Armenia’s Innovation Paradox

On March 18, 2025, we lost our former colleague and dear friend, Leigha Schjelderup. Leigha was a staff writer for EVN Report’s Creative Tech section, the assistant editor of 374 and was preparing to take on the role of section editor for Creative Tech. Just months before her passing, Leigha successfully defended her master’s thesis, titled “Dynamics of the Armenian Innovation System: A Functions-based Analysis in Catching-up” at TalTech University. The full thesis is available on TalTech’s website. 

In her memory, we are publishing a review of her thesis to help share her insights with a wider audience.

Special thanks to Njdeh Satourian for this thoughtful and important review.

Listen to the article.

Late on a spring evening in Yerevan, in a modest office cluttered with whiteboards and empty coffee cups, a group of young engineers argue passionately over how Armenia might finally secure the supercomputer they desperately need to join the global AI research race. Just across town, government officials proudly announce yet another ambitious blueprint for Armenia’s high-tech future, replete with glossy renderings of futuristic campuses. The contrast is stark: on one side, urgent grassroots ambition; on the other, polished rhetoric detached from immediate realities. It’s in this gap that Leigha Schjelderup’s thesis, “Dynamics of the Armenian Innovation System”, places itself, exploring the uneasy relationship between Armenia’s extraordinary talent and its persistent institutional inertia.

The thesis examines how Armenia might harness an emerging Artificial Intelligence sector as a springboard for economic development. Schjelderup approaches Armenia’s situation as a kind of case study in the promises and perils of “innovation by catch-up”. Her analytical lens is the Technological Innovation Systems (TIS) framework—a tool that focuses not just on who the players are (as in traditional National Innovation System models) but on what functions they are or aren’t performing. In a country long on talent but short on trust, and rich in ambition but poor in institutions, this shift in perspective proves insightful. Schjelderup adapts the standard TIS approach, originally designed for mature economies, to better suit a transition economy context, as she brings into focus the dynamic processes that make or break innovation in Armenia’s “fragmented” system.

The AI “Window of Opportunity”

Not long ago, Armenia’s leaders began declaring Artificial Intelligence a strategic priority, seeing it as a possible “window of opportunity” in the global tech landscape. The phrase, borrowed from Carlota Perez’s theories of catch-up, suggests that in each new techno-economic revolution latecomers have a chance to leap ahead. Schjelderup seizes on this metaphor of the “window”. In her introduction, she observes that despite an apparent high-level commitment to realizing Armenia’s “high-tech potential”, the government’s supportive rhetoric has yet to translate into the substantive reforms necessary to fully capitalize on the promise of AI. The clock is ticking: “as the ‘window of opportunity’…for participating in the emerging technology system wanes, identifying and addressing system weaknesses becomes increasingly urgent.”

The thesis paints AI as a promising pathway and a test case. On one hand, Armenia has cultivated a vibrant tech scene, with a legacy of strong math education and a diaspora that has funneled expertise and capital back home. AI startups like Krisp and PicsArt have garnered international attention, and even giants like NVIDIA have established an R&D center in Yerevan, an achievement “diaspora-driven” in origin. All this feeds the optimistic narrative that Armenia might “catch up” by riding the AI wave. “While AI is often identified as a ‘window of opportunity’ to position Armenia within a high-value global system, this vision has traditionally remained underdeveloped,” Schjelderup writes, “lacking specificity and formalization necessary to coordinate and implement a national strategy.” In other words, everyone says AI could be Armenia’s ticket to the future, but until there’s a concrete plan the window could close before the country climbs through it. 

Interestingly, Schjelderup documents a moment in 2023 when Armenia’s tech community tried to pry that window open. A consortium of organizations, led by local groups such as YerevaNN, with help from influential diasporan AI experts, drafted a proposal for a National AI Institute and lobbied hard for a state-of-the-art supercomputing center. They saw these as critical steps to “capture the closing ‘window of opportunity’ in the international AI landscape.” Entrepreneurs and scientists themselves stepped into the policy arena – “actively lobby[ing]… for favorable economic conditions… to drive technological progress.” It was a vivid example of a bottom-up initiative, born of the realization that Armenia cannot afford complacency. Schjelderup uses this episode to illustrate how TIS functions play out in real life: entrepreneurs and visionaries guiding the search had to also take on roles in mobilizing resources and legitimizing the very idea of AI investment to skeptical officials. 

This example demonstrates an important point that is a central component of the thesis: progress in developing Armenia’s AI sector will come from more than just technology advancements, attention must also be paid to policy, institutions, and social cohesion. The initiative was a success as community members successfully lobbied the government to invest in an AI supercomputer in late 2023. It is expected to become operational later this year. 

Institutional Inertia

This tension between ambition and execution reflects a broader structural reality within Armenia itself. Schjelderup vividly portrays a nation caught between two tracks: on one side, brilliant, internationally connected entrepreneurs and researchers steadily proving Armenia’s technological prowess; on the other, post-Soviet institutions struggling to shake off outdated habits and chronic underfunding.

The thesis traces the roots of Armenia’s high-tech boom in part to the diaspora. After the collapse of the USSR, Armenia’s scientific establishment withered from lack of funds and a massive brain drain. But those engineers and computer scientists didn’t disappear, many found success in Silicon Valley, Boston, Moscow, and beyond. Crucially, they stayed connected: “Diaspora Armenians forged new ties to the homeland, establishing firms that laid the groundwork for a nascent technology cluster within Armenia’s fragmented NIS.” The first IT companies and venture funds in Yerevan were often started or financed by Diasporans returning home (including those who had left Armenia post-independence) armed with Western know-how and a sentimental desire to build something in the motherland. Thanks to these efforts, “the influx of foreign investment and expertise originally spurred the emergence of Armenia’s ‘first generation of startups,’ positioning Armenia as a ‘technological nation.’” By the late 2010s, Yerevan’s tech scene was vibrant enough that optimistic reports (and local politicians) started to tout the country as a rising innovation hub. 

But Schjelderup is careful to point out that this success was largely in spite of the domestic innovation system, not because of it. She cites one interviewee’s blunt reminder: “Developments stem primarily from the diaspora, rather than a functional NIS.” The phrase “fragmented NIS” appears repeatedly in the thesis, evoking an image of a puzzle with crucial pieces missing—those pieces often being the connective tissue that binds entrepreneurs, academia, government, and finance into a coherent whole. Armenia’s innovators have learned to operate in a broken system, navigating around the gaps. The result is a patchwork innovation landscape: a world-class AI startup might emerge, but there is no robust local supply chain of talent feeding it; a new research center opens, but it functions almost entirely on grant money and goodwill, with minimal integration into any national strategy. Armenia’s challenge is to translate its scattered pockets of excellence into a concerted national capability.

Policy as Performance

In addition to institutional inertia, Schjelderup identifies another key obstacle to developing Armenia’s tech sector: the performative nature of innovation policy itself. Over the past decade, Armenia’s government has established a Ministry of High-Tech Industry, announced lofty strategies, and partnered in showcase projects like engineering city complexes. On the surface, Armenia’s policy appears to be aligning with its rhetoric of becoming a tech-driven economy. Yet, according to interviewees, little substantive change has followed—even after the reformist government that came to power with the 2018 Velvet Revolution. Officials remained stuck in the comfort of ribbon-cutting ceremonies for innovation centers rather than tackling deeper institutional reforms or human capital investment. “The focus of innovation policy remained on new infrastructure rather than addressing fragmentation,” Schjelderup writes. 

The proposed Academic City is a case in point. This mega-project—a modern campus to centralize universities and research institutes—is referenced in the thesis as emblematic of this problem. It’s a grand vision that certainly sounds great: who wouldn’t want a state-of-the-art academic hub to signal Armenia’s commitment to science? Yet, as Schjelderup observes, “public support for science and technological development in Armenia has not been accompanied by the systemic reforms necessary to revitalize Soviet-era research infrastructure and meet the growing demands of the diaspora-driven entrepreneurial ecosystem.” In other words, building a new campus won’t magically create collaboration between academia and industry, or stop scientists from emigrating, or convince innovative companies to trust government grants. There is a “persistent gap between aspirational infrastructure policies—such as the Academic City initiative—and the substantive actions required to address IS fragmentation.” 

Schjelderup gives credit where it’s due, noting, for example, the recent establishment of a high-level Science and Technology Development Council under the Prime Minister as a sign that at least coordination is being taken seriously. However, she importantly adds that without “bottom-up administrative reforms” to accompany the top-down council, it may not penetrate the ministry silos that resist change.

This theme of policy as performance invites a broader reflection that Schjelderup hints at: in transitional countries, governments often adopt the form of Silicon Valley-esque innovation policy (tech parks, startup funds, grand strategies) because it photographs well and pleases stakeholders, but they shy away from the substance—the less glamorous institution-building like education quality upgrades or enforcing anti-corruption in university hiring. The reader comes away convinced that unless Armenia moves beyond performative gestures and addresses its “vicious circle” of institutional weaknesses, even the brightest tech achievements will remain isolated exceptions rather than a new normal.

Virtuosity in Innovation Systems

Amid these sobering observations, Schjelderup introduces a hopeful concept—or at least a diagnostic tool—that she calls “virtuosity” in innovation systems. Borrowing the term from the language of performance (in the musical or artistic sense), she repurposes it to ask: What does successful innovation activism look like in a fractured system? How do we know when the various players—entrepreneurs, researchers, officials, diaspora—are not just busy, but excelling at pushing the system forward? 

The answer, she suggests, lies in how well these efforts build the social foundations for innovation. “This thesis defined ‘virtuosity’ as the degree to which efforts to catalyze cycles of change simultaneously break the ‘vicious circle’ of fragmentation at the national level,” Schjelderup writes. In simpler terms, virtuosity is measured not by the number of tech startups launched or dollars invested, but by whether these activities knit the ecosystem together, enhance trust, and align incentives. An innovation policy or project has virtuosity if it strengthens networks, develops talent collaboratively, and counters the fragmentation that plagues the system. 

This is a subtle but important reframing. It means, for example, that a hackathon which brings students, industry engineers, and government mentors together might be more valuable (more “virtuosic”) than an expensive new laboratory that sits apart from the private sector. Schjelderup’s interviews underscore this point: many of her respondents cite “lack of ‘trust’ between actors” as a key barrier in Armenia. One even circulated a quote from Jennifer Pahlka’s “Recoding America, Why Government Is Failing in the Digital Age and How We Can Do Better” among colleagues: when systems don’t work, “it is generally not because the people in them are stupid or evil. It is because they are operating according to structures and incentives that aren’t obvious from the outside.” This insight resonates strongly with the thesis’s findings. Public officials, academics, and entrepreneurs in Armenia are often sincere and competent as individuals; the failure is in the relationships and institutional linkages (or lack thereof) that trap them in unproductive patterns. 

So, what does virtuosity look like in Armenia’s innovation system? Schjelderup offers a few examples. One is the Generation AI initiative by FAST, which placed young data scientists inside a government ministry to work on pilot projects. This was an attempt to “ingrain adaptive capacity within the Ministry,” and quietly shift the ministry’s culture toward openness and learning—a small crack in the wall of inertia. Another example is the coalition lobbying for the supercomputer: it forced tech entrepreneurs to engage with the political process, creating new channels of dialogue between the private and public sectors. Schjelderup suggests the process itself had virtuous effects, introducing a new mode of interaction (evidence-based, coalition-driven, cross-sector) into Armenia’s policy sphere. Each of these efforts, she argues, should be judged by how they contribute to building “the ‘social capabilities’ necessary to address systemic fragmentation at the national level.” 

Crucially, Schjelderup ties this back to theory: she invokes economist Moses Abramovitz’s famous notion that technological catch-up depends on “social capability”—education levels, institutions, and the like—as much as on any given technology. In line with this, the thesis insists that “soft institutions” such as culture and trust must be treated as core components of an innovation system, not as afterthoughts. “‘Soft institutions’ such as culture and trust must also be more explicitly represented in the functions of [the innovation system] model. Only then can the framework reliably assess innovation dynamics and guide the implementation of effective policy reforms,” Schjelderup concludes in her analysis. 

It’s a striking call to arms for scholars and policymakers alike: if you want to know how well a country is doing at innovation, don’t just count patents or R&D spending, ask whether people are talking to each other, whether they believe in a shared mission, whether they trust the rules of the game. In Armenia’s case, this translates to bridging the “cultural and competency asymmetries between the Silicon Valley-influenced private sector and the Soviet-era public sector.” The phrase evokes a split-screen of Yerevan today: on one side, tech executives in T-shirts moving fast and breaking things; on the other, veteran bureaucrats in suits, wary of change. The virtuoso innovation reformer, in Schjelderup’s view, is the one who can get these two sides into concert, aligning their visions (so they aren’t working at cross purposes) and fostering enough trust that they can collaborate effectively.

Adapting TIS for Transition Economies

Beyond the specifics of Armenia, Schjelderup’s thesis makes a broader contribution to innovation studies by experimenting with the TIS framework in a novel context. Traditionally, Technological Innovation Systems analysis has been applied to well-defined sectors in advanced economies to figure out what makes them tick. Applying it to an emerging AI sector in a post-Soviet developing country is not business-as-usual. Schjelderup is candid about adapting the framework to fit Armenia’s unique context, and in doing so, she offers a valuable template for examining other catching-up nations grappling with the innovation paradox of pockets of excellence within otherwise fragile systems.

The core of her adaptation is to emphasize process over structure. She contrasts the NIS model—which maps out institutions like universities, firms, government agencies—with the TIS approach, which looks at dynamic functions like entrepreneurial activity, knowledge creation, networking, resource mobilization, etc. Armenia’s NIS on paper might look dire (lots of old institutes, low R&D spending, fragmented policies), but the TIS lens might reveal that, say, there is actually intense entrepreneurial activity and some knowledge development happening in AI, even if other functions like market formation or guidance lag. By focusing on “what is achieved” rather than what formal structures exist, Schjelderup finds a way to articulate Armenia’s strengths in the midst of its weaknesses. This helps shift the narrative from “Armenia has bad institutions” to “Here are specific functions that are not being fulfilled, and here are others that are surprisingly robust.” It’s a diagnostic nuance, but an important one for crafting solutions.

One of Schjelderup’s innovations is how she evaluates the quality of those functions through the earlier notion of “virtuosity.” Traditional TIS analysis might count how many startups were founded (entrepreneurial activity) or how many patents filed (knowledge outputs). Schjelderup suggests asking deeper questions such as: Are the research outputs relevant to local needs or only chasing global trends? These qualitative aspects feed into her assessment of the functional pattern of Armenia’s AI sector. She identifies feedback loops between functions, and assesses its virtuosity, i.e. its ability to generate positive, reinforcing cycles rather than fizzing out. 

For example, she observes that when entrepreneurs lobby policymakers and succeed in securing some resource, like a budget increase for science, this not only helps their immediate cause but also legitimizes the process of public-private cooperation itself. That’s a virtuous cycle in the making. On the other hand, if a flashy government initiative dumps money into a new research center without involving the existing tech community, it may create a flurry but do nothing for long-term trust or capabilities—a cycle that peters out, or even a vicious cycle if it breeds cynicism. By framing it this way, Schjelderup effectively adapts TIS to capture what standard metrics would miss in a country like Armenia. 

One important theoretical point she raises is the “development paradox” in innovation: developing countries require strong institutions to advance technologically, but strong institutions often depend on an already strong economy. Schjelderup argues the TIS framework needs refinement to address this paradox by integrating principles of “reflexive governance”—adaptive, inclusive policymaking that enables continuous learning and adjustment. She emphasizes building institutional “competence to improve competence,” essentially learning how to learn. Practically, this means policies should be experimental and responsive, allowing quick evaluation and adaptation instead of rigid, long-term plans.

Finally, Schjelderup touches on a humbling insight often forgotten in tech-optimism: advanced technology in a society with unresolved systemic problems can actually exacerbate inequality or social tensions. She invokes Richard Nelson’s “Moon and the Ghetto” dilemma—the coexistence of high-tech achievements with persistent social ills. In Armenia’s case, one might imagine shiny tech parks operating in a bubble while regional towns see little benefit. The thesis warns that “although high-tech innovation is often seen as inherently beneficial… emerging technologies can bring unintended consequences and potentially undermine other national development goals.” This is a prudent reminder that innovation for innovation’s sake is not the goal; broad-based development is. 

Conclusion

In the end, “Dynamics of the Armenian Innovation System” is both a celebration of Armenia’s homegrown innovation virtuosos and a clear-eyed critique of its systemic shortcomings. Some readers might wish for a punchier set of prescriptions to the Armenian government: “Do X, Y, Z, and pronto.” But that was never the thesis’s aim. Its contribution is to reframe the conversation about innovation in Armenia (and by extension, in similar transition economies) to focus on functions, behaviors, and relationships. It gives equal weight to the software of innovation (skills, mindsets, networks) as to the hardware. And it carves out a middle ground between the cynics who see Armenia as hopelessly stuck and the boosters who trumpet every new tech success as proof of progress. 

Readers unfamiliar with Armenia will come away with a nuanced understanding of how a tiny country with big brains can both dazzle and flounder on the path to development. Readers familiar with Armenia will likely nod along, recognizing the anecdotes and issues, but also gain a fresh analytic language (“functions,” “virtuosity,” “network organizers”) to articulate what they have observed in practice. And perhaps most importantly, the thesis quietly challenges policymakers: if a small group of researchers and advocates can diagnose the problems and even begin to fix them through sheer dedication, imagine what a concerted official effort could achieve. The closing of one window of opportunity can, after all, be the opening of another, but only if one has the vision to see it, and the will to act. Schjelderup’s work reminds us that in innovation, as in music, virtuosity is about the cohesion and performance of the whole ensemble, and less about single brilliant notes. 

Armenia’s task now is to get all its players on stage, playing in tune. The score is written; the audience waits. It’s time to see if the Armenian innovation system can deliver a performance to remember, or if it will remain an under-rehearsed symphony still searching for its conductor.

Leigha’s work on EVN Report