This chapter brings together two distinct literature themes, from national innovation systems and intellectual capital. A growing scholarly and practitioner community views softer knowledge assets, those less defined by structured innovation mechanisms such as patents, as additional, alternative sources of competitive advantage for the firm. The growing recognition of intangible assets as a critical source of competitive advantage has important implications for corporate governance. The interplay between firm governance and its national environment raises further questions. By adding knowledge asset development and use to the perspective of national innovation systems, governing bodies have an opportunity to enact policies making their firms more competitive on international markets. Governance opportunities present themselves in the areas of strategy and investment, reporting, protection, and government stewardship. National innovation system theory has proved valuable during the past two decades as a guide to creating the right national governance approach to generating innovation. Different nations have different circumstances, and optimal policies may vary by such circumstances; but the concept remains that systems can be designed to get government to encourage innovation (or at least get out of its way). An effective national system enables corporate leadership to better fulfill its own governance role of making the firm competitive and generating appropriate financial returns.
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