Research Policy 33 (2004) 395–408
The reconfiguration of National Innovation Systems—the
example of German biotechnology
Robert Kaiser∗ , Heiko Prange
Chair for Political Science, Technische Universität München, Lothstr. 17, D-80335 München, Germany
Received 20 May 2003; received in revised form 1 September 2003; accepted 4 September 2003
Abstract
The concept of the National System of Innovation (NSI) has been applied in order to analyze the interrelation of institutions
and technological development. It has been diversified as a growing number of studies recognized the emergence of autonomous
innovation systems at various territorial levels. Focusing on German biotechnology, this article takes an alternative perspective
arguing that functions of the NSI became part of a multi-level governance system. By proposing a multi-level approach, which
directs on the dynamic reconfiguration of NSIs towards the subnational as well as the international level, we are trying to
bridge the gap between innovation system approaches that analytically highlight one specific territorial level only.
© 2003 Elsevier B.V. All rights reserved.
Keywords: National Innovation System; Biotechnology; Germany; Multi-level governance; Reconfiguration
1. Conceptualizing the reconfiguration of
innovation systems
Technological innovations occupy a key position
both for the competitive advantage of private sector firms as for the establishment of a self-enforcing
process of economic growth and prosperity in modern welfare economies (cf. Koopmann and Münnich,
1999). Given the importance of technological progress
it is a crucial question under which conditions firms
innovate. A substantial part of the literature has argued
that there is a primacy of the firms’ internal resources
or capabilities over outside influences (cf. Teece and
Pisano, 1994). However, a second strand of the literature, which we follow here, has concluded that innovative activities of enterprises do not only depend
∗ Corresponding author. Tel.: +49-89-289-24335;
fax: +49-89-289-24275.
E-mail address: [email protected] (R. Kaiser).
upon intra-firm organizational capacities but are fundamentally shaped by the organization’s institutional
environment as well as through specific technological
or scientific patterns in which innovation processes are
embedded. Hence, national or regional differences in
technological performance can be attributed, at least
to a significant extent, to variations in the institutional
environment (Lundvall et al., 2002, p. 220).
Since the mid-1980s, Freeman (1988, 1992),
Lundvall (1992a) and Nelson (1993), among others,
have developed the concept of the ‘National System
of Innovation’ (NSI) in order to study the interrelations between technological development and the institutional embeddedness of innovative organizations
(for an overview see Lundvall et al., 2002). Since
the early 1990s this approach has been diversified by
studies that recognized the evolution of autonomous
systems of innovation at the local, the regional, the
European and even the global level (e.g., Acs, 2000;
Braczyk et al., 1998; Cooke et al., 2000; Dalum et al.,
0048-7333/$ – see front matter © 2003 Elsevier B.V. All rights reserved.
doi:10.1016/j.respol.2003.09.001
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R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
1999; De la Mothe and Paquet, 1998; Howells, 1999;
Mytelka, 2000a,b). Whereas a first group of scholars
stressed the importance of local institutions and networks, transfer mechanisms, regional labor markets,
as well as specific socio-cultural environments a second group pointed to the internationalization of markets, technologies and corporate activities as well as
the ongoing Europeanization of public policies. They
both have in common that they called the dominance
of national institutions into question as they emphasized the growing importance of institutional arrangements below and beyond the nation-state level.1
In contrast to that, this article aims at identifying
those features within a national system of innovation that have been territorially reconfigured along
European/international lines or regional/local lines.
Consequently, this proposed approach, which takes
the NSI-concept as the analytical starting point,2 focuses on the dynamics of the reconfiguration of NSIs,
rather than just describing ‘new’ innovation systems
on one specific territorial level, as most other studies do.3 Since reconfiguration processes take course
in both territorial directions, beneath and above the
nation-state, the growing meaning of the regional
as well as the international level can be thoroughly
explained. Additionally, by using the concept of reconfiguration of innovation systems we are able to
align with an increasingly intense discussion on transformations of political systems which has emerged
especially in the political science discipline. This is
important because political systems, at least in western
societies, are equally exposed to processes of transnationalisation and regionalization (e.g., Geyer, 1998;
Hettne, 1999; Hooghe and Marks, 2001; Kuhlmann,
1999; Kuhlmann, 2001; Prange, 2003; Schulze and
Ursprung, 1999; Strange, 1998).
1 In addition to those studies that concentrate on the territorial
dimension of innovation systems there is also a growing literature
on sectoral innovation systems which argues that sectoral systems
have specific knowledge bases, technologies, etc. (cf. Carlsson,
1997; Malerba, 2002).
2 With this approach, we follow Lundvall et al. (2002, p. 215)
who argue that “as long as nation states exist as political entities
with their own agendas related to innovation, it is useful to work
with national systems as analytical objects”.
3 Recently, Carlsson et al. (2002, p. 236) have stressed the need
for a more dynamic analysis when applying the NSI-approach.
We empirically explore the changing logics of
systems of innovation, which are mirrored in their
territorial reconfigurations, with regard to the German
biotechnology sector. As an emerging science-based
industry, biotechnology makes new demands on the
institutional environment of a National Innovation
System. In science-based industries, firms are intensively engaged in cooperation with universities and
non-university research institutes as they rely heavily
on the exchange of knowledge with the domestic or
international science base. The dependence on scientific knowledge is mainly due to three distinct features
that characterize those industries: the increasing costs
of innovation, the growing significance of interdisciplinarity, and the closer relationship between basic
research and industrial application as well as between
producers and customers of innovations. Those industries therefore require new institutional arrangements,
inter alia, for financing innovations, for technology
transfer, and for the coordination of extramural R&D
activities (cf. Kaiser, in press; Meyer-Krahmer, 1997).
In biotechnology, the innovation system is both
highly regionalized, for example with regard to research and early exploitation, and highly globalized,
for example, in terms of development as well as
distribution and marketing (Dohse, 2000; European
Commission, 2002). For many reasons, the German
case seems to be of special interest. Given its traditionally strong chemical-pharmaceutical industry,
Germany had been called the “pharmacy of the world”
for many decades. However, the industry lost ground
in more recent years due to a technological paradigm
shift from chemistry-driven to genomics-based drug
development. In line with the new paradigm, modern pharmaceutics developed into a high-technology
and science-based industry in which technological
progress is based on radical rather than incremental innovations. That is why it has been assumed
that the German innovation system, which performs
best in more traditional technologies, would be in
an unfavorable position to create a modern pharmaceutical biotechnology industry that succeeds in the
highly-risky business of drug development (Casper,
1999; Casper et al., 1999; Giesecke, 2000; Soskice,
1997). As for now, this assumption proved to be
wrong. Since the mid-1990s the German pharmaceutical biotechnology developed into the most dynamic
sector of its kind in Europe and it surpassed all other
R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
Table 1
Number of biotech companies in selected European countries
Country
Private
companies
Public
companies
Total
Germany
UK
France
Sweden
Switzerland
The Netherlands
Finland
347
285
233
170
124
82
75
13
46
6
9
5
3
1
360
331
239
179
129
85
76
Source: Ernst and Young (2002): 10th European Biotechnology
Report.
member states of the European Union (EU) in terms
of new company formations (see Table 1). Even
though it is still behind in view of drug candidates that
have been introduced into clinical trials (see Table 2),
the vast majority of firms have oriented their R&D
activities towards drug development.
As we will show, all this can be traced back to a
significant extent to institutional reforms within the
German innovation system that have taken place as
part of the reconfiguration process.
Our article, first, recapitulates the theoretical debate about the concept of National Systems of Innovation and its subsequent variations, including
regional, local and international systems of innovation. Secondly, an analytical framework is put forward
that allows for a precise description of the reconfiguration of NSIs applying several established variables.
Thirdly, we test the conclusiveness of our argument
empirically. Though we cannot give a full picture of
the reconfiguration process, we will provide the most
Table 2
Number of products in the pipeline in selected European countriesa
Country
Pre-clinical
Phase
I
Phase
II
Phase
III
Total
UK
Switzerland
Sweden
France
Germany
The Netherlands
Finland
65
45
14
16
7
9
9
50
12
8
8
4
1
1
56
11
10
6
3
1
0
23
11
0
1
1
0
0
194
79
32
31
15
11
10
Source: Ernst and Young (2002): 10th European Biotechnology
Report.
a Statistics on product candidates only includes public companies.
397
important facts for each of our variables. Finally, we
draw some conclusions for the theoretical debate on innovation systems claiming that the reconfiguration of
national innovation systems is closely connected with
transformation processes of national political systems.
2. Variants of systems of innovation approaches
2.1. The National System of Innovation Approach
Innovation systems can be defined in many ways focusing either on their functional or on their territorial
aspects (Carlsson et al., 2002; Malerba, 2002; Niosi,
2002). However, they all involve the creation, diffusion and use of knowledge. This article takes a territorial perspective, since we use the national system
of innovation as a starting point. According to Galli
and Teubal (1997, p. 345) national systems of innovation are defined as “the set of organizations, institutions, and linkages for the generation, diffusion, and
application of scientific and technological knowledge
operating in a specific country”.
Such a broad definition of NSIs demands the inclusion of a vast number of organizations and institutions in order to analyze the capability of a NSI.
However, the kind of sub-systems and institutions,
which are considered for analyzing a NSI depends on
the time-period and the theoretical perspective studied
(e.g., the learning economy, linear model of technological change). Whereas such an approach leaves certain
analytical flexibility, Lundvall (1992b, p. 13) nevertheless proposes several basic indicators which should
mirror country-specific differences in national innovation systems. The focus upon national systems, he
claims, “reflects the fact that national economies differ
regarding the structure of the production system and
regarding the general institutional set-up” (Lundvall,
1992b, p. 13). The following features should reflect
national idiosyncrasies: the internal organization of
firms, the interfirm relationships, the role of the public
sector, the institutional set-up of the financial sector, as
well as the intensity and the organization of research
and development.
Thus, NSIs are characterized by a differentiated
set of organizations and institutions. Among the organizations one can, for example, subsume political,
administrative, regulatory and economic actors (Galli
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and Teubal, 1997, p. 346). Institutions can be of
“formal” or “informal” nature (Edquist and Johnson,
1997, p. 49) regulations and directives are examples of
“formal” institutions, whereas traditions, practices and
norms of cooperation are part of “informal” institutions. According to Edquist and Johnson (1997, p. 50),
the distinction between “formal” and “informal” institutions is of considerable importance since their
relation differs significantly, for example, between
countries or between sectors within countries. However, measuring the impact of “informal” institutions
on the innovation process is problematic since they
are not codified as “formal” institutions are. In any
case, each kind of institution plays a specific role
within the NSI by providing “the formal rules, compliance procedures, and standard operating practices
that structure the relationship between individuals in
various units of the polity and economy” (Hall, 1986,
p. 19). Consequently, institutions simultaneously create order and continuity as well as impact upon the
conduct and performance of the system (Lundvall
et al., 2002, p. 220; Olsen, 1996, p. 250).
Organizations and institutions stand in close connection. On the one hand, organizations are embedded
in a certain institutional environment or set of rules.
Hence, institutions define the incentive structure for
innovative activities within a country, they shape
their inherent organizations, and they rule the relationship among organizations (Edquist and Johnson,
1997, p. 59; March and Olsen, 1998). On the other
hand, institutions are also embedded in organizations as established practices may only be relevant
in operating enterprises (e.g., employee–employer
relations). Edquist and Johnson (1997, p. 60) argue that the country-specific design of this “mutual
embeddedness” decisively shapes the capacity of
national systems of innovation.
Besides their emphasis on the “national”, studies
about the NSI consider that innovation processes not
merely proceed within the national sphere (Lundvall,
1992a). Rather, they point at the fact that in a globalizing economy regional and local innovation systems continuously emerge. Rip (2002, p. 124) admits
that a national innovation system is a “leaky” system
where “national boundaries do not contain the innovation dynamics, or at best partially”. He defines a
NSI as a mosaic of sectoral systems and networks,
with a national boundary imposed upon them (Rip,
2002, p. 124). However, recent studies stress that national systems of innovation still play a central role in
supporting and governing the innovation process (e.g.,
Galli and Teubal, 1997; Mytelka, 2000b). The following section sketches innovation system approaches beyond the national level.
2.2. Beyond national systems of innovation
Tensions for NSIs arise both from globalization and
regionalization resulting first of all from increasing
cross-border technological alliances of multi-national
enterprises (Lundvall, 1992b; Nelson and Rosenberg,
1993). Additionally, international science, innovation
and diffusion networks turn nationally based systems
of innovation into open systems (Galli and Teubal,
1997).
Arguments in favor of the existence of European
or even global systems of innovation refer mainly to
two developments: first, the effects of national policies are diminishing due to the increase of transnationally organized technologies and businesses; second, a
growing number of policy areas are coordinated by the
European Union or other regional integration agreements (Anderson et al., 1998; Jacobs, 1998, p. 712).
For authors like Caracostas and Soete (1997, p. 416)
the establishment of post-national institutions in the
area of the science infrastructure, such as European
science funding, innovation and technology transfer,
and European programs for education and training, are
clear signs to believe in a European innovation system. However, such studies neglect to show in how far
the totality of NSI-elements have been established on
the European level, and to what extent they are still
embedded in national systems of innovation or exist
separately from them.
Studies about global innovation systems are still
quite rare. Rather, scholars focus on specific elements
of innovation systems, such as private research and
development (R&D) which are increasingly organized
globally (Chesnais and Simonetti, 2000; ETAN, 1998;
Meyer-Krahmer and Reger, 1999; Patel and Pavitt,
1998). Apparently, the internationalization of enterprise R&D rests on two main factors: the search for
specialized regional centers of excellence in key technological areas, and their presence on important lead
markets. Archibugi and Iammarino (1999) have defined a “taxonomy of the globalization of innovation”
R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
with which they categorize internationalization strategies of firms. These categories include the international exploitation of technology produced nationally,
the global generation of technology, and global technological collaborations.
In recent years, much more attention has been paid
to the concept of regional or local innovation systems
(e.g., Braczyk et al., 1998; Cooke, 1992; Cooke, 2000;
Dalum et al., 1999; De la Mothe and Paquet, 1998;
Howells, 1999; Niosi and Bas, 2001). The concept of
regional innovation systems (RIS) is based on the assumption that the regional level can play a balancing
role in the age of growing globalization (Cooke et al.,
2000, p. 2). Additionally, Cooke (2002, p. 134) has
argued that the national innovation system cannot
function well without regional innovation systems “in
respect of the enterprise and innovation support infrastructure, specialized human capital, leading edge
basic and applied research and the varieties of network relationships that function most effectively in
the relatively close proximity of regional clusters”.
Indeed it is obvious that regions within a national
innovation system might develop quite differently.
One can conclude that specific regional or local characteristics and structural patterns exist which have a
deep impact on the competitiveness of regions. A recent comparison of two leading innovation regions in
the USA (“Silicon Valley” in California and “Route
128” in the Boston area) impressively shows that in
the area of Silicon Valley a network-based system
of production has emerged, in which enterprises, on
the one hand, compete on the basis of close social
networks and flexible labor markets, but on the other
hand cooperate through collective learning processes.
The other example reveals a totally different development. The Boston area is characterized by a structure
that is based on the hierarchical organization of firms.
Moreover, information still flows only vertically and
the borders between enterprises and local public
institutions have remained (Saxenian, 1999, pp. 2f).
What follows from these studies is that two main
reasons for the emergence of regional innovation systems can be identified: first, RIS develop within a geographical space consisting of a common language,
culture and territorial identity; or, second, on the level
of sub-state units, such as the German Länder or the
US federal states. To conclude, the RIS approach tries
to explain how and to what extent the institutional
399
and cultural environment of a region supports or obstructs innovation. But whereas the proponents of the
NSI-approach demand the existence of all necessary
components for the system to function, RIS scholars
deny this prerequisite (Cooke et al., 2000, p. 21).4
Despite processes of internationalization and regionalization, the meaning of the national environment for the generation of innovation continues to
be important (e.g., Liu and White, 2001). This is
explicitly expressed by remaining national patterns
of economic specialization. This means that national
systems of innovation significantly vary, for example,
according to the direction of public science and technology policies, the distribution and the success of
public R&D-financing, the technological orientation
of industrial research, the level of the enterprises’
technological development, and the acquisition strategies of firms (Pauly, 1999).
The following section explains the article’s analytical framework. We argue that the reconfiguration
of innovation systems can be described through established variables, such as regulation, the financial
system, public technology and innovation policies,
the research and education systems, and the R&D
activities of firms.
3. The analytical framework
The basic hypothesis of our study is that certain
functions of the national innovation system have either
been delegated—exclusively or partially—towards the
regional/local level or the European/international level
or have been supplemented by these levels. In some
cases, those functions became part of a multi-level
governance system which is characterized by institutional incentives or framework conditions provided by
various actors that share responsibilities over territorial levels. In the latter case, territorial levels above
and beneath the nation-state level have not only been
assigned with functions formerly provided by the national level, they also have become involved through
activities that complement the national framework (cf.
Grande, 1999). Consequently, our analytical approach
conceives the territorial reconfiguration of national
4 A comprehensive analysis of “systems” has been presented by
Carlsson et al. (2002).
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R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
innovation systems as a process that generates new
modes of coordination among established or new organizations. Those organizations operate within an innovation system in which the national frame of reference
is still important—and may be even prevailing. Nevertheless, the borders of such systems have become
blurred as more and more functions of the institutional
environment can be located across various levels.
We examine our hypothesis by applying five indicators that have been developed in the NSI literature
(cf. Lundvall, 1992b, p. 13)
1. Regulation: In the field of biotechnology the European Union has emerged as an important actor since
the early 1990s whereas, as the German example
shows, regional authorities play a role at least in
federal or even decentralized systems.
2. The financial system: The traditional German bank-centered financial system has been
proven to be unfavorable for the financing of
highly-innovative science-based industries. Institutional reforms have taken place that improved
access especially to venture capital (VC) which
is provided to a considerable extent by foreign
investors.
3. Public technology and innovation policies: New
public innovation policy initiatives were crucial for
Germany’s catching-up process in biotechnology.
Those initiatives originated not only from the national but also from the regional and European
level.
4. The research and education systems: In sciencebased industries the research and education systems
play a significant role both for the provision of
qualified personnel and for the commercialization
of scientific knowledge.
5. Corporate activities: In the pharmaceutical
biotechnology sector small and medium-sized research companies are heavily engaged in partnerships and alliances with local knowledge providers
and national as well as international pharmaceutical companies.
The following section analyzes for all these indicators the extent to which the various territorial
levels are involved and in which fields activities have
become coordinated across those levels. As we are
especially interested in the processes of reconfiguration, we will present each case in a way that evaluates
first the “national configuration” as our point of
departure.
4. The reconfiguration of the German innovation
system in biotechnology
4.1. The new regulatory regime for pharmaceutical
biotechnology
Since the early 1980s, the German regulatory
regime in the field of biotechnology has undergone
two major developments. The first development can
be characterized as a centralization of regulatory
competencies within the German federation. Prior to
1990, no uniform regulatory framework for genetical
engineering was enacted in Germany. The approval of
research laboratories or production facilities fell under the authority of regional regulation bodies whose
decisions differed considerably depending on political
majorities in the respective state. Federal legislation
went into force only in 1990 with the enactment of the
Embryo Protection Law, which prohibited researchers
from using embryos for genetic experiments, and the
Genetic Engineering Law, which set legal standards
for the authorization of laboratories and production
facilities as well as field trials with genetically modified organisms.
The second development, which started shortly
after the establishment of the national regulatory
framework, is primarily marked by a process of Europeanization of biotechnology regulation. The European Union introduced respective legislation for the
first time in 1990 through Directive 90/219/EEC on
activities related with genetically modified microorganisms in closed systems, and Directive 90/220/EEC
on the handling of genetically modified microorganisms in field trials and open production systems. Until
2001 both directives have been amended twice. Apart
from regulatory measures on laboratories and field
trials the European Union introduced legislation on
marketing authorization for pharmaceutical products.
In 1995, new centralized procedures went into force
which allowed for community-wide authorization of
medical products. Those marketing authorizations are
granted by the European Commission on the basis of
a scientific examination made by a newly established
European Agency for the Evaluation of Medicinal
R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
Products (EMEA).5 Evaluations are mandatory for
certain pharmaceutical products which have been
developed by means of biotechnological processes.
Since such procedures are widely compatible with
the authorization procedures employed by the US
Federal Drug Administration (FDA), the regulatory
standards which guide the drug development process
on the pharmaceutical lead markets in Europe and
North America are now more or less identical.
Today, the European Union has grown into a central
role in regulating biotechnology. However, the overall regulatory regime still has a strong regional dimension, at least in Germany, since the authority to
enforce biotechnology-related regulations rests with
the states. State government action is not only relevant at the regional, but also at the federal level, since
amendments to the national regulatory framework for
biotechnology require the consent of the subnational
governments in the Bundesrat. Moreover, due to their
right to participate in federal legislation, state governments are also entitled to introduce bills implementing
European laws.
As a result, biotechnology regulation has become
organized across various territorial levels and has thus
developed typical multi-level characteristics. As for
the German case, this multi-level character has been
illustrated by the attempt of the state governments
of Bavaria and Baden–Württemberg to speed up implementation of the EU directive 98/81/EC through
a legislative proposal issued by the Bundesrat. Both
governments aimed at accelerating administrative authorization procedures that would have benefited the
biotech industry which is especially strong in these
states. Finally, the Bundestag vetoed the proposal and
the initiative failed due to the fact that the implementation of EU regulations in biotechnology requires the
amendment of the federal genetic engineering law.
4.2. The financial system
Germany traditionally has had a bank-centered
financial system in which economic activities were
5 Council Regulation (EEC) No. 2309/93 of 22 July 1993 laying down Community procedures for the authorization and supervision of medicinal products for human and veterinary use and
establishing a European Agency for the Evaluation of Medicinal
products, OJ L 214, 24 August 1993, p. 1.
401
primarily funded by firms that finance expansion
through profits, or by banks which grant loans to
such companies which proved their credit-worthiness
through their corporate performance in the past
(Adelberger, 2000, p. 113). Either way, bank-centered
systems tend to promote companies engaged in incremental innovations rather than radical innovations.
For that reason, highly innovative and science-based
industries depend on a financial system which is
based on the availability of venture capital and the
existence of high-tech specialized stock exchanges.
In the early 1990s, private venture capital was
hardly available for biotech start-up companies in
Germany. Therefore, public engagement was essential
to fill this gap. It has taken place both at the federal
but especially at the regional level. In Bavaria, for example, private venture capital firms were not present
at the time more and more biotech start-up companies
settled in the Munich area. In this situation, the public
VC-agency Bayern Kapital, a company in which the
state of Bavaria holds 100% of the shares, provided
early stage seed capital. In the meantime, however,
more than 20 private venture capital firms and Investment Banks took residence in the Munich area. At
the federal level, the Kreditanstalt für Wiederaufbau
and the Deutsche Ausgleichsbank jointly created the
Technologiebeteiligungsgesellschaft (tbg) in order to
support private sector engagement in risk capital financing. Between 1989 and 2000, the tbg has offered
more than 250 million to private venture capital
companies (Adelberger, 2000, p. 115).
In contrast to regulatory activities, the European
Union did not yet manage to create a common market
for venture capital. On the contrary, the venture capital market in Europe is still highly fragmented while
the amount of risk capital, which is available in the
various member states, differs significantly. A European stock exchange for high-technology firms could
not be established with the concurrence of the leading
European stock markets in Frankfurt, London or Paris.
As a consequence, the Stockholm European Council
set up a risk capital action plan6 in 1998 which is
aimed at establishing an integrated European risk capital market by 2003. Moreover, non-EU countries play
an increasing role in the provision of venture capital
6 “Risk Capital: Commission calls for timely implementation of
Action Plan”, IP/01/1490, Brussels, 25 October 2001.
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R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
in Europe. In 2001, about one quarter of private equity
funds raised by European companies originated from
the United States.7
4.3. Public technology and innovation policies
In Germany, public R&D policies are organized
along federal lines. In this context, various vertical
policy coordination arrangements exist which primarily coordinate public R&D funding. The federal level
provides R&D funds particularly as institutional (co-)
funding of non-university research organizations and
as project funds issued through various thematic R&D
programs, whereas the Länder are mostly involved
through the financing of the higher education sector.
Additionally, the Länder have initiated their own innovation policy programs since the mid-1970s in reaction to economic recession and structural change
(cf. Scherzinger, 1998). In doing so, they have concentrated on areas in which they are least encumbered
by the constraints of joint policy-making. As a result,
regional innovation policies gained importance as an
element of competition and differentiation among the
states, while the federal level has focused its activities either on cross-cutting infrastructural programs or
specialized priority programs funding technologies at
a pre-competitive stage (Wilson and Souitaris, 2002,
p. 1132). Moreover, since the early 1980s the European Union has emerged as an increasingly important
actor in innovation policies and funding. Apart from
its multi-annual framework programs, which support
R&D in a number of strategic technological fields, the
EU has more recently refocused its activities towards
a regional dimension as well as towards additional
actions that have been taken to foster European innovativeness (Grande, 1999; Kaiser, 2003; Krull and
Meyer-Krahmer, 1996; Kuhlmann, 2001; Peterson and
Sharp, 1998).
To a certain extent these three territorial levels
have contributed to the establishment of the German
biotechnology industry. The federal government initiated the BioRegio program in 1995 as an innovative
policy tool which was designed as a contest aimed at
stimulating the creation of biotechnology clusters. The
7 “Annual Survey of Pan-European Private Equity and Venture
Capital”, ENN Supplement. No. 6 (2002), European Private Equity
and Venture Capital Association (EVCA), p. 2.
17 German regions, which entered the contest, had to
demonstrate that they were able to set up a working
and interacting infrastructure for the commercialization of biotechnology. Between 1996 and 2000, the
Federal Ministry of Education and Research (BMBF)
supported the four winning regions—the bioregions
around Cologne, Heidelberg, Jena and Munich—with
a total investment of 72 million. After the phase-out
of the BioRegio program, the federal government initiated a number of specific new programs that either
support the specialization of established bioregions
(BioProfile) or certain highly-risky R&D projects
conducted by small and medium-sized biotechnology companies (BioChance). All in all, the BMBF’s
project-based funding for the German biotechnology
sector will increase steadily over the next years from
154 million in 2002 to 171 million in 2005.8
In many respects, regional innovation policies by
the Länder supported the creation of biotechnology
clusters in Germany. During the 1990s, the Bavarian
government started initiatives that were aimed at upgrading the research infrastructure and the provision
of risk capital at the regional level. It invested a considerable amount of money gained from privatizations
in the expansion of the university infrastructure. Since
the federal government was not ready to provide
its share for this investment—which was mandatory
since the establishment of the university infrastructure
is a common responsibility of the federal government
and the states—Bavaria decided to pre-finance even
the federal share. The state of Baden–Württemberg
issued a biotechnology-specific program in 2002
which is targeted at product developing small and
medium-sized research companies. The initiative explicitly encourages those companies to engage in
cooperation with other firms or public research organizations. The state of North Rhine-Westphalia
recently started the “offensive for future-oriented
leading research” to further expand selected leading
fields of strategic research. One focus has been laid
on biotechnology and stem cell research in particular.
The program is aimed at encouraging the formation
of clusters and the networking of research at universities and between universities, research institutions,
8 “Rahmenprogramm Biotechnologie—Chancen nutzen und
gestalten”, Federal Ministry of Education and Research, Bonn,
April 2001, p. 42.
R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
business, and culture. Besides this new program, the
former State Ministry for Education, Science and Research initiated in the year 2002 the so-called “Stem
Cell Network North Rhine-Westphalia” which brings
together institutions and experts working in the field
of biotechnological research. For the Land of North
Rhine-Westphalia the Stem Cell Research Association
acts as a role model of the state government’s new
approach for identifying vital future research fields
in the life sciences.9 Additionally, some Länder, like
Mecklenburg–Vorpommern, follow an internationalization strategy, which includes bilateral cooperations,
e.g. with Finland, as well as multi-lateral approaches,
such as the so-called ScanBalt BioRegion. The latter,
which has been established with financial assistance
from the Nordic Industrial Fund in November 2001,
can be labeled a “meta-bioregion” that encompasses
regional biotech networks from the Nordic countries,
the Baltic countries, Poland, St. Petersburg, Kaliningrad, and Northern Germany (e.g., BioCon Valley
Mecklenburg–Vorpommern).10
The European Union has been increasingly engaged in the promotion of R&D in biotechnology
since the 1990s. Within the context of the first
three framework programs, the EU financed R&D
in biotechnology with a relatively limited budget.
This situation changed, however, with the fourth
framework program which made it easier for the participants to cooperate with non-European research
groups especially in the US and Japan. Moreover,
since the fourth framework program the Commission began to consider biotechnology as one of the
key technologies along with information technology,
material sciences and telecommunications (Nollert,
2000, pp. 210–218). Expenditures for biotechnology
R&D have further increased with the fifth and sixth
framework programs. The fifth framework program
(1998–2002) placed more emphasis on the efficient
interaction between research organizations and industry. Between 1998 and 2002, the EU supported those
activities with a total of 483 million. Additionally,
the quality of life program provided money for a
key action called “The cell factory” which addressed
companies in the life sciences sector which are engaged either in health, environment or agriculture.
9
10
See http://www.stammzellen.nrw.de.
See http://www.scanbalt.org.
403
This action was financed with about 400 million.
In the sixth framework program a total sum of 2.25
billion will be available specifically for research and
development in pharmaceutical biotechnology.
Above the European level, public policy initiatives
fostering international cooperation in biotechnology
are still rare. Nonetheless, the example of the Human Genome Project, a large-scale international effort aimed at the complete sequencing of 3.2 billion
base pairs of the human genome, impressively shows
that coordinated action can be successful even under
the condition that the respective national contributions
are solely financed by domestic public and private actoers aactors. Under the auspices of the private Human Genome Organization (HUGO) national research
projects from over 30 countries worked together in the
largest worldwide bioscience project ever. The German contribution to HUGO has been financed between
1995 and 2003 primarily by the BMBF with an annual budget of about 20 million (German Human
Genome Project, 2002, pp. 10–13).
4.4. The research and education systems
Germany’s position as a latecomer in the commercialization of biotechnology does not indicate that
public policy actors did not invest early enough in
the infrastructure for biotechnological research and
education. The federal government, for instance, established four national centers for genetical research
in Berlin, Cologne, Heidelberg, and Munich already
in the early 1980s. The Länder provided their universities with capacities for research and training
in biotechnology as well. Additionally, Bavaria and
Baden–Württemberg, first of all, utilized receipts of
privatized Land owned enterprises to establish industry oriented research foundations under public law
(so-called Stiftungen) which contribute an important
share of research and development at the subnational
level since the 1980s.11 In sum, according to the
German Statistical Office, 450 university institutes
11 In 1990, the Bavarian Government, for example, established
the Bavarian Research Foundation. It was initially financed from
receipts of the privatization of the VIAG AG. Having one emphasis on biotechnology, the Bavarian Research Foundation provides
funds for research networks (e.g., Research Network for Fundamental Genetic Technology—FORGEN) as well as for cooperative
projects between science and industry.
404
R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
were involved in biotechnological research in 1995
(European Commission, 2000a, p. DE-24). About 48
universities offer academic programs in biotechnology, of which 20 are more oriented towards technical
aspects, the other 28 more towards studies in biology,
microbiology or biochemistry. In addition to that, 16
universities of applied sciences (polytechnics) have
initiated programs in biotechnology in recent years.
The German Research Council (Deutsche Forschungsgemeinschaft), the major funding organization for
academic research in Germany which is co-financed
by the federal government and the states, increased
its budget for medical and biological research considerably. Since 1997, total expenditures for both areas
have surged by more than 25% to 431 million in the
year 2000 (Deutsche Forschungsgemeinschaft, 2001,
p. 56). Out of its 278 collaborative research centers
(Sonderforschungsbereiche) a total of 110 are now
engaged in the field of biotechnology.12
Apart from financing the research and education
systems, the federal government and the Länder have
collectively as well as individually initiated reforms
that were aimed at reforming the German university
system. The federal government, which was assigned
to issue framework provision for the respective legislation by the Länder in 1969, amended the Framework
Act for Higher Education (Hochschulrahmengesetz)
twice, in 1998 and 2002. These amendments are aimed
at increasing the autonomy of universities at designing
scientific careers more effectively and at establishing
new study courses and degrees that are more compatible with international models. Most of the Länder
sized the opportunity of the 1998 amendment of the
Framework Act for Higher Education and introduced
university reforms also at the state level.
However, those university reforms could not prevent yet that there is still a certain lack of qualified personnel especially in science-based industries.
Looking at the German biotechnology industry, one
can identify some areas in which employees are not
available as needed. One area concerns the discipline
of bioinformatics. Since bioinformatics is a relatively
new discipline, the German university system has not
12 Statistical data of collaborative research centers financed by the
Deutsche Forschungsgemeinschaft refer to the year 2002. “DFGCollaborative Research Centres”, [http://www.dfg.de/english/
funding/sfb/sfb english.html].
been able to offer specialized programs in this field,
which is comparable to the situation in other countries. Only recently have many universities and polytechnics started programs in bioinformatics. In a more
general perspective, the total number of graduates in
Germany is considerably lower than in other OECD
countries. Whereas the OECD average is 920 graduates per 100,000 employees, there were only about
700 in Germany in 1999. As a consequence, the German university system has started reforms which are
primarily aimed at the shortening of university studies
through the introduction of bachelor and master study
programs. In the meantime, more than 1,000 of such
programs have been established at German universities (BMBF/KMK, 2001).
4.5. Corporate activities
In recent years, the German pharmaceutical biotechnology industry has entered a phase in which more
and more firms engage in drug development programs. Those programs are conducted either in cooperation with traditional pharmaceutical companies
or with other biotechnology firms. In more and more
cases there are also fully in-house R&D programs
that are increasingly based on drug candidates which
have been licensed-in from partners or competitors. In
that situation, small and medium sized research companies, which dominate the German biotechnology
industry, are heavily depended on cooperation with
customers or external knowledge providers. Such arrangements primarily exist within the local area or at
the international stage where German biotechnology
firms have become integrated into the global pharmaceutical R&D system through the establishment of
foreign subsidies or through strategic alliances with
international pharmaceutical companies and biotechnology firms.
Cooperation at the local and the international level
has increased significantly in most recent years, while
the national and European levels are still less important for the R&D process. Between 2000 and 2001
the number of agreements on collaboration has grown
from 237 to 429, while German biotech companies acquired 18 biotech firms. In both areas most of the deals
have been made with US-based firms. Only recently
those deals also involve partners from the European
biotechnology lead markets, especially from Britain
R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
and Germany (cf. Ernst and Young, 2002, pp. 32ff).
The international character of R&D collaboration becomes evident even if “national” companies agree on
such arrangements. Since 1999, two German biotechnology firms, GPC Biotech and Lion Bioscience, entered into R&D agreements with two Germany-based
pharmaceutical companies, Altana and Bayer. Both
agreements provide for cooperation in the field of genomics that takes place abroad and led to the establishment of R&D facilities in Massachusetts. Apart
from that, Germany’s biotechnology companies have
a strong international orientation especially in view of
their licensing activities and their patent or product
marketing applications.
At the local level formal R&D agreements between
biotechnology firms are still rare. The reason for this
is that companies use those partnerships to compensate for knowledge that does not exist in-house or in
order to optimize their product or service portfolio. By
doing so, geographical proximity does not play a decisive role. Even in publicly-funded research projects,
most firms have chosen regional partners only in a
limited number of cases. Biotechnology companies
profit from the local innovation milieu primarily
through informal contacts with corporate actors or
publicly-funded research organizations or through
relations with supporting institutions, such as VC
providers or patent lawyers that concern their business
development. However, public innovation policies
can strengthen socio-economic interaction within a
biotechnology cluster especially through the provision
of funds for collaborative R&D projects that explicitly
favor networking of core competencies. In the case of
the Munich pharmaceutical biotechnology cluster, for
example, the BMBF initiated the so-called proteomics
consortium in 2001 which brings together leading
public research institutions with four local companies
which have expertise in different fields of biotechnology, such as biochemistry, medicine, and bioinformatics. The proteomics consortium has been financed
by the BMBF with a total sum of 10.8 million.
5. Conclusions: from national to multi-level
innovation systems?
We have argued that institutions at territorial levels
beneath and above the nation-state are of increasing
405
importance for innovation processes. This statement
is in line with many studies that have recognized
the emergence of innovation systems within the local/regional or the European/international sphere.
However, in contrast to those studies our concept of
reconfigured NSIs turns against the attempt to identify autonomous innovation systems at various levels.
Instead, we have hypothesized that certain functions
traditionally associated with the National System
of Innovation have either been delegated towards
other territorial levels or supplemented by those levels. In some cases those functions became part of a
multi-level governance system in which institutional
incentives and framework conditions are provided
by various actors who share responsibilities across
territorial levels. By proposing such a multi-level
approach, we are trying to bridge the gap between
innovation system approaches that analytically focus
on one specific territorial level only.
Our empirical data confirm that the national institutional framework is still important even in federalized
or decentralized countries, in which subnational regions and localities do not only provide incentives
or create framework conditions autonomously, but
also in a coordinated manner with the national and
the European level. The German case also shows that
Europeanization has an important impact on the institutional environment in which innovative actors
are embedded. At least some functions, especially
regulation, public R&D financing and public innovation policies, are increasingly integrated into a
multi-level governance system while the financial or
the research and education systems still reflect national and regional patterns of specialization. From
our findings we can conclude that in the European
context the emergence of a multi-level innovation system seems to be driven by those areas in which political integration has proceeded furthest. This underlines
that the reconfiguration of national innovation systems can be connected with transformation processes
of national political systems (e.g., Kuhlmann, 2001).
This finding is most important in the context of
current EU visions for a more coherent and more coordinated European Research and Innovation Area (cf.
European Commission, 2000b) in which the so-called
“Open Method of Coordination” (OMC) shall be
the central integration instrument (e.g., Hodson and
Maher, 2001; Kaiser and Prange, 2002). However, as
406
R. Kaiser, H. Prange / Research Policy 33 (2004) 395–408
long as elements of an innovation system are mostly
in the competence of regional or national administrations (e.g., research and education policies), it is
quite unlikely that such efforts are successful, since
especially regions with legislative and budgetary
powers are generally quite reluctant to further centralize policies and competences. Thus, relating to
Kuhlmann (2001, p. 967), we assume that a “concentration and integration of European innovation
policies in transnational arenas” is not likely to come
true. Rather, we favor the notion of “a co-evolution
of regional, national and European (and maybe international, the authors) policy arenas” (Kuhlmann,
2001, p. 970), which characterizes those emerging
multi-level innovation systems, where political power
does not crystallize around one institutional core, one
political arena, and one territorial level.
While we have only explored our argument with
respect to German biotechnology, we propose that
further cross-country and cross-sectoral empirical research is needed to give a complete picture of the
reconfiguration processes and its policy implications.
Nevertheless, our example opens up an empirical
as well as a theoretical perspective. Empirically, the
article shows thoroughly the changing logics of innovation systems by tracing back the reconfiguration
of established NSI-variables (i.e. from national to
multi-level innovation systems); theoretically, the article helps to understand when and why multi-level
innovation systems appear revealing that the reconfiguration of national innovation systems is closely
connected to transformation processes of national
political systems.
Acknowledgements
Major parts of the empirical data of this article originate from two research projects, ‘National Systems
of Innovation and Networks in the Idea-Innovation
Chain in Science-based Industries’, funded by the European Community under the TSER program (Contract No. SOE1-CT-98-1102) and ‘Globalisation and
the Future of the Nation State’, DFG project as part
of the Collaborative Research Center 536 ‘Reflexive Modernisation’, recently concluded at the Technical University of Munich. The authors would like to
thank the two anonymous referees for their valuable
comments and suggestions on the first version of the
paper.
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