Interrupted innovation: Innovation system dynamics in latecomer aerospace industries

In this paper we analyse the role of sectoral innovation systems in the emergence and catch-up of aerospace industries in latecomer economies. We argue that the aerospace sector is characterized by a process of interrupted innovation. Competitive pressures and the cyclical nature of the industry not only require shifts in the direction of innovation and changes in the production system, but also periodical restructuring of the whole sectoral system of innovation.

Aerospace manufacturing requires advanced technological capabilities at the earliest stages of the emergence of the industry. Producers immediately need to comply with high international technology, quality and safety standards. Stage models of gradual technological upgrading in the process of catch up are therefore not appropriate to analyse the evolution of this industry in latecomer economies. The model of interrupted innovation developed in this paper provides an alternative perspective.

In country case studies of Brazil, China, Indonesia and Argentina, we show how changes in the global competitive landscape and major political developments trigger crises in the industry, with which existing systems of innovation are unable to cope. Competitive pressures periodically require the industry to reinvent itself almost from scratch.

We conclude that the emerging economies that have succeeded in catching up in aerospace are those that have established a competitive industrial sector with a sectoral innovation system which is able to adapt flexibly to radically changing circumstances.

Keywords: aerospace manufacturing, sectoral innovation systems, system dynamics, latecomer industrialization, technological capabilities

JEL Codes: L62, O14, O31, O32, O33, O38