Technological Paradigms, Regimes and Trajectories: Manufacturing and Service Industries in A New Taxonomy of Sectoral Patterns of Innovation

Research Policy 37 (2008) 978–994
Contents lists available at ScienceDirect
Research Policy
journal homepage: www.elsevier.com/locate/respol
Technological paradigms, regimes and trajectories: Manufacturing and

service industries in a new taxonomy of sectoral patterns of innovation
Fulvio Castellacci
Department of International Economics, Norwegian Institute of International Affairs (NUPI), POB 8159, Dep. 0033 Oslo, Norway
a r t i c l e i n f o a b s t r a c t
Article history: This article presents a new sectoral taxonomy that combines manufacturing and service
Received 13 July 2005 industries within the same framework. This exercise is relevant because it aims at greater
Received in revised form 5 February 2008
integration between the study of sectoral patterns of innovation in manufacturing and ser-
Accepted 26 March 2008
vices, stressing the increasing importance of vertical linkages and inter-sectoral knowledge
Available online 15 May 2008
exchanges between these interrelated branches of the economy. The relevance of the new
taxonomy is illustrated with reference to the innovative activities and economic perfor-
Keywords:
Technological paradigms mance of manufacturing and service industries in Europe. This empirical evidence, which
Regimes presents fresh results from the Fourth Community Innovation Survey, supports the relevance
Trajectories of the taxonomy by showing the great variety of sectoral patterns of innovation in European
Vertical linkages industries.
Service innovation © 2008 Elsevier B.V. All rights reserved.
1. Introduction 2001; Laursen and Meliciani, 2002; Marsili and Verspagen,

2002; Malerba, 2002).
The study of sectoral patterns of innovation has For a long time, most of the empirical literature in this
attracted increasing academic attention in recent decades. field, and the underlying theoretical framework, focused
Seminal contributions have pointed out some major fea- on innovative activities and performance in manufactur-
tures of the innovative process and the great variety of ing industries. In the past few years, however, with the
patterns in different historical periods and industrial set- rapid growth in the service sectors and the increased
tings (Nelson and Winter, 1977; Dosi, 1982; Freeman et al., pace of innovation experienced by some advanced ser-
1982; Pavitt, 1984). vice providers, a new body of research has turned to
Inspired by these original insights, a substantial amount this hitherto unexplored branch of the innovation sys-
of empirical research has focused on various aspects of tem.
sectoral patterns of innovation. Several contributions have The literature on service innovation represents an
investigated the emergence and diffusion of technological increasingly important field of research, which has formu-
paradigms that characterize any given historical era, the lated new questions and shed new light on the process of
set of opportunities and constraints that these create for knowledge creation in the service sectors (Drejer, 2004;
different types of sectoral regimes, the distinct trajecto- Miles, 2005). In particular, this literature has identified
ries followed by industrial sectors, and the related web of certain features that make the innovation process in
vertical linkages between sector-specific regimes and tra- services markedly different from that of manufacturing,
jectories in the national system of innovation (Archibugi, and emphasized the growing interdependence between
the manufacturing and service branches of the economy
(Evangelista, 2000; Miozzo and Soete, 2001; Guerrieri and
E-mail address: [email protected]. Meliciani, 2005).
0048-7333/$ – see front matter © 2008 Elsevier B.V. All rights reserved.
doi:10.1016/j.respol.2008.03.011
F. Castellacci / Research Policy 37 (2008) 978–994 979
However, the service innovation literature seems to of the process of technological change, in particular on its
be developing, to some extent, into a separate field of paradigmatic, cumulative and sector-specific nature.1
investigation within innovation studies, without much The paradigmatic nature refers to the existence of major
interaction with or relation to the well-established technologies that create, in any given historical era, a set of
paradigm–regime–trajectory model already developed for opportunities and constraints for the innovative activities
the study of innovation in manufacturing industries. One and business strategies of economic agents. The seminal
major challenge is therefore to provide a more inte- concept is that of technological paradigm.
grated view of the characteristics that innovation takes
In broad analogy with the Kuhnian definition of a
in manufacturing and in service industries alike, and to
“scientific paradigm”, we shall define a “technological
shed new light on the relationships between these inter-
paradigm” as “model” and a “pattern” of solution of
related parts of the economy (Gallouj and Weinstein,
selected technological problems, based on selected prin-
1997).
ciples derived from natural sciences and on selected
Motivated by this need for greater integration between
material technologies [. . .] It would perhaps be better to
the study of manufacturing and service innovation, this
talk of “cluster of technologies”, e.g. nuclear technolo-
article presents a new sectoral taxonomy that combines
gies, semiconductor technologies, organic chemistry
manufacturing and service industries within the same
technologies, etc. (Dosi, 1982, p. 152)
overall framework. The taxonomy is built up by focus-
ing on two main characteristics of industrial sectors: The idea of technological paradigms is closely related to the
the function they assume in the economic system as perspective originally proposed by Schumpeter in Business
providers and/or recipients of advanced products, ser- Cycles (1939), which emphasized the discontinuities asso-
vices and knowledge; and the dominant innovative mode ciated with the introduction of radical technologies and the
that characterizes their technological activities (their disruptive effects that these may have on the dynamics of
sectoral regime and trajectory). Using these two con- the whole economy. Historically, the emergence and dif-
ceptual dimensions, the new taxonomy identifies four fusion of new technological paradigms have been closely
major sectoral groups, points out their characteristic fea- associated with the rise of interrelated and pervasive radi-
tures, and focuses on the vertical linkages that tie them cal innovations which had the potential to be used in many
together. sectors of the economy and to drive their long-run perfor-
The empirical relevance of the taxonomy is then illus- mance for several decades (Freeman et al., 1982; Freeman
trated by means of descriptive evidence. The analysis and Louça, 2001).
presents fresh results from the Fourth Community Innova- Thus, the concept of technological paradigm does not
tion Survey (CIS4, 2002–2004) on the innovative activities simply describe a set of structural techno-economic fea-
of manufacturing and service industries in a sample of tures in a static sense, but is inherently related to the
24 European countries, and combines them with infor- dynamic behaviour of the system, i.e. the growth poten-
mation on the economic performance of these industrial tial that any given set of interrelated and pervasive radical
sectors in the longer period 1970–2003 from the OECD- technologies entails. The exploitation of such technological
STAN database. The descriptive evidence supports the and economic potential proceeds along well-established
relevance of the taxonomy by demonstrating the great directions, the technological trajectories.
variety of sectoral patterns of innovation in European
We will define a technological trajectory as the pattern of
industries.
“normal” problem solving activity (i.e. of “progress”) on
The article is organized as follows. Section 2 briefly
the ground of a technological paradigm. [. . .] Once a path
reviews the literature on paradigms, regimes and trajec-
has been selected and established, it shows a momen-
tories in manufacturing industries. Section 3 describes the
tum of its own [. . .], which contributes to define the
state of the art in the study of service innovation and argues
directions towards which the “problem solving activ-
for greater integration between the research on manu-
ity” moves. A technological trajectory, i.e. to repeat,
facturing and on service innovation. Section 4 presents
the “normal” problem solving activity determined by
the new taxonomy, pointing out the main implications
a paradigm, can be represented by the movement of
of this theoretical view for understanding the process of
multi-dimensional trade-offs among the technologi-
growth and structural change. Section 5 illustrates the
cal variables which the paradigm defines as relevant.
empirical relevance of the taxonomic model. Section 6
Progress can be defined as the improvement of these
concludes and discusses the policy implications of the anal-
trade-offs. (Dosi, 1982, pp. 152–154)
ysis.
The third pillar in this theoretical construction is then the
2. Paradigms, regimes and trajectories in sector-specific nature of innovation. This is a direct con-
manufacturing industries sequence of this Schumpeterian perspective and of the
paradigm-bounded and path-dependent nature of the pro-
The study of innovation in manufacturing industries cess of technological accumulation. In fact, when a new
received a significant push between the late 1970s and the
early 1980s, when the seminal contributions of, among oth-
ers, Dosi, Freeman, Pavitt, Nelson and Winter opened up a 1
For a more extensive survey of this literature and a comparison of
new direction of research and a new set of questions. This various theoretical approaches to the study of innovation and economic
perspective focused on some of the major characteristics growth, see Castellacci (2007a).
980 F. Castellacci / Research Policy 37 (2008) 978–994
technological paradigm emerges and starts to diffuse in the i.e. the set of relationships and interactions that innova-
economic system tive firms have with enterprises in other sectors of the
economy. The systemic nature of the innovative process
industries differ significantly in the extent to which they
in fact calls attention to the interactions, cooperations
can exploit the prevailing general natural trajectories,
and exchanges involving producers, suppliers and users
and these differences influence the rise and fall of dif-
of new technologies. These inter-sectoral exchanges, the
ferent industries and technologies. (Nelson and Winter,
set of input–output relationships in terms of advanced
1977, pp. 59–60)
knowledge, material inputs and demand, constitute a fac-
In any given historical era, industrial sectors whose knowl- tor crucial to enhance the competitiveness of the whole
edge base and capabilities are closely related to the national system. According to the home market hypothe-
constellation of emerging radical innovations face a broader sis, in fact, the strength of interactions among suppliers,
set of opportunities and tend therefore to follow dynamic producers and users of advanced technologies and the exis-
trajectories. By contrast, industries less directly involved tence of an established and well-functioning set of vertical
in the production and use of the new general-purpose linkages represent one major factor of competitive advan-
technologies experience a lack of opportunities and are tage (Porter, 1990; Lundvall, 1992; Laursen and Meliciani,
therefore forced to move along less dynamic paths. 2002).
Inspired by these theoretical insights, empirical Even though various strands of recent empirical
research on sectoral patterns of innovation has flourished research have focused on distinct aspects, all of them
in the last few years, investigating both the characteristics are founded upon the original Schumpeterian framework
of the innovative process in particular industries as well briefly outlined in this section. In sum, this story is based
as cross-sectoral differences in technological activities on the emergence and diffusion of technological paradigms
and performance. Different strands of research have that characterize any given historical era, the set of oppor-
focused on different elements of the original theoretical tunities and constraints that these create for different types
framework. of sectoral regimes, the distinct trajectories followed by
One group of studies has focused on sector-specific industrial sectors, and the related web of vertical linkages
technological regimes, identifying the various features that that tie together sector-specific regimes and trajectories in
distinguish innovative activities and industrial dynamics the national system of innovation.
in different sectors, particularly in terms of technological The ideal-type example of this paradigm–regime–
opportunities, properties of the knowledge base, cumula- trajectory–linkages model – and the very same histori-
tiveness and appropriability conditions (e.g. Breschi et al., cal context where this framework was conceived – dates
2000; Marsili and Verspagen, 2002; Malerba, 2002; Van from the Fordist age (Freeman et al., 1982; Freeman and
de Poel, 2003; Dosi et al., 2006). Other studies, instead of Louça, 2001). The radical technologies that brought a strong
focusing on the patterns of industrial dynamics and the growth potential in the post-war era were initially based on
related process of competition and selection within each the petrochemical technology for producing oil (‘cracking’)
industrial sector, have more closely analysed the innova- as well as the internal combustion engine. These radical
tive strategies that firms follow in different sectors of the innovations gave a major push to the mass-producing sec-
economy. Here, the emphasis is more on the notion of tech- tors that employed these technologies on a large scale,
nological trajectories, and on the relationships between especially the automobile, plastic and chemical industries,
sector-specific paths and the various characteristics of which came to follow highly dynamic trajectories during
firms’ innovative strategies. the post-war decades.
It was Pavitt (1984) who originally applied the idea This growth potential diffused rapidly throughout the
of technological trajectories to the investigation of sec- economic system by means of the set of vertical link-
toral patterns of innovation. In his well-known taxonomy, ages and inter-sectoral relationships within the home
Pavitt identified four major patterns of innovation (i.e. four market. The general-purpose technologies sectors fostered
dominant technological trajectories): supplier-dominated, the demand for specialized inputs from their suppliers
scale-intensive, specialized suppliers, and science-based (e.g. precision instruments and advanced components),
industries. Pavitt’s taxonomy inspired a great amount of while at the same time providing a set of advanced
research in this field.2 In particular, this empirical work has knowledge outputs to the users of new technologies,
been fostered by the rapid diffusion of Community Innova- supplier-dominated firms as well as final consumers.
tion Survey (CIS) data in Europe in the past decade, which Pavitt’s model of the linkages between science-based, spe-
has made it possible to enlarge the set of factors used to cialized suppliers, scale-intensive and supplier-dominated
describe the dominant technological trajectories followed industries provides a stylized and powerful descrip-
by innovating firms in different industries of the economy tion of the core set of industrial sectors that sustained
(Evangelista et al., 1997; Evangelista, 1999; Veugelers and the growth of advanced economies during the Fordist
Cassiman, 1999; Mairesse and Mohnen, 2002; Reichstein age.
and Salter, 2006).
A crucial aspect of the Pavitt taxonomy and the related 3. Structural change, innovation and the growth of
set of later empirical studies is the focus on vertical linkages, services
The literature on technological regimes, trajectories and

2
For a critical discussion of this literature, see Archibugi (2001). vertical linkages is mostly focused on the manufacturing
branch of the economy, since this represented the major uses a similar approach to examine the innovative patterns
growth engine and the most innovative part of the eco- of different types of service industries.3
nomic system throughout most of the post-war era. In The study of the sectoral variety of innovation within
recent decades, however, the service sectors have experi- services is closely related to the analysis of the relation-
enced rapid growth, and they now account for a large share ships among different types of service industries, namely
of value added, employment and trade in most industrial- the extent and intensity of vertical linkages that tie together
ized countries. producers, suppliers and users of new technologies. This
The traditional view of services as productivity laggards aspect becomes even more relevant in the light of the
and employment sponges (Baumol, 1967) has been called fact that an intense process of outsourcing has taken place
into question by the great dynamism that some advanced in recent decades, where many activities previously per-
service sectors have shown in relation to the emergence and formed within manufacturing firms are now carried out by
diffusion of information and communication technologies specialized business services. This process is leading to an
(ICTs). In the last few decades, a range of interrelated rad- increasing interdependence and a more intense knowledge
ical innovations has progressively been introduced in the exchange between manufacturing and service activities.
economic system, first in the semiconductor industry and While the former outsource part of the technological and
later in the software and telecommunications sectors, dif- productive activities to specialized service providers, thus
fusing rapidly since the early 1990s (Freeman and Louça, sustaining their growth by demanding a new range of inter-
2001). As part of the diffusion of the new general-purpose mediate products and services, technological advances in
technologies, a related set of innovations has spread, based the latter serve to sustain the dynamics of the whole
on multimedia and the Internet, closely linked to pub- manufacturing branch (Park and Chan, 1989; Franke and
lishing and entertainment activities and to a whole range Kalmbach, 2005).
of new services (voice networks, cable, mobile and satel- Two examples can illustrate the relevance of this argu-
lite communications, data transmission, networks, etc.). ment. The first concerns infrastructural and distributive
The growth of advanced services is thus closely related to services, such as transport, financial and telecommuni-
the emergence of a new technological paradigm character- cation services. Innovative activities for service providers
ized by the pervasiveness and growth potential brought by of this type are heavily dependent on the acquisition of
ICTs. advanced capital equipment (ICT-related devices in par-
Motivated by these recent transformations, an emerg- ticular) from manufacturing industries, whose application
ing body of literature points to the increasingly important yields increases in efficiency and quality improvements of
role of innovation for the creation of entirely new ICT- the infrastructure of the economy. In turn, advances in the
based services as well as for the growth of existing ones. latter have a pervasive effect on the whole system of inno-
The literature on innovation in services now represents vation by bringing cost reductions and productivity gains in
one of the most rapidly growing areas within innovation all other industries. In addition, an advanced communica-
studies (Drejer, 2004; Miles, 2005). This recent literature tion infrastructure favours the process of technological and
emphasizes the existence of a great variety of innovative economic specialization: hence, it enables the deepening of
strategies and patterns within services (Evangelista, 2000; the division of labour and the outsourcing of activities that
Tether, 2003). In fact, the service branch of the economy the process of structural change entails (Antonelli, 1998).
consists of a very heterogeneous set of activities, and the The second example refers to knowledge-intensive busi-
study of innovation in different service industries must take ness services, such as software, R&D, engineering and
these sectoral specificities into account. Thus, similarly to consultancy firms. These produce specialized knowledge
what was done in the study of manufacturing industries, and act as problem-solvers for advanced manufacturing
innovation scholars have recently started to analyse the firms, as well as for ICT-based infrastructural services. This
technological trajectories followed by different types of ser- is for instance the case for the interactions between hard-
vice industries and have proposed taxonomies of service ware and software in the computer industry, and for the
innovation aimed at identifying some major sectoral pat- increasingly important role played by R&D and engineering
terns of innovation that characterize different groups of services for the innovative activities carried out by science-
service industries. based and specialized manufacturing industries.
In the economics literature, a traditional and well- Therefore, a crucial factor of competitive advantage
known distinction is that between producer, distributive in the new ICT-based technological paradigm is repre-
and personal services (Gershuny and Miles, 1983; Park and sented by the interdependence and vertical linkages that
Chan, 1989). This simple taxonomy is not explicitly focused tie together different groups of manufacturing and ser-
on innovation, but it is important because it points out the vice sectors (Windrum and Tomlinson, 1999; Di Cagno and
different functions that various groups of service sectors Meliciani, 2005; Guerrieri and Meliciani, 2005). Such an
perform within the economic system as providers of inter- extension of the home market hypothesis is a fascinating
mediate, distributive or final services, respectively. Building subject for further study, although at present a full under-
upon this original distinction, but focusing more explicitly standing of the interactions and co-evolutionary process
on the role of innovation and of inter-sectoral exchanges of linking together manufacturing and services is still lacking.
knowledge among different groups of industries, Miozzo
and Soete (2001) have proposed an interesting taxonomy
of sectoral patterns of innovation in services. This taxon- 3
See also the related works of Evangelista (2000) and Hipp and Grupp
omy is inspired by Pavitt’s (1984) conceptualization, and it (2005).
In summary, despite the recent advances in the study industry-specific nature of innovation and the great variety
of service innovation, this literature still seems fragmented of sectoral patterns of technological change characteristic
and not clearly related to the paradigm–regime–trajectory of the knowledge-based economy. While recognizing the
model earlier developed for the study of innovation in man- analytical appeal of this simple type of classification, our
ufacturing industries. The service innovation literature has typology aims to provide a more precise characterization
shed much new light on a range of specific aspects that of sectoral patterns of innovation than what is commonly
characterize the process of knowledge creation in the pro- offered by endogenous growth models in the economics
vision of services, but it has so far been less successful literature.
in integrating these new insights into the previous well- On the other hand, the innovation studies literature has
established research on paradigms, regimes, trajectories frequently adopted sectoral classifications that point out
and vertical linkages. more explicitly the characteristics of the process of tech-
One major challenge is therefore to build up a more nological change, rather than the types of items produced
integrated view of the characteristics that innovation takes by firms in various sectors. Technological systems of classi-
in manufacturing and in service industries, and to shed fication focus on the innovative modes and strategies that
new light on the relationships between these interrelated are adopted by firms in different parts of the economic sys-
branches of the economy. One previous important attempt tem, i.e. the characteristics of their technological regimes
in this direction was presented by Gallouj and Weinstein and trajectories. As pointed out in Section 2, the focus
(1997), who argued in favour of a synthesis approach to on technological regimes and trajectories naturally leads
innovation and presented an integrated microeconomic to an emphasis on the vertical linkages and knowledge
model encompassing both manufacturing and service char- exchanges that firms in different sectors of the economy
acteristics. have with their suppliers and/or with the users of new
technologies. A familiar example of this type of classifica-
The construction of a general description of innovation
tion scheme is the taxonomy of Pavitt (1984), where the
is essential for an understanding of what the notion of
main focus is on the innovative mode adopted by different
innovation might encompass, in both services and man-
sectoral groups and the related inter-sectoral knowledge
ufacturing industry, and the basic forms it might take.
flows.4 Our taxonomic model also builds upon this type
(Gallouj and Weinstein, 1997, p. 538)
of classification scheme, but it differs from previous sec-
This paper agrees that greater integration between the toral taxonomies in the innovation studies literature in one
study of manufacturing and service innovation constitutes important aspect. While typologies of manufacturing and
an important challenge for research in the field; however, service innovation have so far been carried out separately
instead of focusing on the microeconomic characteristics of and independently of each other, the taxonomic model pro-
goods and services, it approaches the issue at a more aggre- posed here combines manufacturing and services within
gate level of analysis, and presents a sectoral taxonomy that the same framework, and points out the fundamental role
integrates manufacturing and service industries within the played by vertical linkages and inter-sectoral knowledge
same general framework. exchanges between them.
Fig. 1 presents a stylized representation of this tax-
4. Manufacturing and service industries in a new onomic model. In an attempt to consider product-
taxonomy and technology-related characteristics simultaneously, the
typology is constructed by dividing industrial sectors along
The new taxonomy of sectoral patterns of innovation two main dimensions. The first focuses, in analogy with the
presented in this section builds upon and combines ele- endogenous growth literature, on the function assumed by
ments of sectoral classifications previously pointed out in each industry in the economic system as provider and/or
the economics and innovation studies literatures. recipient of goods and services, i.e. its position in the verti-
On the one hand, the economics literature has fre- cal chain. Industries that provide final (intermediate) goods
quently adopted a product-related type of classification, and services to other sectors are therefore positioned at
where industrial sectors are identified according to the kind a higher (lower) level on the Y-axis in the diagram in
of item that firms predominantly produce and commercial- Fig. 1.
ize. The product-related classification naturally leads to an The second dimension represents, in analogy with pre-
emphasis on the function that each industry assumes in vious taxonomic exercises in the innovation literature, the
the economic system as provider (recipient) of goods and technological content of an industry, i.e. the overall level of
services to (from) other industries, i.e. its stage in the verti- technological capabilities of innovative firms in the sectoral
cal chain. One well-known example of this type of product- system. This dimension is thus defined by the technological
and function-related classification scheme can be seen in the regimes and trajectories that characterize sectoral systems,
“new growth” literature. New growth models admittedly
provide a rather stylized representation of sectoral groups,
which mainly differ in terms of their function in the eco-
4
nomic system as producers of blueprints (the R&D sector), To be more precise, Pavitt’s taxonomy does not only focus on inno-
intermediate or final goods (e.g. Romer, 1990; Grossman vative activities and knowledge flows, but also incorporates elements of
a process-related type of classification, e.g. by emphasizing the relevance
and Helpman, 1991). This standard type of three-sector of scale economies for his group of scale-intensive producers. For a more
model presents a useful stylized representation of the econ- detailed discussion of product-, technology- and process-related sectoral
omy, but it does not enable detailed investigation of the classification schemes, see Von Tunzelmann and Acha (2005).
Fig. 1. A new taxonomy of sectoral patterns of innovation in manufacturing and service industries.
and the extent to which industrial sectors are able to create not only points out the function of each sector as provider
new technologies internally or must rely on the external and/or recipient of goods and services to other industries,
acquisition of machinery, equipment and knowledge from but also acknowledges the presence of considerable hetero-
their suppliers. Technologically advanced sectors, able to geneity within each industrial block, in line with previous
develop new technologies internally and provide them to related exercises in the innovation literature (Pavitt, 1984;
the rest of the economy, are positioned on the right-hand Miozzo and Soete, 2001).
side of the X-axis in Fig. 1, whereas industries that mostly Table 1 presents a summary of the main features of these
acquire advanced knowledge from other sectors rather than various industrial blocks, pointing out their relationship to
creating them internally are positioned on the left-hand the dominant technological paradigm and some of the char-
side of the X-axis.5 acteristics of their technological regimes and trajectories.6
The typology is built up by applying these dimensions Advanced knowledge providers (AKP) are characterized
in a two-step conceptual exercise. First, sectors are divided by great technological capability and a significant ability
according to the main function they assume in the eco- to manage and create complex technological knowledge.
nomic system (Y-axis). This yields the identification of four Two sub-groups of industries belong to this category: (1)
major sectoral groups. Secondly, each of these four blocks is within manufacturing, specialized suppliers of machinery,
subsequently divided into two distinct sub-groups on the equipment and precision instruments; (2) within services,
basis of the technological content that characterizes them providers of specialized knowledge and technical solutions
(X-axis). By using these two layers of analysis, the taxonomy like software, R&D, engineering and consultancy (so-called
knowledge-intensive business services). What these indus-
tries have in common is that, in addition to their high level
5
One important caveat needs to be noted. The two dimensions pointed of technological capability, they perform the same func-
out here and graphically presented in Fig. 1 admittedly provide a rather tion in the innovation system as providers of advanced
stylized and simplified representation of concepts that are indeed multi-
technological knowledge to other industrial sectors. They
dimensional in nature. First, the vertical chain represented on the Y-axis
of Fig. 1 refers to the product chain, and the related set of input–output represent the supporting knowledge base upon which inno-
sectoral exchanges. The chain would, however, look different if structured vative activities in all other sectors are built, and they
in terms of, e.g., knowledge or financial flows. Furthermore, the degree continuously upgrade and renew this base. Firms in these
of vertical integration in the industrial system changes over time, so that industries are typically small, and tend to develop their
different sectors, and firms within sectors, may indeed shift their rela-
tive position on the vertical chain in the long run (Von Tunzelmann and
technological activities in close cooperation with their
Acha, 2005). Secondly, the technological content dimension represented
on the X-axis in the figure also represents a convenient linearization of the
concept of innovative mode (regimes, trajectories, etc.), which is actually
6
complex and difficult to summarize by means of a single uni-dimensional The table can be directly compared to the corresponding tables in
construct, as discussed in Section 2. Thus, this taxonomic model provides Pavitt (1984, p. 354) and Miozzo and Soete (2001, p. 161), which, as pointed
a rather stylized and simplified representation of the economic system, out, represent two major previous taxonomic exercises for the study of
and it is important to acknowledge and emphasize the sense of multi- sectoral patterns of innovation in manufacturing and service industries,
dimensionality that underlies these two conceptual dimensions. respectively.
984
Table 1
The main characteristics of the various sectoral groups in the new taxonomy
Sectoral category Sub-groups within Typical core sectors Major function and relationship to Technological regimes Technological trajectories
each category technological paradigms
Advanced knowledge providers Knowledge-intensive Software; R&D; The supporting Opportunity levels: very high Type of innovation: new services;
business services engineering; knowledge base of the External sources: users and organizational innovation
consultancy ICT paradigm universities Innovation expenditures and
Appropriability: know-how; strategy: R&D; training;
copyright cooperations
Dominant firm size: SMEs
Specialized suppliers Machinery; The supporting Opportunity levels: high Type of innovation: new products
manufacturing instruments knowledge base of the External sources: users Innovation expenditures and
Fordist paradigm Appropriability: patents; design strategy: R&D; acquisition of
F. Castellacci / Research Policy 37 (2008) 978–994

know-how machinery; software purchase
Mass production goods Science-based Electronics The carrier industries Opportunity levels: high Type of innovation: new products;
manufacturing of the ICT paradigm External sources: universities and organizational innovation
users Innovation expenditures and
Appropriability: patents; design; strategy: R&D; cooperations
copyright
Dominant firm size: large
Scale-intensive Motor vehicles The carrier industries Opportunity levels: medium Type of innovation: mixed products
manufacturing of the Fordist paradigm External sources: suppliers and and process innovation
users Innovation expenditures and
Appropriability: design; process strategy: R&D; acquisition of
secrecy machinery
Supporting infrastructure services Network infrastructure Telecommunications; The supporting Opportunity levels: medium Type of innovation: mixed process,
services finance infrastructure of the External sources: suppliers and service and organizational
ICT paradigm users innovation
Appropriability: standards; norms; Innovation expenditures and
design strategy: R&D; acquisition of
Dominant firm size: large software; training
Physical infrastructure Transport; wholesale The supporting Opportunity levels: low Type of innovation: process
services trade infrastructure of the External sources: suppliers Innovation expenditures and
Fordist paradigm Appropriability: standards; norms; strategy: acquisition of machinery
design and software
Innovation expenditures and
Innovation expenditures and

clients and with the users of the new products and services
Type of innovation: process
Type of innovation: process

Technological trajectories
they create. In the Fordist model, the typical example of this
strategy: acquisition of
strategy: acquisition of
kind of user–producer interactions was Pavitt’s illustration
machinery; training
of the close ties between specialized suppliers and car pro-
ducers in the automotive industry. In more recent times, the
machinery
greater technological specialization and deeper division of
labour have increased the demand for complex innovative
capabilities, leading to the emergence and rapid growth of
knowledge-intensive business services, which now act as
providers of specialized knowledge and technical solutions
for the other advanced branches of the economic system.
Opportunity levels: medium
Supporting infrastructural services (SIS) may be located,

External sources: suppliers
External sources: suppliers


Opportunity levels: low similarly to the previous category, at an early stage of
Technological regimes
non-technical means
the vertical chain, since they mostly produce intermedi-
trademarks; design
ate products and services rather than items for personal

Appropriability:
Appropriability:
and end users
consumption. Where they differ from advanced knowledge

know-how
providers is in terms of their technological capability, espe-

cially their more limited ability to develop new knowledge
internally. Their innovative trajectory tends to be based on
the acquisition of machinery, equipment and various types
of advanced technological knowledge created elsewhere in
the economic system. Two sub-groups of sectors can be dis-
tinguished here, each characterized by a different level of
technological paradigms
technological sophistication (Miozzo and Soete, 2001): (1)

technologies related to
products and services
providers of distributive and physical infrastructure ser-

different paradigms
Major function and
They enhance the
by acquiring and
vices (e.g. transport and wholesale trade); (2) providers

relationship to
quality of final
of network infrastructure services (such as finance and

embodying
telecommunications). Firms in the latter group typically

make heavy use of ICTs developed by other advanced
sectors in order to increase the efficiency of the produc-
tive process and the quality of their services, whereas the
former group of industries has significantly less capabil-
ity in this respect. Regardless of these differences, what
Hotels and restaurants
Textiles and wearing
these sectoral groups have in common is the function they

Typical core sectors
assume in the economic system: they represent the sup-

porting infrastructure upon which business and innovative
activities carried out by firms in the whole economy are
based. The more advanced this infrastructure is, the eas-
ier the process of inter-sectoral knowledge diffusion within
the domestic economy, and the more efficient and produc-
tive the national system will be.
Sectors producing mass-production goods (MPGs) con-
stitute a key part of the manufacturing branch. They may be
Supplier-dominated
Supplier-dominated
located at an intermediate stage of the vertical chain, since

Sub-groups within
they produce both final goods and intermediate products

each category
used in other stages of the production process. In terms

of their technological content, they are characterized by
services
their considerable capability to develop new products and

goods
processes internally, although two distinct sub-groups may

be distinguished (Pavitt, 1984): (1) scale-intensive indus-
tries (e.g. motor vehicles and other transport equipment)
frequently have their own in-house R&D facilities, and
their innovative activities also develop in close coopera-
Personal goods and services
tion with the specialized suppliers of precision instruments

and machinery; (2) science-based sectors (such as electron-
Table 1 (Continued )
ics) are characterized by a greater ability to create new

Sectoral category
technological knowledge internally, and their innovation

processes stay close to the scientific advances continu-
ously achieved by universities and other public research
institutes. Different as they may be, these sectoral groups
share several common characteristics. Firms are typically
large, and their profitability depends on the exploitation national systems of innovation. When a new technological
of scale economies that can be obtained through the mass paradigm emerges and diffuses throughout the economy,
production of standardized goods. Further, they all assume industrial sectors differ greatly in terms of the technological
a central position in the knowledge chain, as they receive opportunities, capabilities and constraints they face. High-
technological inputs from advanced knowledge providers, opportunity technological regimes are in a better position
while in turn providing technological outputs (new prod- to exploit the advantages of the new general-purpose tech-
ucts) that are used by infrastructural services as well as by nologies, and have a greater growth potential. Some of
producers of final goods. They are, in a nutshell, the carrier these industries belong to our mass-production goods sec-
industries of a new technological paradigm (Freeman and toral group. By demanding new infrastructural services as
Louça, 2001). By producing technologically advanced prod- well as advanced specialized knowledge and technical solu-
ucts on a large scale, by fostering the efficiency and quality tions to their suppliers, they transmit part of this growth
of the production process of infrastructural and final goods potential to some of the other industrial groups.
and services, and by increasing the demand for specialized To illustrate, under the Fordist paradigm, the typical
solutions from advanced knowledge providers, this group high-opportunity mass-production sectors included the
of industrial sectors plays a pivotal role in the economic chemical, plastics and automobile industries (Freeman et
system. al., 1982). In order to follow their dynamic trajectories,
In the fourth sectoral block we find the producers of per- these branches fostered the growth of specialized suppliers
sonal goods and services (PGSs). Located at the final stage of (e.g. producers of precision instruments) and of infras-
the vertical chain, these manufacturing and service indus- tructural services (in particular, physical infrastructural
tries are characterized by a lower technological content services like transport). It was the set of mutual interac-
and a more limited ability to develop new products and tions between these vertically integrated branches of the
processes internally. Their dominant innovation strategy economy that sustained the dynamics of national systems
is typically based on the acquisition of machinery, equip- in many advanced countries in the post-war era.
ment and other types of external knowledge produced by More recently, with the emergence and rapid diffusion
their suppliers, while they commonly lack the capability of the ICT-based paradigm, greater technological opportu-
and resources to organize and maintain their own R&D labs. nities can instead be found in other sectors. Electronics and
This explains the term supplier-dominated industries that is hardware producers may be seen as the high-opportunity
frequently adopted in the innovation literature—and that mass production manufacturers of the present age. In
describes well the two sub-groups of industries included their dynamic trajectory, these sectors have, however,
in this category: (1) the producers of personal goods and also sustained the rise of advanced knowledge providers
(2) the providers of personal services (Pavitt, 1984; Miozzo (such as software and technical consultancy) and of net-
and Soete, 2001). Firms in these manufacturing and service work infrastructure services (e.g. telecommunications). It
branches, typically small enterprises, are mostly recipients is the exchange of advanced knowledge, goods and services
of advanced knowledge. To the extent that they are able among these high-opportunity manufacturing and service
to implement new technologies created elsewhere in the sectors that accounts for the bulk of the growth potential
economy, they may use them to increase the efficiency of of the current era.
the production process as well as to improve the quality of In short, the specific key industries will differ in any
the final goods and services they commercialize. This type given historical age, but the overall causation mechanism
of strategy may help to lengthen the industry-life cycle of that drives the dynamics of the system remains, by and
these mature industrial sectors and recreate new techno- large, the same. A new set of general-purpose technologies
logical opportunities.7 will need to be produced on a large scale, supported by
In a nutshell, this sectoral typology presents a stylized an efficient infrastructure and sustained by the provision
view of some of the main vertical linkages between manu- of an advanced knowledge base. Our four-group typol-
facturing and business services within a national system of ogy provides a comprehensive and general framework that
innovation. One relevant aspect of this neo-Schumpeterian accounts for the dynamics of a national system within each
taxonomic model is the explanation it provides of the paradigmatic phase, as well as for the transformations that
mechanisms that drive growth and structural change in occur when a regime shift changes the locus of technolog-
ical opportunities and of the related growth potential.8
This theoretical view has one important implication for
7
It is important to emphasize the multifaceted nature of the concept
the competitiveness of national systems. Given the exis-
of opportunity that is so frequently used in the innovation literature.
Table 1 and the related discussion in this section focus on technologi-
cal opportunities, in line with the emphasis on technological paradigms,
8
regimes and trajectories that inspires the new taxonomic model. How- This is an aspect where the new taxonomy differs substantially from
ever, for some industrial sectors, market opportunities may frequently be related works in this field. The main purpose of previous taxonomic exer-
an equally important driver of structural change and competitiveness. cises was more to point out the existence of industries characterized by
For instance, in some medium- and low-tech industries, demand differ- distinct innovative modes in a given historical period (e.g. in the post-war
entiation plays a relevant role, as firms progressively seek to improve era, as in Pavitt’s taxonomy), rather than exploring the implications of a
the quality of traditional products and to produce new items in keep- given industrial structure for the dynamics of the economic system. The
ing with new tastes and demand changes (Von Tunzelmann and Acha, taxonomy presented here, by making explicit the link between paradigms,
2005). By focusing on technological rather than market opportunities, our regimes and trajectories, tries to link the identification of sectoral pat-
taxonomic model emphasizes the supply-side determinants of structural terns in a static sense with the study of structural change and economic
change, while neglecting some important demand-side drivers. dynamics in the long run.
tence of a web of vertical linkages among industries, a
dominated
specialization pattern in advanced manufacturing indus-
Supplier-
services
tries fosters the development of new services, and the latter
2.49
2.04
16.69
31.99
17.82
0.67
8.73
3.13
22.15
in turn acts to enhance the growth of the former. The key
mechanism of competitiveness of a national system is thus
related to two major factors: first, the ability of a country
to undertake a process of structural change from tradi-
dominated
Supplier-
tional to GPT-related high-opportunity manufacturing and

goods
4.44
37.59
22.52
13.96
5.23
10.03
27.26
4.27
24.37
service industries; secondly, the intensity of inter-sectoral
PGS
linkages between different types of sectoral groups within

the domestic economy.
infrastructure
5. Empirical evidence: regimes, trajectories and

Physical
services
29.96
2.69
13.96
6.59
25.86
3.79
3.97
9.12
25.14
performance in Europe
This section presents some descriptive evidence to illus-

Network infrastructure
trate the empirical relevance of the new sectoral taxonomy.

The empirical evidence is based on the Fourth Community
Innovation Survey (CIS4, 2002–2004). CIS4 data are here
AKP: advanced knowledge providers; MPG: mass production goods; SIS: supporting infrastructure services; PGS: personal goods and services.
used at the industry-level for a sample of 24 European

countries.9 This cross-industry dataset provides relevant
services
46.49
2.66
4.89
26.34
29.02
4.60
24.07
3.74
12.17
and up-to-date information on a range of characteristics

SIS
of innovative activities in Europe, thus making it possi-

ble to analyse some major features of sectoral innovation
Scale-intensive
manufacturing
systems. The analysis here focuses on a set of important

aspects that characterize the technological regimes and tra-
The characteristics of the categories of the new taxonomy [Technological regimes—CIS4 data (2002–2004), EU24 averagea ]
jectories of the various sectoral groups. The main purpose

3.49
14.40
13.53
23.92
26.65
7.08
28.77
42.71
4.15
of the exercise is to provide empirical support for the sec-

toral properties outlined in Table 1, and to show the close
Science-based
relationship between paradigms, regimes and sectoral tra-

manufactur-
jectories.
Tables 2 and 3 present some main descriptive results
13.00
7.98
56.59
5.28
48.45
21.46
30.65
20.14
22.10
MPG
from the CIS4 Survey. Table 2 reports a set of indicators

ing
measuring various characteristics of sectoral technologi-

cal regimes, such as their innovativeness and opportunity
Specialized suppliers
levels, cumulativeness conditions, appropriability means,

and external sources of opportunities (e.g. suppliers, users
manufacturing
and Universities). Table 3 presents a set of variables that

describe some of the features of sectoral trajectories, such
20.92
5.89
14.90
31.62
6.30
43.24
21.97
53.27
5.37
as the dominant type of innovation produced (process,

product, organizational and marketing innovation) and the
type of expenditures and strategies typically adopted in the
Knowledge-intensive
innovative process (intramural R&D, acquisition of machin-

business services
ery, software and other external knowledge, training and

cooperation activities). A complete list, with definitions of
the indicators, is given in Appendix B.
As discussed in Section 2, the conceptual distinction
21.00
11.75
12.60
19.24
14.61
56.76
14.15
28.13
48.11
AKP
between regimes and trajectories is indeed difficult to

determine. There exists a close relationship between these
Sources of opportunities: universities (%)
two concepts, due to the inherent link between the struc-

Sources of opportunities: suppliers (%)
Appropriability through copyright (%)
tural characteristics of an industry in a static sense and its

Appropriability through patents (%)
Appropriability through design (%)
Sources of opportunities: users (%)
dynamic trajectory over time. Consequently, any attempt

Cumulativeness conditions (%)
to employ indicators that try to measure and empirically

Level of innovativeness (%)
distinguish the characteristics of regimes from those of

Level of opportunities (%)
9
The 24 countries in the CIS dataset used in this section are listed as
follows: Sweden, Denmark, Norway, Finland, Germany, UK, Netherlands,
Belgium, Austria, Italy, France, Bulgaria, Czech Republic, Estonia, Hungary,
Table 2
Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Spain, Portugal and

Greece. For a list of industries included in each sectoral category of the
a
taxonomy, see Appendix A.

trajectories must be interpreted with caution. With this
dominated
caveat in mind, it is interesting to make use of these indi-
Supplier-
services
cators in order to achieve a more precise description of the
0.45
7.83
26.45
56.65
12.08
61.84
28.23
6.91
5.17
dominant innovative modes that characterize the various
sectoral groups of our taxonomy.10
In addition to this descriptive evidence, Tables 4 and 5
Supplier-dominated
present the results of a statistical exercise aimed at testing

the significance of differences in technological regimes and
trajectories between the two sub-groups of industries indi-
cated in each of the four sectoral blocks of the taxonomy.11
goods
21.68
12.88
18.92
12.39
68.63
45.08
28.56
2.70
0.17
The results of the two tests are basically the same, and indi-
PGS
cate that the cross-country distributions of the sub-groups

of industries belonging to each of the four sectoral groups
infrastructure
differ from each other at conventional statistical levels on

several important dimensions.
Physical
services
54.44 The advanced knowledge providers group is character-

18.64
0.29
17.45
9.40
68.36
5.46
31.96
10.33
ized, on average, by a dynamic technological regime (high

levels of opportunities, high cumulativeness conditions,
close relationship to the users as a major external source
Network infrastructure
of opportunities) as well as a dynamic trajectory (based
on the creation of advanced products and services, and on
a considerable share of innovative expenditures devoted
to intramural R&D). Behind this overall pattern, however,
services
the two sub-categories within this sectoral group have

40.66
10.52
33.26
29.22
47.46
0.02
10.40
64.12
23.13
SIS
quite different innovative modes. Innovative activities in

The characteristics of the categories of the new taxonomy [Technological trajectories—CIS4 data (2002–2004), EU24 averagea ]
knowledge-intensive business services are closer to the

Scale-intensive
technological core of the ICT-based paradigm than the

manufacturing
corresponding group of specialized suppliers manufactur-

ing sectors, and this is one major factor explaining their
22.99
2.29
0.07
29.37
60.01
38.01
13.21
52.16
10.74
different regimes and trajectories. Knowledge-intensive

business services are characterized by a much higher level
of technological opportunities than specialized suppliers
manufacturing
Science-based
manufacturing (19% against 5%), lower reliance on patents

as an appropriability mechanism (15% versus 21%), a greater
use of protection through copyright claims (14% against 6%),
59.98
−0.32
29.81
19.58
51.75
2.75
44.62
15.72
37.12
MPG
a much closer connection to the scientific knowledge pro-

duced by universities (12% as against 6%), a higher share of
Specialized suppliers
innovative expenditures devoted to intramural R&D and a

correspondingly lower investment share for the acquisition
manufacturing
of machinery and software.

Sectors producing mass-production goods are also char-
acterized, on average, by dynamic technological regimes
17.59
28.23
49.26
57.45
2.67
−0.27
15.37
40.01
41.14
and trajectories, and are, similar to the previous group,

closely related to the users and to the science system
as external sources of knowledge. However, although the
Knowledge-intensive
two sub-groups of industries in this block share similar

business services
functions in the economic system, they show important

differences in their innovative patterns. Science-based sec-
24.44
35.39
18.45
59.81
5.58
65.22
13.09
45.05
−0.21
AKP
10
The CIS-based indicators used here have frequently been used in
the recent applied innovation literature to measure various aspects of
sectors’ regimes and trajectories. They therefore constitute, despite the
Organizational innovation (%)
Acquisition of machinery and
Acquisition of other external

Process-product orientation
obvious limitations, a relevant and widely diffused source of knowledge

Cooperation in innovative
Marketing innovation (%)
improved products (%)
on the innovative activities of European firms. For previous studies using

Turnover from new or
some of these indicators, see e.g. Evangelista (1999, 2000), Veugelers and
Training activities (%)
Intramural R&D (%)
Cassiman (1999), Kaiser (2002), Mairesse and Mohnen (2002), Marsili and
knowledge (%)
Verspagen (2002), Reichstein and Salter (2006) and Castellacci (2007b).

activities (%)
software (%)
11
The ANOVA is a standard parametric test for comparing the mean of
different statistical distributions, whereas the Mann–Whitney U-test is a
(+1/−1)
Table 3
corresponding non-parametric procedure based on the rank of the vari-

ables, which has the advantage of being robust to violations of the standard
a
assumptions of normality and homoschedasticity.

Table 4
Testing for the significance of differences within each of the four sectoral blocks [ANOVA and Mann–Whiney U-test—Technological regimesa ]
AKP MPG SIS PGS
ANOVAb Mann–Whitneyb ANOVAb Mann–Whitneyb ANOVAb Mann–Whitneyb ANOVAb Mann–Whitneyb
Level of innovativeness 0.69 −0.74 10.68*** 2.70*** 15.56*** 3.55*** 8.21*** 2.79***
Level of opportunities 21.11*** −4.13*** 2.52 0.62 0.00 0.26 16.09*** 3.84***
Cumulativeness conditions 1.14 −1.15 14.89*** 3.19*** 6.53** 2.34** 1.41 1.36
Appropriability through patents 2.95* 1.46 2.54 1.64* 0.64 −1.94* 6.02** 2.74***
Appropriability through design 1.35 1.25 5.83** 1.99** 0.91 0.20 2.20 1.41
Appropriability through copyright 7.11** −2.53** 7.60*** 2.95*** 0.03 −0.45 5.08** 2.46**
Sources of opportunities: suppliers 0.08 0.47 0.19 −1.06 0.02 0.21 2.00 −0.61
Sources of opportunities: users 0.85 0.73 1.25 0.82 1.47 1.17 6.66** 2.05**
Sources of opportunities: universities 7.48*** −2.40** 0.12 0.73 0.13 −0.50 0.55 2.02**
F. Castellacci / Research Policy 37 (2008) 978–994

***Significance at 1% level; **significance at 5% level; *significance at 10% level.
a
b
Test.
Table 5
Testing for the significance of differences within each of the four sectoral blocks [ANOVA and Mann–Whiney U-test—Technological trajectoriesa ]
AKP MPG SIS PGS
ANOVAb Mann–Whitneyb ANOVAb Mann–Whitneyb ANOVAb Mann–Whitneyb ANOVAb Mann–Whitneyb
Process-product orientation 0.27 −0.54 18.79*** −3.99*** 4.09* −1.98** 4.42** −1.83*
Turnover from new or improved products 5.52** 2.00** 1.33 1.38 0.01 0.04 5.26** 1.96**
Organizational innovation 2.18 −1.33 1.98 1.29 5.81** 2.41** 2.59 1.74*
Marketing innovation 0.87 −1.03 11.42*** 2.95*** 13.59*** 3.33*** 2.23 1.36
Intramural R&D 2.62 −1.56 10.86*** 3.01*** 3.62* 1.87* 0.40 −0.97
Acquisition of machinery and software 5.52** 1.83* 7.27** −2.49** 7.50*** −2.39** 0.57 1.09
Acquisition of other external knowledge 5.49** −2.39** 0.49 0.54 7.03** 2.07** 4.26* −1.18
Training activities 2.19 −1.33 2.14 1.40 3.56* 1.61* 3.51* −1.80*
Cooperation in innovative activities 1.78 −1.54 2.53 1.64* 3.66* 1.96** 0.00 0.12
***Significance at 1% level; **significance at 5% level; *significance at 10% level.

a
b
Test.
989
tors, when compared to scale-intensive industries, are (e.g. from consultancy firms, 5% versus 2.7%), and more fre-
characterized by higher opportunity levels (innovative- quently organize training activities (57% as against 45%).
ness variable: 57% versus 43%), higher cumulativeness Summing up, the descriptive evidence presented in
conditions (48% against 29%), greater reliance on formal Tables 2 and 3, and the corresponding statistical tests
appropriability means (e.g. patents, design, copyright), reported in Tables 4 and 5, indicate the existence of a con-
stronger orientation to the creation of new products, a siderable range of innovation modes in European industries
much higher share of innovative expenditures devoted to and, relatedly, a close relationship between technologi-
intramural R&D activities (52% instead of 29%), and a cor- cal paradigms, regimes and trajectories. On the one hand,
respondingly lower percentage invested for the acquisition there is a cluster of industries whose knowledge base
of machinery and software from their suppliers (37% versus and innovative activities are close to the emerging set of
60%). general-purpose technologies based on ICTs. In our taxon-
Industries in the supporting infrastructural services block omy, these are the groups of knowledge-intensive business
share the same broad function in the economic system services, mass-production science-based industries and
as providers of infrastructural and distributive services, network infrastructure services. In these industries, the
although the two sub-groups of industries belonging to close relationship to the emerging technological paradigm
this category are characterized by rather different regimes results in a regime characterized by high technological
and trajectories. Network infrastructural services are, as opportunities and a dynamic technological trajectory ori-
previously noted, closer to the new core of general- ented towards the creation of advanced products and
purpose technologies that provide the bulk of the growth services and R&D-related investments. These sectoral
potential in the current ICT-based paradigm, whereas the groups are thus active providers of advanced knowledge,
corresponding group of physical infrastructural services products and infrastructures to the rest of the economic
represented a more dynamic area of industrial devel- system.
opment during the Fordist age. A comparison between Another set of industrial sectors appears to be less close
network and physical infrastructure services indicates that to the core of the new technological paradigm, in the sense
the former is characterized by a higher opportunity level that they are less directly involved in the production of ICT-
than the latter group (innovativeness variable: 46% against related technologies, although they may of course make
30%), greater cumulativeness conditions (24% and 14%), a intensive use of them in order to improve the efficiency
closer tie to the users of new technologies (29% against of their production process and/or the quality of the final
25%), a greater propensity to introduce service, organi- good and service they provide. These are the industries that
zational and marketing innovations, a greater effort for represented the most dynamic part of the economy during
investments in intramural R&D activities, acquisition of the Fordist paradigm (or in previous paradigmatic phases).
other external knowledge and training of personnel, and In our taxonomy, they are the mass-production scale-
a higher cooperation intensity (40% against 32%). intensive industries, the physical infrastructure services
Industries in the fourth sectoral group of the taxon- and the supplier-dominated personal goods and services.
omy, the producers of personal goods and services, tend These sectors, on average, are characterized by lower-
to experience a less dynamic technological environment, opportunity technological regimes, and a less dynamic
with trajectories characterized by a greater orientation trajectory oriented towards the introduction of labour-
towards the introduction of process innovations and, like- saving process innovations and predominantly based on
wise, by a higher investment share for the acquisition of the acquisition of machinery, equipment and software from
advanced machinery and equipment from their suppli- the suppliers. These sectoral systems are therefore mostly
ers. Even for this group, despite the common function and recipients of the advanced knowledge, products and infras-
similar technological environment, some important intra- tructures created by other more technologically advanced
group differences emerge between the innovative mode industries.
of manufacturing producers and that of service providers. CIS4 data provide rich empirical evidence on the char-
Supplier-dominated manufacturing firms have in general acteristics of European industries at the present time,
a greater capability to acquire advanced technologies pro- although their mainly static nature does not permit proper
duced in other sectors of the economy and to use this analysis of the process of structural change and industrial
type of embodied technological change strategy to recreate transformation over a longer period. For this reason, it is
new opportunities and lengthen their industry-life cycle useful to support our descriptive analysis with a different
(Von Tunzelmann and Acha, 2005; Robertson and Patel, type of data source referring to a longer time span. This
2007). This is reflected in the indicators presented in our is provided by OECD-STAN data on the economic perfor-
tables, which show that supplier-dominated manufactur- mance of industrial sectors in Europe for the longer period
ing industries have much greater opportunity levels than 1970–2003.
the corresponding group of services, stronger cumulative- Fig. 2 reports the evolution of the relative labour produc-
ness conditions, greater reliance on formal appropriability tivity (RLP) of the various sectoral groups of our taxonomy
means, closer ties with the end users, higher turnover over this three-decade period in Europe. RLP is defined as
from the commercialization of new products, and a higher the labour productivity of a sectoral group divided by the
investment intensity for the acquisition of machinery and labour productivity of the whole economy. The RLP is mea-
software from their suppliers. Personal services, in turn, sured on the Y-axis of the various graphs, where a value
have a closer link to their suppliers (32% against 24%); they greater (lower) than 100 means that an industrial group
more intensively acquire other external types of knowledge is more (less) productive than the average sector of the
Fig. 2. The dynamics of relative labour productivity (RLP) in the various sectoral groups, 1970–2003, EU24 average.
economy. From the various graphs, it is evident that, for tial, so that the high-opportunity sectors of one age may
each of the four sectoral groups in our taxonomy, industries become lower-opportunity industries in the next paradig-
related to the new GPT have progressively increased their matic phase. The evidence presented here – on the variety
contribution to the growth of the European economy in the of technological regimes, trajectories and economic per-
past few decades, while those related to the Fordist indus- formance within each of the four sectoral groups of our
trial core are characterized by a stagnant or decreasing RLP taxonomy – provides basic support for this view.12
trend. This becomes particularly clear when we compare
science-based industries with the scale-intensive group, 6. Conclusions and policy implications
and the network infrastructure with the physical infras-
tructure service sectors (second and third panels of Fig. 2, This paper has put forward a new taxonomy of sectoral
respectively). The former (more technologically advanced) patterns of innovation that combines manufacturing and
groups have significantly increased their contribution to service industries within the same framework. The taxon-
aggregate labour productivity since the early 1980s. Today omy is based on the paradigm–regime–trajectory model,
their productivity level is now far above the average for originated and commonly used for the study of technologi-
the economy (considerably higher than 100). By contrast,
the latter (less technologically dynamic) groups are char-
acterized by stable or decreasing trends in relative labour 12
One limitation of this empirical analysis is that it focuses on the sec-
productivity. toral (two-digit) level of analysis, and is therefore unable to investigate
Taken together, this empirical evidence on the inno- the extent of firm-level heterogeneity within each industry. Leiponen and
vative and economic characteristics of the major sectoral Drejer (2007) have recently presented an empirical study based on CIS2
firm-level data for Finland and Denmark, which points out the existence of
groups of our taxonomy illustrates the empirical relevance a great variety of innovative modes and strategies within each sector. Their
of the theoretical view presented in the previous section. findings challenge the well-established view that technological regimes
The four-group taxonomic model provides a general and and trajectories are mostly determined by sector-specific characteristics
stylized view of the basic growth mechanism within each of industries, and show instead the relevance of firm-specific capabilities
and strategies. Leiponen and Drejer’s argument is indeed important, and
long-run paradigmatic phase based on the interactions
it is likely to be investigated and supported further in future research,
between mass-production manufacturers, infrastructural given the current great availability and interest in the use of firm-level
services and providers of advanced knowledge. However, innovation data. However, while firm-level research is certainly necessary
behind this general mechanism, the specific set of high- for investigating the nature and extent of within-industry heterogeneity,
opportunity industries will differ in any given historical industry-level analyses such as the one reported in this paper may still
be important for obtaining a more aggregate and synthetic picture of the
age. In the long run, the emergence of a new paradigm innovation system as a whole. Ideally, firm- and industry-level innovation
may determine a shift in the locus of the growth poten- studies should complement (rather than compete with) each other.
cal activities in the manufacturing branch. Here it is further literature, the existence of several peculiarities in the pro-
extended to include the service sectors in the Schumpete- cess of knowledge creation in services. These peculiarities
rian growth framework. are indeed important, and innovation policies must take
The taxonomic model, in a nutshell, suggests that it is them into due account. Three of them appear particularly
the interaction between technologically advanced manu- relevant in light of the empirical evidence presented here.
facturing and service industries that sustains the dynamics First, the great importance of customization and interac-
of national systems in each long-run paradigmatic phase. tivity emphasizes the role of user–producer interactions
In order to sustain their international competitiveness, and of policies that may strengthen linkages of this type.
national systems should ideally build up and maintain a Secondly, the relevance of human resources and capabili-
sophisticated branch of advanced knowledge providers, an ties for the performance of service firms should draw the
efficient set of supporting infrastructure services and a attention of policy-makers to the role played by training
strong mass-producing manufacturing base. In this ideal activities and organizational changes—that may prove to be
scheme, the dynamics of the latter supports, and is sup- a more crucial factor of competitive advantage in services
ported by, the growth of the former groups of industrial than the amount of resources spent on R&D investments,
sectors. Each national economy should therefore make an as suggested by the CIS4 evidence presented in this paper.
active effort to transform its industrial structure towards Finally, the lower reliance on formal means of appropri-
the most progressive industries of a given historical age, ability (e.g. patents) in services requires a rethinking of the
so to make it more congruent with the requirements and policy rationale that is commonly adopted for the protec-
opportunities provided by the emergence and diffusion of tion of innovative results.
a new set of general-purpose technologies.
This broad policy implication, although reasonable and
widely shared, requires a long-run commitment and con- Acknowledgements
siderable resources that may be hard to find in a short
time-horizon. Such a long-term strategy should therefore This article has been produced as part of the ICONS
be complemented by other types of shorter-term and more project. Financial support from the Nordic Innovation Cen-
specific policies that may have a more immediate effect on tre and Innovation Norway is gratefully acknowledged.
the dynamics of a national system. These policy measures Carolina Castaldi, Bent Dalum, Rinaldo Evangelista, Susan
should be based on the sector-specific nature of innovative Høivik, Keld Laursen, Valentina Meliciani, Sandro Montre-
activities, targeting the specific characteristics, obstacles sor, three anonymous referees of this journal and the Editor,
and opportunities that characterize technological activities Nick Von Tunzelmann, have carefully read the paper. I wish
in various industries of the economy—instead of imple- to thank all of them for the insightful comments and useful
menting a generic scheme of R&D support for all industrial suggestions.
sectors.
The focus on industry-specific regimes, trajectories and
vertical linkages draws attention to the variety of inno- Appendix A. List of industries in each sectoral group
vative patterns that have been pointed out in this paper.
On the one hand, the performance of the group of high- Advanced knowledge providers—Knowledge-intensive business
services:
opportunity industries that are more closely related to
Computer and related activities; research and development; other
the new technological paradigm (advanced knowledge business activities
providers, science-based and network infrastructure ser-
Advanced knowledge providers—Specialized suppliers manufacturing:
vices) can be enhanced by policies designed to foster Machinery and equipment; medical, precision and optical
their overall level of innovation intensity and strengthen instruments
the intensity of interactions with the advanced users Mass production goods—Science-based manufacturing:
of new technologies and with the public S&T system. Chemicals; office machinery and computers; electrical machinery
On the other hand, it is also possible to sustain the and apparatus; radio, TV and communication equipment
competitiveness of sectors that face lower opportuni- Mass production goods—Scale-intensive manufacturing:
ties and less dynamic trajectories in the new ICT-based Rubber and plastic products; other non-metallic mineral products;
age (scale-intensive, physical infrastructure services, and basic metals; fabricated metal products; motor vehicles; other
transport equipment
supplier-dominated). The crucial challenge for industries of
this type is to strengthen their linkages with more techno- Supporting infrastructure services—Network infrastructure:
Post and telecommunications; financial intermediation; insurance
logically advanced branches of the economy, so as to enable
and pension funding; activities auxiliary to financial
the process of inter-sectoral knowledge diffusion that may intermediation
generate new opportunities and lengthen the industry-life
Supporting infrastructure services—Physical infrastructure:
cycles of these mature sectors. Public policies can acceler- Wholesale trade and commission trade; land, water and air
ate this process, for instance, by supporting the acquisition transport; supporting and auxiliary transport activities
of advanced machinery, equipment, software and external Personal goods and services—Supplier-dominated goods:
knowledge from specialized suppliers, and by increasing Food and beverages; textiles; wearing; leather; wood and related;
the intensity of supplier–producer interactions. pulp and paper; printing and publishing; furniture; recycling
While the main intention of this paper has been to Personal goods and services—Supplier-dominated services:
combine manufacturing and services within the same com- Sales, maintenance and repair of motor vehicles; retail trade and
repair of personal and household goods; hotels and restaurants
prehensive framework, we have also noted, in line with the
Appendix B. Definitions and source of indicators Breschi, S., Malerba, F., Orsenigo, L., 2000. Technological regimes
used [Source: Fourth Community Innovation Survey and Schumpeterian patterns of innovation. Economic Journal 110,
388–410.
(2002–2004)] Castellacci, F., 2007a. Evolutionary and new growth theories. Are they
converging? Journal of Economic Surveys 21 (3), 585–627.
• Level of innovativeness: innovative firms, share of total Castellacci, F., 2007b. Technological regimes and sectoral differences
in productivity growth. Industrial and Corporate Change 16 (6),
population of firms. 1105–1145.
• Level of opportunities: total innovation expenditures, Di Cagno, D., Meliciani, V., 2005. Do inter-sectoral flows of services matter
share of total turnover. for productivity growth? An input/output analysis of OECD countries.
• Cumulativeness conditions: firms engaged continuously in Economics of Innovation and New Technology 14 (3), 149–171.
Dosi, G., 1982. Technological paradigms and technological trajectories.
R&D, share of innovative firms. Research Policy 11, 147–162.
• Appropriability through patents: firms with patent appli- Dosi, G., Marengo, L., Pasquali, C., 2006. How much should society fuel the
greed of innovators? On the relations between appropriability, oppor-
cations, share of innovative firms.
tunities and rates of innovation. Research Policy 35 (8), 1110–1121.
• Appropriability through design: firms with industrial Drejer, I., 2004. Identifying innovation in surveys of services: a Schum-
designs registration, share of innovative firms. peterian perspective. Research Policy 33, 551–562.
• Appropriability through copyright: firms with copyright Evangelista, R., 1999. Knowledge and Investment. The Sources of Innova-
tion in Industry. Edward Elgar, Cheltenham.
claims, share of innovative firms. Evangelista, R., 2000. Sectoral patterns of technological change in services.
• Sources of opportunities—Suppliers: firms considering Economics of Innovation and New Technologies 9, 183–221.
their suppliers of equipment, materials, components or Evangelista, R., Perani, G., Rapiti, F., Archibugi, D., 1997. Nature and impact
of innovation in manufacturing industries: some evidence from the
software as a very important source of information for Italian innovation survey. Research Policy 26, 521–536.
their technological activities, share of innovative firms. Franke, R., Kalmbach, P., 2005. Structural change in the manufacturing sec-
• Sources of opportunities—Users: firms considering their tor and its impact on business-related services: an input–output study
for Germany. Structural Change and Economic Dynamics 16, 467–488.
clients or customers as a very important source of Freeman, C., Clark, J., Soete, L., 1982. Unemployment and Technical Inno-
information for their technological activities, share of vation. Pinter, London.
innovative firms. Freeman, C., Louça, F., 2001. As Time Goes by: From the Industrial Revolu-
• Sources of opportunities—Universities: firms considering tions to the Information Revolution. Oxford University Press, Oxford.
Gallouj, F., Weinstein, O., 1997. Innovation in services. Research Policy 26,
the universities or other public research institutes as a 537–556.
very important source of information for their techno- Gershuny, J., Miles, I., 1983. The New Service Economy. The Transformation
of Employment in Industrial Societies. Frances Pinter, London.
logical activities, share of innovative firms.
Grossman, G.M., Helpman, E., 1991. Innovation and Growth in the Global
• Process-product orientation: [(number of process inno- Economy. MIT Press, Cambridge, MA.
vators − number of new product innovators)/(number Guerrieri, P., Meliciani, V., 2005. Technology and international competi-
of process innovators + number of new product inno- tiveness: the interdependence between manufacturing and producer
services. Structural Change and Economic Dynamics 16, 489–502.
vators)]. The indicator varies between +1 (only process Hipp, C., Grupp, H., 2005. Innovation in the service sector: the demand for
innovation) and −1 (only product innovation). service-specific innovation measurement, concepts and typologies.
• Turnover from new or improved products: turnover of new Research Policy 34, 517–535.
Kaiser, U., 2002. Measuring knowledge spillovers in manufacturing and
or improved products, share of total turnover. services: an empirical assessment of alternative approaches. Research
• Organizational innovation: firms introducing organiza- Policy 31, 125–144.
tional innovations, share of total population of firms. Laursen, K., Meliciani, V., 2002. The relative importance of international
vis-à-vis national technological spillovers for market share dynamics.
• Marketing innovation: firms introducing marketing inno-
Industrial and Corporate Change 11 (4), 875–894.
vations, share of total population of firms. Leiponen, A., Drejer, I., 2007. What exactly are technological regimes?
• Intramural R&D: intramural R&D expenditures, share of Intra-industry heterogeneity in the organization of innovation activi-
ties. Research Policy 36 (8), 1221–1238.
innovative costs. Lundvall, B.-Å., 1992. National Systems of Innovation: Towards a Theory
• Acquisition of machinery and software: expenditures for of Innovation and Interactive Learning. Pinter Publishers, London.
the acquisition of machinery and software, share of inno- Mairesse, J., Mohnen, P., 2002. Accounting for Innovation and Measuring
Innovativeness: an Illustrative Framework and an Application. Amer-
vative costs.
ican Economic Review 92 (2), 226–230.
• Acquisition of other external knowledge: expenditures for Malerba, F., 2002. Sectoral systems of innovation and production. Research
the acquisition of other external knowledge, share of Policy 31 (2), 247–264.
innovative costs. Marsili, O., Verspagen, B., 2002. Technology and the dynamics of industrial
structure: an empirical mapping of Dutch manufacturing. Industrial
• Training activities: firms engaged in training activities, and Corporate Change 11 (4), 791–815.
share of innovative firms. Miles, I., 2005. Innovation in services. In: Fagerberg, J., Mowery, D.C., Nel-
• Cooperation in innovative activities: firms engaged in all son, R.R. (Eds.), The Oxford Handbook of Innovation. Oxford University
Press, Oxford.
types of cooperation in technological activities, share of Miozzo, M., Soete, L., 2001. Internationalization of services: a technological
innovative firms. perspective. Technological Forecasting and Social Change 67, 159–185.
Nelson, R., Winter, S., 1977. In search of a useful theory of innovation.
Research Policy 6, 36–76.
Park, S., Chan, K., 1989. A cross-country input–output analysis of inter-
References
sectoral relationships between manufacturing and services and their
employment implications. World Development 17 (2), 199–212.
Antonelli, C., 1998. Localized technological change, new information tech- Pavitt, K., 1984. Sectoral patterns of technical change: towards a taxonomy
nology and the knowledge-based economy: the European evidence. and a theory. Research Policy 13, 343–373.
Journal of Evolutionary Economics 8, 177–198. Porter, M., 1990. The Competitive Advantage of Nations. Macmillan, Lon-
Archibugi, D., 2001. Pavitt’s taxonomy sixteen years on: a review article. don.
Economics of Innovation and New Technology 10, 415–425. Reichstein, T., Salter, A., 2006. Investigating the sources of process innova-
Baumol, W., 1967. Macroeconomics of unbalanced growth: the anatomy tion among UK manufacturing firms. Industrial and Corporate Change
of urban crisis. American Economic Review 57, 415–426. 15 (4), 653–682.
Robertson, P., Patel, P., 2007. New wine in old bottles: technological diffu- Veugelers, R., Cassiman, B., 1999. Make and buy in innovation strate-
sion in developed economies. Research Policy 36 (5), 708–721. gies: evidence from Belgian manufacturing firms. Research Policy 28,
Romer, P., 1990. Endogenous technological change. Journal of Political 63–80.
Economy 98, 71–102. Von Tunzelmann, N., Acha, V., 2005. Innovation in ‘low-tech’ industries. In:
Schumpeter, J., 1939. Business Cycles. Porcupine Press, Philadelphia. Fagerberg, J., Mowery, D.C., Nelson, R.R. (Eds.), The Oxford Handbook
Tether, B., 2003. The sources and aims of innovation in services: vari- of Innovation. Oxford University Press, Oxford.
ety between and within sectors. Economics of Innovation and New Windrum, P., Tomlinson, M., 1999. Knowledge-intensive services
Technology 12 (6), 481–505. and international competitiveness: a four country compari-
Van de Poel, I., 2003. The transformation of technological regimes. son. Technology Analysis and Strategic Management 11 (3),
Research Policy 32, 49–68. 391–408.

Technological Paradigms, Regimes and Trajectories: Manufacturing and Service Industries in A New Taxonomy of Sectoral Patterns of Innovation

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Technological Paradigms, Regimes and Trajectories: Manufacturing and Service Industries in A New Taxonomy of Sectoral Patterns of Innovation

Uploaded by

Copyright:

Available Formats

Research Policy 37 (2008) 978–994

Contents lists available at ScienceDirect

Technological paradigms, regimes and trajectories: Manufacturing and

1. Introduction 2001; Laursen and Meliciani, 2002; Marsili and Verspagen,

The literature on technological regimes, trajectories and

F. Castellacci / Research Policy 37 (2008) 978–994

Innovation expenditures and

Innovation expenditures and

Type of innovation: process

Type of innovation: process

Supporting infrastructural services (SIS) may be located,

External sources: suppliers

Dominant ﬁrm size: SMEs

ate products and services rather than items for personal

consumption. Where they differ from advanced knowledge

providers is in terms of their technological capability, espe-

technological sophistication (Miozzo and Soete, 2001): (1)

providers of distributive and physical infrastructure ser-

They enhance the

vices (e.g. transport and wholesale trade); (2) providers

of network infrastructure services (such as ﬁnance and

telecommunications). Firms in the latter group typically

these sectoral groups have in common is the function they

assume in the economic system: they represent the sup-

located at an intermediate stage of the vertical chain, since

they produce both ﬁnal goods and intermediate products

used in other stages of the production process. In terms

their considerable capability to develop new products and

processes internally, although two distinct sub-groups may

tion with the specialized suppliers of precision instruments

ics) are characterized by a greater ability to create new

technological knowledge internally, and their innovation

tence of a web of vertical linkages among industries, a

tional to GPT-related high-opportunity manufacturing and

linkages between different types of sectoral groups within

5. Empirical evidence: regimes, trajectories and

This section presents some descriptive evidence to illus-

trate the empirical relevance of the new sectoral taxonomy.

used at the industry-level for a sample of 24 European

and up-to-date information on a range of characteristics

of innovative activities in Europe, thus making it possi-

systems. The analysis here focuses on a set of important

jectories of the various sectoral groups. The main purpose

of the exercise is to provide empirical support for the sec-

relationship between paradigms, regimes and sectoral tra-

from the CIS4 Survey. Table 2 reports a set of indicators

measuring various characteristics of sectoral technologi-

levels, cumulativeness conditions, appropriability means,

and Universities). Table 3 presents a set of variables that

as the dominant type of innovation produced (process,

innovative process (intramural R&D, acquisition of machin-

ery, software and other external knowledge, training and

between regimes and trajectories is indeed difﬁcult to

two concepts, due to the inherent link between the struc-

tural characteristics of an industry in a static sense and its

Sources of opportunities: users (%)

dynamic trajectory over time. Consequently, any attempt

to employ indicators that try to measure and empirically

distinguish the characteristics of regimes from those of

Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Spain, Portugal and

taxonomy, see Appendix A.

trajectories must be interpreted with caution. With this

present the results of a statistical exercise aimed at testing

Significance at 1% level; significance at 5% level; significance at 10% level.