The Embedded Innovation Systems of Germany and Japan: Distinctive Features and Futures

Why is it that Germany and Japan, economic miracles of the 60's are nowadays perceived as ailing capitalisms and should they adopt a typical American market led capitalism? Can the German and Japanese Social Systems of Innovation (SSI) survive into the next century? Does the opposition between embedded and market-led capitalism provide a satisfactory interpretation? The answers to the three previous questions are respectively no, yes, and no. The paper first provides an institutional and statistical analysis of the Social System of Innovation of major OECD countries, then builds a Kaldorian endogenous growth model which captures three sources for technical change, and finally, uses this framework in order to elaborate some scenarios for the transformation of the Japanese and German economies.