The central components of national systems of innovation in the advanced OECD countries are the innovative activities performed by practitioners (mainly businesses), and the basic research and related training performed by universities. The close linkages observed between the national science base and innovative activities in nationally owned firms reflect the advantages of physical agglomeration in innovative activities, and allow companies and countries to extract major economic benefits from their investments. However, national systems of innovation are under increasing strain, because of emerging imbalances between what the science base has to offer, and the demands of the technology system. These imbalances reflect the combined effects of (1) the liberalisation of international exchanges, (2) uneven rates of national technological development, (3) increasing pressures of competition, (4) the increasing range of fields of potentially useful technology. These imbalances have long been felt by large firms in smaller countries. They have recently been experienced in different forms in Germany, Japan and the UK, in the last of which the dominant links between the science base and national firms has virtually disappeared in the electronics industry, and been replaced by more complicated links with foreign firms. These are likely to grow in all countries in future.
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