Global production networks and the changing geography of innovation systems. Implications for developing countries

The paper addresses disruptive changes that globalization imposes on the geography of innovation systems, and identifies potential benefits that developing countries could reap from international linkages. The analysis is centered on three propositions. First, developing countries need to blend diverse international and domestic sources of knowledge to compensate for initially weak national production and innovation systems. Second, a greater variety of international knowledge linkages is possible, as globalization reduces the spatial stickiness of innovation. Third, globalization has culminated in an important organizational innovation: the spread of global production networks (GPN) combines concentrated dispersion with systemic integration, creating new opportunities for international knowledge diffusion. We argue that GPN provide firms and industrial districts in developing countries with new opportunities for reverse knowledge outsourcing. We explore resultant challenges that define the need for public policy response, define the new agenda for industrial upgrading, and discuss what types of policies and support institutions may help to reap the benefits from network participation.