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Captures the current characteristics of China's production and innovation system; how they are shaped by history and what major challenges they raise for the.
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However, developing countries, due to limited capital, limited training and formal education, and limited developed industrial knowledge bases, often have to 28 rely on exogenous sources of capital, technology and knowledge. This paper pays special attention to the strategic coupling between the absorptive capacity of the region RIS and these transnational sources of capital, technology and knowledge Dicken et al. Particularly the paper focuses on TNCs and to minor extent transnational communities as the external sources thus other external sources are bracketed.

The rest of the paper is structured as follows. The differences are considered crucial as we argue in favor of placing the regional government bodies in a more central position than is the case in NSI. Subsequently, RIS is adapted to the specificities characterizing developing countries; particularly the frequent need to rely on transnational corporations TNCs as a central source of capital, technology and knowledge.

This is followed by a section paying attention to the importance of building the regional absorptive capacity required for embedding these transnational flows of knowledge, technology and capital in the regional context. As it is beyond the scope of the paper to engage in a thorough theoretical stocktaking and empirical assessment of the entire TNC literature this section focuses mainly on strategic coupling and how we position ourselves in contrast to general positions within TNC literature. The paper is rounded of with some concluding remarks. It provides the background for the following sections on development and upgrading in developing countries as well as the derived implications on the RIS policies in the context of regions in developing countries.

In many OECD countries this led to a strong focus on constructing or building selfcontained regional innovation systems Asheim ; Bathelt ; Morgan in an attempt to emulate the success of the triad regions. The relevance of the traditional self-contained regional innovation systems to construct competitive advantage Sabel ; Isaksen for developing countries is often limited as the have to rely on TNCs, thus the challenge is to develop an exogenously driven RIS that allows regions in developing countries to benefit from TNCs investments. Thus the RIS needs to be re-conceptualized.

What is meant by RIS? According to Cooke et al. The crux of this definition lies in the notion of embeddedness.

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This refers to the importance of personal relations and networks ingrained in local social and cultural institutions Volume 8, Issue 1—2, July Granovetter Without it the definition would equal the definition of a national innovation system written small. Thereby the regional innovation system is boiled down to two main types of actors and the interactions between them.

The first concerns the companies in the main industrial clusters in a region, as well as their support industries e. These knowledge-creating and diffusing organizations hold important competence, train labor and provide necessary funding for the innovativeness of the RIS; it is however not assumed that they always function either in developed or in developing countries. While, as Lundvall puts it, an innovation system is a set of relationships between entities or nodal points involved in innovation, it is really much more than this. Finally, RIS stresses the importance of interactive learning.