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... economic historians such as Landes, Gerschenkron and Abramovitz, which, by focusing on case studies of the technological catch up process, pointing out that international knowledge diffusion is a complex and demanding process. Inspired by these original insights, theoretical models in the technology-gap (or distance-tofrontier) tradition have developed a more stylized notion of absorptive capacity, and often focused on human capital as the single most important factor shaping a country’s capability to imitate and absorb foreign advanced technologies (Nelson and Phelps, 1966; Verspagen, 1991; Benhabib and Spiegel, 1994; Papageorgiou, 2002; Stokke, 2004; Fagerberg and Verspagen, 2002; Fagerberg et al., 2007; Fagerberg and Srholec, 2008; Castellacci, 2008). Most of this empirical research, however, has so far focused on the cross-country comparative aspect (“why growth rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’...

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...of economic growth and the competitiveness of countries. The study of NIS focuses on the main components of the system and investigates their mutual interactions as well as their relationships with the social and institutional framework in which the system is embedded (Lundvall, 2007). The study of the dynamics and evolution of national systems provided one of the original motivations for the development of this approach. However, the focus on long-run dynamics and historical transformations was mainly developed in a branch of qualitative-oriented and historical case studies type of research (Nelson, 1993; Edquist and Hommen, 2008; Lundvall et al., 2009). By contrast, quantitative and modelling oriented contributions in this field have not yet provided a consistent and fully-fledged analysis of the complex set of factors that drive the dynamics of national systems in the long-run. There are however important branches of the literature on innovation and economic growth that do provide key theoretical insights and relevant empirical results to describe the long-run evolution of a NIS and its relationships to the country’s economic performance. The first is new growth theory, and in particular Ro...

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...oss-country comparative aspect (“why growth rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capital and imitation activities - may explain the cumulative nature of the process of technological accumulation and economic growth in the long-run (Azariadis and Drazen, 1990; Howitt, 2000; Galor and Weil, 2000; Galor, 2005; Howitt and Mayer-Foulkes, 2005; Acemoglu et al., 2006). This brief review of the literature makes it possible to identify four major challenges ahead that represent the main motivations for the analysis carried out in the present paper. 1. A time series perspective. Most empirical research on NIS and economic growth has so far adopted an explicitly comparative perspective and largely neglected the time series dimension. 2. The dynamics and determinants of innovative capability. Only a limited number of studies have empirically investigated the...

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...h rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capital and imitation activities - may explain the cumulative nature of the process of technological accumulation and economic growth in the long-run (Azariadis and Drazen, 1990; Howitt, 2000; Galor and Weil, 2000; Galor, 2005; Howitt and Mayer-Foulkes, 2005; Acemoglu et al., 2006). This brief review of the literature makes it possible to identify four major challenges ahead that represent the main motivations for the analysis carried out in the present paper. 1. A time series perspective. Most empirical research on NIS and economic growth has so far adopted an explicitly comparative perspective and largely neglected the time series dimension. 2. The dynamics and determinants of innovative capability. Only a limited number of studies have empirically investigated the dynamics of innovative capability o...

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...ostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capital and imitation activities - may explain the cumulative nature of the process of technological accumulation and economic growth in the long-run (Azariadis and Drazen, 1990; Howitt, 2000; Galor and Weil, 2000; Galor, 2005; Howitt and Mayer-Foulkes, 2005; Acemoglu et al., 2006). This brief review of the literature makes it possible to identify four major challenges ahead that represent the main motivations for the analysis carried out in the present paper. 1. A time series perspective. Most empirical research on NIS and economic growth has so far adopted an explicitly comparative perspective and largely neglected the time series dimension. 2. The dynamics and determinants of innovative capability. Only a limited number of studies have empirically investigated the dynamics of innovative capability over time and ...

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...ct (“why growth rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capital and imitation activities - may explain the cumulative nature of the process of technological accumulation and economic growth in the long-run (Azariadis and Drazen, 1990; Howitt, 2000; Galor and Weil, 2000; Galor, 2005; Howitt and Mayer-Foulkes, 2005; Acemoglu et al., 2006). This brief review of the literature makes it possible to identify four major challenges ahead that represent the main motivations for the analysis carried out in the present paper. 1. A time series perspective. Most empirical research on NIS and economic growth has so far adopted an explicitly comparative perspective and largely neglected the time series dimension. 2. The dynamics and determinants of innovative capability. Only a limited number of studies have empirically investigated the dynamics of i...

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... the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capital and imitation activities - may explain the cumulative nature of the process of technological accumulation and economic growth in the long-run (Azariadis and Drazen, 1990; Howitt, 2000; Galor and Weil, 2000; Galor, 2005; Howitt and Mayer-Foulkes, 2005; Acemoglu et al., 2006). This brief review of the literature makes it possible to identify four major challenges ahead that represent the main motivations for the analysis carried out in the present paper. 1. A time series perspective. Most empirical research on NIS and economic growth has so far adopted an explicitly comparative perspective and largely neglected the time series dimension. 2. The dynamics and determinants of innovative capability. Only a limited number of studies have empirically investigated the dynamics of innovative capability over time and the main 4 factors that may explain its long-run evoluti...

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...ed the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capital and imitation activities - may explain the cumulative nature of the process of technological accumulation and economic growth in the long-run (Azariadis and Drazen, 1990; Howitt, 2000; Galor and Weil, 2000; Galor, 2005; Howitt and Mayer-Foulkes, 2005; Acemoglu et al., 2006). This brief review of the literature makes it possible to identify four major challenges ahead that represent the main motivations for the analysis carried out in the present paper. 1. A time series perspective. Most empirical research on NIS and economic growth has so far adopted an explicitly comparative perspective and largely neglected the time series dimension. 2. The dynamics and determinants of innovative capability. Only a limited number of studies have empirically investigated the dynamics of innovative capability over time and the main 4 factors that may expl...

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...ed by the work of economic historians such as Landes, Gerschenkron and Abramovitz, which, by focusing on case studies of the technological catch up process, pointing out that international knowledge diffusion is a complex and demanding process. Inspired by these original insights, theoretical models in the technology-gap (or distance-tofrontier) tradition have developed a more stylized notion of absorptive capacity, and often focused on human capital as the single most important factor shaping a country’s capability to imitate and absorb foreign advanced technologies (Nelson and Phelps, 1966; Verspagen, 1991; Benhabib and Spiegel, 1994; Papageorgiou, 2002; Stokke, 2004; Fagerberg and Verspagen, 2002; Fagerberg et al., 2007; Fagerberg and Srholec, 2008; Castellacci, 2008). Most of this empirical research, however, has so far focused on the cross-country comparative aspect (“why growth rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the int...

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...the present paper. 1. A time series perspective. Most empirical research on NIS and economic growth has so far adopted an explicitly comparative perspective and largely neglected the time series dimension. 2. The dynamics and determinants of innovative capability. Only a limited number of studies have empirically investigated the dynamics of innovative capability over time and the main 4 factors that may explain its long-run evolution (Furman, Porter and Stern, 2002; Castellacci, 2011; Filippetti and Peyrache, 2011). 3. The dynamics and multifaceted nature of absorptive capacity. As argued by Archibugi and Coco (2004), Godinho et al. (2006) and Fagerberg and Srholec (2008), it is crucial to adopt a multifaceted description and measurement of the various factors that contribute to shape nations’ absorptive capacity, rather than simply regarding them as a set of exogenous control factors in cross-country growth regression exercises. 4. The coevolution between innovative capability and absorptive capacity. Innovation and imitation have typically been regarded as two distinct (albeit related) drivers of growth and catching up, however investigating a two-way relationship approach is crucial. 3. Model and hypot...

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...economic and social development of a country, and it is then an important factor to define its absorptive capacity. • International trade. This represents the openness of the national system. The more open the system, the more capable to imitate foreign advanced knowledge (Gong and Keller, 2004). • Human capital. This is the key absorptive capacity variable typically emphasized by technology-gap models (see references in section 2). • Infrastructures. A greater level and quality of infrastructures increases the country’s capability to absorb, adopt and implement foreign advanced technologies (Esfahani and Ramirez, 2003; Freeman, 2004; Castellacci, 2011). • Quality of institutions and governance system. A better and more efficient governance system tends to increase the country’s commitment to technological upgrading as well as its imitation capability (Fagerberg and Srholec, 2008). • Social cohesion and economic inequality. A greater level of social cohesion and withincountry income equality is in general characterizes a higher degree of trust and knowledge sharing, hence supporting the pace of diffusion and adoption of advanced knowledge within the country (Weinhold and Nair-Reichert, 2009). In econometric...

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...tz, which, by focusing on case studies of the technological catch up process, pointing out that international knowledge diffusion is a complex and demanding process. Inspired by these original insights, theoretical models in the technology-gap (or distance-tofrontier) tradition have developed a more stylized notion of absorptive capacity, and often focused on human capital as the single most important factor shaping a country’s capability to imitate and absorb foreign advanced technologies (Nelson and Phelps, 1966; Verspagen, 1991; Benhabib and Spiegel, 1994; Papageorgiou, 2002; Stokke, 2004; Fagerberg and Verspagen, 2002; Fagerberg et al., 2007; Fagerberg and Srholec, 2008; Castellacci, 2008). Most of this empirical research, however, has so far focused on the cross-country comparative aspect (“why growth rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capita...

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... trade), on the other. Keywords: national systems of innovation; innovative capability; absorptive capacity; economic growth and development; coevolution; panel cointegration analysis. JEL codes: O1, O3, O4 1 jm.natera@pdi.ucm.es / PhD Student on Economics and Management of Innovation at Complutense University of Madrid. This paper has been developed under the direction and supervision of Fulvio Castellacci from the Norwegian Institute of International Affairs (NUPI). 1 1. Introduction The study of national innovation systems (NIS) has attracted considerable attention in the last two decades (Lundvall, 2007). While a substantial amount of research has been devoted to the investigation of cross-country differences in technological capabilities and the related institutional and policy framework, much less attention has so far been given to the analysis of the dynamics of national systems over time. This is unfortunate, since evolution and change represent indeed key aspects of Schumpeterian research, which did in fact constitute some of the crucial motivations for the original development of the NIS approach. The lack of focus on dynamic aspects is partly explained by the lack of time series data o...

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...ical catch up process, pointing out that international knowledge diffusion is a complex and demanding process. Inspired by these original insights, theoretical models in the technology-gap (or distance-tofrontier) tradition have developed a more stylized notion of absorptive capacity, and often focused on human capital as the single most important factor shaping a country’s capability to imitate and absorb foreign advanced technologies (Nelson and Phelps, 1966; Verspagen, 1991; Benhabib and Spiegel, 1994; Papageorgiou, 2002; Stokke, 2004; Fagerberg and Verspagen, 2002; Fagerberg et al., 2007; Fagerberg and Srholec, 2008; Castellacci, 2008). Most of this empirical research, however, has so far focused on the cross-country comparative aspect (“why growth rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capital and imitation activities - may explain the cumulati...

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...ent of a country, and it is then an important factor to define its absorptive capacity. • International trade. This represents the openness of the national system. The more open the system, the more capable to imitate foreign advanced knowledge (Gong and Keller, 2004). • Human capital. This is the key absorptive capacity variable typically emphasized by technology-gap models (see references in section 2). • Infrastructures. A greater level and quality of infrastructures increases the country’s capability to absorb, adopt and implement foreign advanced technologies (Esfahani and Ramirez, 2003; Freeman, 2004; Castellacci, 2011). • Quality of institutions and governance system. A better and more efficient governance system tends to increase the country’s commitment to technological upgrading as well as its imitation capability (Fagerberg and Srholec, 2008). • Social cohesion and economic inequality. A greater level of social cohesion and withincountry income equality is in general characterizes a higher degree of trust and knowledge sharing, hence supporting the pace of diffusion and adoption of advanced knowledge within the country (Weinhold and Nair-Reichert, 2009). In econometric terms, we repr...

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...studies of the technological catch up process, pointing out that international knowledge diffusion is a complex and demanding process. Inspired by these original insights, theoretical models in the technology-gap (or distance-tofrontier) tradition have developed a more stylized notion of absorptive capacity, and often focused on human capital as the single most important factor shaping a country’s capability to imitate and absorb foreign advanced technologies (Nelson and Phelps, 1966; Verspagen, 1991; Benhabib and Spiegel, 1994; Papageorgiou, 2002; Stokke, 2004; Fagerberg and Verspagen, 2002; Fagerberg et al., 2007; Fagerberg and Srholec, 2008; Castellacci, 2008). Most of this empirical research, however, has so far focused on the cross-country comparative aspect (“why growth rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capital and imitation activiti...

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... Landes, Gerschenkron and Abramovitz, which, by focusing on case studies of the technological catch up process, pointing out that international knowledge diffusion is a complex and demanding process. Inspired by these original insights, theoretical models in the technology-gap (or distance-tofrontier) tradition have developed a more stylized notion of absorptive capacity, and often focused on human capital as the single most important factor shaping a country’s capability to imitate and absorb foreign advanced technologies (Nelson and Phelps, 1966; Verspagen, 1991; Benhabib and Spiegel, 1994; Papageorgiou, 2002; Stokke, 2004; Fagerberg and Verspagen, 2002; Fagerberg et al., 2007; Fagerberg and Srholec, 2008; Castellacci, 2008). Most of this empirical research, however, has so far focused on the cross-country comparative aspect (“why growth rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation ...

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...ss of countries. The study of NIS focuses on the main components of the system and investigates their mutual interactions as well as their relationships with the social and institutional framework in which the system is embedded (Lundvall, 2007). The study of the dynamics and evolution of national systems provided one of the original motivations for the development of this approach. However, the focus on long-run dynamics and historical transformations was mainly developed in a branch of qualitative-oriented and historical case studies type of research (Nelson, 1993; Edquist and Hommen, 2008; Lundvall et al., 2009). By contrast, quantitative and modelling oriented contributions in this field have not yet provided a consistent and fully-fledged analysis of the complex set of factors that drive the dynamics of national systems in the long-run. There are however important branches of the literature on innovation and economic growth that do provide key theoretical insights and relevant empirical results to describe the long-run evolution of a NIS and its relationships to the country’s economic performance. The first is new growth theory, and in particular Romer’s (1990) idea-based growth model. This seminal...

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...ovation activities carried out by the public S&T system (e.g. scientific and technical publications). • Technological output. This is the total output of technological and innovative activities carried out by private firms (e.g. patents, new products). II. Absorptive capacity: • Income level. It defines the overall level of economic and social development of a country, and it is then an important factor to define its absorptive capacity. • International trade. This represents the openness of the national system. The more open the system, the more capable to imitate foreign advanced knowledge (Gong and Keller, 2004). • Human capital. This is the key absorptive capacity variable typically emphasized by technology-gap models (see references in section 2). • Infrastructures. A greater level and quality of infrastructures increases the country’s capability to absorb, adopt and implement foreign advanced technologies (Esfahani and Ramirez, 2003; Freeman, 2004; Castellacci, 2011). • Quality of institutions and governance system. A better and more efficient governance system tends to increase the country’s commitment to technological upgrading as well as its imitation capability (Fagerberg and Srholec, 2008). •...

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...s an inherent ability to uncover dynamic relationships among variables that coevolve over time, and we therefore argue that it constitutes a natural platform for investigating the long-run dynamics of national systems of innovation.3 3 An important antecedent of our approach is the work of Foster (1991), which discussed the suitability of time series cointegration analysis and error correction models for evolutionary analyses of technological change and economic growth. Recent applications of the panel cointegration approach have been presented, among others, in the field of energy economics (Costantini and Martini, 2010) and trade and FDI (Krammer, 2010). 9 The empirical methodology adopted in this paper consists of the following four steps. First, since cointegration analysis can by definition only be used to study the relationships between time series variables that have the same order of integration, we start by carrying out a battery of unit root tests. Secondly, we investigate the existence of a long-run equilibrium relationship between our variables of interest by means of the Pedroni cointegration test, which adopts ADF and PP-like specifications and extends them to a panel dataset by looking at both t...

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...to strengthen the productivity of the country’s R&D sector (productivity effect). Secondly, the development of the country’s institutional and governance quality, may systematically increase the amount of resources that the system will devote to R&D activities, e.g. because it enhances the country’s policy commitment to an increased level of innovation intensity (policy effect). 4. Data and indicators Our empirical analysis makes use of the CANA database, a newly released cross-country panel dataset containing a large number of complete indicators (no missing values) for the period 1980-2008 (Castellacci and Natera, 2011), that can be downloaded at the web address: 8 http://cana.grinei.es. Specifically, this paper focuses on a sample of 87 countries (listed in Appendix 1) and a set of nine selected indicators, which are pointed out as follows. I. Innovative capability: • Innovative input. R&D expenditures as a percentage of GDP. • Scientific output. Number of scientific and technical journal articles per million people. • Technological output. Number of patents registered at the USPTO per million people. II. Absorptive capacity: • Income and development level. GDP per capita, purchasing power parity. • Interna...

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...ng out that international knowledge diffusion is a complex and demanding process. Inspired by these original insights, theoretical models in the technology-gap (or distance-tofrontier) tradition have developed a more stylized notion of absorptive capacity, and often focused on human capital as the single most important factor shaping a country’s capability to imitate and absorb foreign advanced technologies (Nelson and Phelps, 1966; Verspagen, 1991; Benhabib and Spiegel, 1994; Papageorgiou, 2002; Stokke, 2004; Fagerberg and Verspagen, 2002; Fagerberg et al., 2007; Fagerberg and Srholec, 2008; Castellacci, 2008). Most of this empirical research, however, has so far focused on the cross-country comparative aspect (“why growth rates differ”) and mostly neglected the time series dimension and the analysis of the dynamics of the technological catch up and economic growth process over time. A recent class of dynamic theoretical models in the distance-to-frontier tradition, also point out that the existence of threshold externalities - the interactions between countries’ R&D and innovation activities, on the one hand, and human capital and imitation activities - may explain the cumulative nature of the pro...

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...iables of interest for a sufficiently long period of time, and partly by the analytical and methodological difficulties that are faced when it comes to model and empirically analyse the dynamics of complex evolving systems (Foster, 1991). Most of the empirical literature on innovation and growth, though, is yet to study two important issues. First, a substantial amount of research has been devoted to the analysis of the impacts of innovation on economic growth while the investigation of the determinants and drivers of national innovative activities, has so far received only limited attention (Castellacci, 2011; Filippetti and Peyrache, 2011). Secondly, the applied literature on innovation and growth has typically focused on the cross-country comparative aspect (“why growth rates differ across countries”) and often neglected the time series properties of the process of technological change and economic development. In short, the existing literature provides only limited insights on the drivers of national systems of innovation and the mechanisms that may explain their evolution and growth over time. This paper adopts a time series perspective and shifts the focus to the analysis of the drivers of NI...

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...for a sufficiently long period of time, and partly by the analytical and methodological difficulties that are faced when it comes to model and empirically analyse the dynamics of complex evolving systems (Foster, 1991). Most of the empirical literature on innovation and growth, though, is yet to study two important issues. First, a substantial amount of research has been devoted to the analysis of the impacts of innovation on economic growth while the investigation of the determinants and drivers of national innovative activities, has so far received only limited attention (Castellacci, 2011; Filippetti and Peyrache, 2011). Secondly, the applied literature on innovation and growth has typically focused on the cross-country comparative aspect (“why growth rates differ across countries”) and often neglected the time series properties of the process of technological change and economic development. In short, the existing literature provides only limited insights on the drivers of national systems of innovation and the mechanisms that may explain their evolution and growth over time. This paper adopts a time series perspective and shifts the focus to the analysis of the drivers of NIS over time, putting forward the...

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...ships among variables that coevolve over time, and we therefore argue that it constitutes a natural platform for investigating the long-run dynamics of national systems of innovation.3 3 An important antecedent of our approach is the work of Foster (1991), which discussed the suitability of time series cointegration analysis and error correction models for evolutionary analyses of technological change and economic growth. Recent applications of the panel cointegration approach have been presented, among others, in the field of energy economics (Costantini and Martini, 2010) and trade and FDI (Krammer, 2010). 9 The empirical methodology adopted in this paper consists of the following four steps. First, since cointegration analysis can by definition only be used to study the relationships between time series variables that have the same order of integration, we start by carrying out a battery of unit root tests. Secondly, we investigate the existence of a long-run equilibrium relationship between our variables of interest by means of the Pedroni cointegration test, which adopts ADF and PP-like specifications and extends them to a panel dataset by looking at both the withinand between-dimension of ...

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...advanced technologies (Esfahani and Ramirez, 2003; Freeman, 2004; Castellacci, 2011). • Quality of institutions and governance system. A better and more efficient governance system tends to increase the country’s commitment to technological upgrading as well as its imitation capability (Fagerberg and Srholec, 2008). • Social cohesion and economic inequality. A greater level of social cohesion and withincountry income equality is in general characterizes a higher degree of trust and knowledge sharing, hence supporting the pace of diffusion and adoption of advanced knowledge within the country (Weinhold and Nair-Reichert, 2009). In econometric terms, we represent the dynamics of the national system as a vector autoregression model (VAR). Define Y as the vector of innovative capability variables listed 6 above [Y1; Y2; Y3], X the vector of absorptive capacity variables [X1; X2; X3; X4; X5; X6], and a vector of nonautocorrelated disturbances. Then, the VAR model of order p is defined as: Yt = + 1 Yt–1 + ….. + p Yt–p + 1 Xt–1 + ….. + p Xt–p + t (1) This is a system of m equations, each of which models a given time series variable Ymt as a function of the lagged values of all the variables in the vector Y, the lagged va...

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...o the analysis of the dynamics of national systems over time. This is unfortunate, since evolution and change represent indeed key aspects of Schumpeterian research, which did in fact constitute some of the crucial motivations for the original development of the NIS approach. The lack of focus on dynamic aspects is partly explained by the lack of time series data of the variables of interest for a sufficiently long period of time, and partly by the analytical and methodological difficulties that are faced when it comes to model and empirically analyse the dynamics of complex evolving systems (Foster, 1991). Most of the empirical literature on innovation and growth, though, is yet to study two important issues. First, a substantial amount of research has been devoted to the analysis of the impacts of innovation on economic growth while the investigation of the determinants and drivers of national innovative activities, has so far received only limited attention (Castellacci, 2011; Filippetti and Peyrache, 2011). Secondly, the applied literature on innovation and growth has typically focused on the cross-country comparative aspect (“why growth rates differ across countries”) and often neglected t...

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...e series perspective. Most empirical research on NIS and economic growth has so far adopted an explicitly comparative perspective and largely neglected the time series dimension. 2. The dynamics and determinants of innovative capability. Only a limited number of studies have empirically investigated the dynamics of innovative capability over time and the main 4 factors that may explain its long-run evolution (Furman, Porter and Stern, 2002; Castellacci, 2011; Filippetti and Peyrache, 2011). 3. The dynamics and multifaceted nature of absorptive capacity. As argued by Archibugi and Coco (2004), Godinho et al. (2006) and Fagerberg and Srholec (2008), it is crucial to adopt a multifaceted description and measurement of the various factors that contribute to shape nations’ absorptive capacity, rather than simply regarding them as a set of exogenous control factors in cross-country growth regression exercises. 4. The coevolution between innovative capability and absorptive capacity. Innovation and imitation have typically been regarded as two distinct (albeit related) drivers of growth and catching up, however investigating a two-way relationship approach is crucial. 3. Model and hypotheses The model focuses...