaceutical research, did some universities,
like the National Taiwan University, started to provide postgraduaat degrees in pharmacology and train pharmaceutical researchers (Zheng 2001:
Modern biotechnology was introduced to Taiwan's universities in the 1980s by a group of young scientists.
2001: 242. Nevertheless, from the 1980s until 2000, the networks between the researchers and between universities and pharmaceutical companies were established not fully.
The research interests of individual scholars determined the research topics. Collaborations between different academmic were not frequent.
But such surveys were merely to serve policy expectations rather than to lead to commercializatiio (Zheng 2001:
Taiwan. 275 1984 to apply the research into small molecules from the universities to develop new chemical medicines and then transfer such technologies to local firms.
and transferring the technology of chemical engineering to pharmaceutical manufacturing (Ding 2001: 229). ) The Industrial Technology research Institute, another public research organization, also helped local SMES upgrade their manufacturing facilities
But until the late 1990s, there was no institution which could transfer pharmaceutical biotechnology from the universities to pharmaceutical companies. 3. 1. 3 National institutions:
which was the first biotechnology policy announced in 1982, should be regarded as an important milestone in the change of policies.
Before 1982, the main purpose of policies was to encourage and to control the manufacturing activities of the pharmaceutical sector.
After 1982 as policies graduaall turned to encouraging innovation in the pharmaceuticca sector, R&d policies became more and more significant.
whose knowledge base was chemical engineering rather than biotechnology (MOEA 2010). Policies of regulation, FDI and R&d were directed towards the pharmaceutical biotechnology innovation system.
The Law of Pharmaceutical Affairs was passed in 1970 and remained the most important regulation controlling the manufacture of medicines until 2000.
The Good Manufacturing Practice regulations were launched in 1982 to force the local SMES to upgrade their manufacturing capabilities.
In 1950, the government launched the‘Statute for Encouraging Foreign Direct Investment'(abolished in 1990)
and gave pharmaceutical MNCS tax exemptions if they manufactured their pharmaceuttica products in Taiwan or transferred manufacturing technologies based on chemical engineering to local companies (Zheng 2001:
202). ) In terms of R&d policies, fundamental biological and pharmaceutical research in universities was funded continuously, and the DCB was found in 1984 to transfer pharmaceutical technology of chemical engineering from the universities to pharmaceuticca companies (DCB 2010).
However, there was no R&d policy to encourage universities to transfer pharmaceuttica biotechnology to companies, and before the late 1990s, there was no particular target for the funding of R&d policies.
Only after 1998 did the government start to recognize Chinese herbal medicines as the backbone of the pharmaceutical sector.
From the perspective of the government, since the knowledge accumulation of biopharmaceuticals in Taiwan was too weak to compete with developed countries,
The R&d policies thus turned to encouraging the development of new herbaceous medicines (NSC 2010. To sum up:
before the late 1990s, the government did not have specific policies to encourage the development of modern pharmaceutical biotechnology.
Only in the late 1990s did the government start to support the development of modern pharmaceutical biotechnnolog through supporting the innovation of new herbaceous medicines. 3. 2 Evolution of the Taiwanese agricultural biotechnology innovation system 3. 2
the experts at the ASS also carried out genetic research on subtropical fruits and vegetables, such as sugar cane and tea (Su 2004:
C.-C. Chung had led the ASS had trained some Taiwanese experts within these organizations (Lin 1995:
The knowledge about hybridization which had been accumulated by the Japanese scientists was developed then further by the Taiwanese experts, especially in rice research (Su 2004:
Furthermore, before the 1980s, most of the crops, especially rice, were exported to foreign markets. Farmers who served the foreign markets only obtained rewards from the sales of their harvests.
They were not sufficient for them to reinvest in seed innovation (Liu 1996: 188). ) The institutions for seed innovation remained almost the same until 2000.
However, the introduction of modern biotechnology in the 1980s extensively changed the knowledge and technology used for seed innovation.
The modern biotechnology of genetic modification was introduced to the ASS through a group of Taiwanese scienttist who were trained in the USA.
In 1997, the genetically modified (GM) papayas which were developed by the Taiwanese scientists and successfully grown in the trial fields were milestones in the development of genetically modified organisms (GMOS).
they were allowed not to be cultivated in the normal farms (Science and Technology research and Information Center, 2005:
and sold watermelon seeds since the 1960s (Cai 2007). The technology used by these private companies was the traditional biotechnology of hybridizatiio
Only in the 1990s did some local SMES start to transfer the modern biotechnoloog of genetic modification from academic institutions and developed GMOS, especially non-edible GMOS.
For example, Taikong which was a trade company selling ornameenta fish has worked with the National Taiwan University to develop GM ornamental fish since the 1990s (Taikong 2010.
However, before 2000, the private companies had developed not successfully any new GMOS. Moreover, throughout Taiwanese agricultural history, MNCS such as Monsanto, have not played any role in seed innovation in Taiwan. 3. 2. 2 Universities and their networks.
Until the 1970s, the agricultural college of National Taiwan University was the most important academic institution carrying out fundamental agricultural research,
In fact, many graduates from the National Taiwan University took important positions in the ASS (Su 2004:
) In the early 1970s, when the headquarters of the ASS was moved next to Chung-hsing University, the agricultural college of that university,
became another important academic institution for agricultural research (Lin 1995: 3; Su 2004: 18). ) A group of Taiwanese scientists trained in US universities introduced modern molecular biotechnology to Taiwanese universities in the 1980s.
Molecular biotechnollog greatly increased the depth of basic agricultural research, especially in genetic modification. However, because a network between universities was not establisshed the research topics were chosen usually according National, sectoral and technological innovation systems:
Taiwan. 277 to the research interests of individual scholars. The topics studied frequently overlapped and there was very limited coordination between the research teams (Su 2004:
18,20. Until 2000, most results of modern biotechnology research done by the universities were transferred to the ASS for further application (Su 2004:
18,20. The ASS created a microbial gene bank, the Agriculture Gene Resources Center, in order to store the genes of hybrid and GM seeds.
and shipping for their services (Su, 2004: 18). ) Indeed, until the 1990s, the modern biotechnology innovated by the universities was transferred only occasionally to particular agricultural companies, such as Taikong. 3. 2. 3 National institutions:
Agricultural policies. The Taiwanese government supported the development of agriculttura biotechnology through its agricultural policies.
The purpose of these policies changed dramatically in the 1980s. Before the 1980s, the agricultural products were export-oriented.
The main purpose of the agricultural policies at the time was to direct the agricultural sector to maximize the production of agricultural products, especiaall the primary productions of rice and sugar cane,
Only after the 1980s, when the manufacturing industries were developed well and agricultural products were exported no longer,
did the policy objectives of the agricultuura policies turned to upgrading the farmers'living standards (Chang 1982:
when the first biotechnology policy, the Eight Key Industries, was announced in 1982, agricultural biotechnology was recognized not as a part of the development of biotechnologgy Indeed,
since the 1980s, compared with the prosperoou ICT industries, the agricultural sector was recognized gradually as the sector with low productivity.
Before the 1980s, research into traditional biotechnology was funded in order to increase the productivity of the agricultural sector,
and after the 1980s, research in modern biotechnology was funded merely to increase the farmers'welfare (Chang 2004:
In the 1990s, when the Taiwanese government was preparing to participate in the World trade organization and to open its domestic market for foreign agricultural products,
the R&d funding for modern agricultural biotechnology was decreased even slightly (Wong 1998: 115), and at the same time, the Farmers'Insurance was launched (CLA 2010.
8 Another important agricultural policy promoted by the government was agricultural regulation. Before the 1980s, there was no policy regulating the innovation of seeds.
With the developmmen of GMOS in the 1980s,‘Genetic Modified Safety Rules'were implemented in the labs. Yet, besides field trials,
none of the GM seeds were allowed to be traded in the domestic market. Moreover, until 2000, there was no regulation for non-edible GMOS.
Therefore, non-edible GMOS, such as GM ornamental fish, could be traded in the domestic market without permission.
and then gradually withdrew their investments in the 1990s. After that there were fewer and fewer large firms involved in pharmaceutical manufacturing.
Only after the 1980s did some Chinese herbal medicine companies occasionally cooperate with the universities to develop new herbaceous medicines.
Only in the 1990s did some universities occasionally transfer modern biotechnology to agricultural SMES. In brief, within the same nation different NSTISS may involve different groups of actors
and did not produce any opportunities for the development of traditional biotechnollogy Modern biotechnology was introduced only to the system after the 1980s
Since the 1980s the modern technique of genetic modification was applied to improve the genes of subtropical fruits (such as papayas) and non-edible organisms (such as ornamental fish.
Before the 1980s, while pharmaceutical manufacturing was the main activity of the system, the main policies were regulation and FDI,
After the 1980s, when the pharmaceutical companies graduaall adopted biotechnology to innovate new herbaceous medicines, R&d policies became more and more importannt Indeed, the Eight Key Industries,
Before the 1980s while agricultural products were exported, the agricultural R&d policies focused on the quantity of agricultural products.
However, after the 1980s, once the agricultural products only served domestic demands, the government promoted agricultural R&d and regulation policies,
and sub-cellular organnism (Laage-Hellman et al. 2004). 2. The medical device sector also adopts biotechnology through the development of bio-chips
whose knowleedg base is across electronic engineering and biotechnollog (Dr. Chip 2010). However, since biochips are very minor in the sector,
In the years 1890 1945, Taiwan was colonized by Japan. After WORLD WAR II, in 1945, as a defeated nation, Japan was forced to return Taiwan to the government of the ROC.
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the Chinese have used only Western pharmacology for a hundred years. The traditional Chinese herbal medicines were usually compound prescriptions.
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