INNOVATION POLICY ARTICLES
Lecture 1
Innovation policy: what, why & how
This paper attempts to stock of the rapidly growing area of public policy, with particular
focus on the definition of innovation policy (what it is); theoretical rationales (why
innovation policy is needed); and the design, implementation and governance of
innovation policy.
What?
To start with innovation, it was the founding father of innovation theory, Josef
Schumpeter, who introduced the distinction between invention (a novel idea of how to
do things) and innovation (carrying it out into practice). This perspective points to two
aspects of innovation: novelty and implementation. For Schumpeter, a main reason for
his distinction between invention and innovation was the realization that what matters
economically and societally is not the idea itself but its exploitation in the economic and
social system. Hence, there are different perspectives on innovation, and this is also
reflected in policy. There is a narrow perspective, considering invention only, and there
is a broader, more holistic perspective, which emphasized the importance of looking at
the entire innovation cycle from the creation of novel ideas to their implementation and
diffusion. Moreover, there is the question of whether one should limit the analysis to
policies designed with the explicit intent of influencing innovation, or also take into
account policies primarily created for other purposes, but which may have a significant
impact on innovation activity. On the basis of these distinctions, 3 types of policies:
1. Mission-oriented policies are aimed at providing new solutions that work in
practice to specific challenges that are on the political agenda
2. Invention-oriented policies have a narrower focus, in the sense that they
concentrate on the R&D/invention phase, and leave the possible exploitation
and diffusion of the invention to the market.
3. System-oriented policies are of more recent origin and focus as the notion
suggests on system-level features, such as the degree of interaction between
different parts of the system; the extent to which some vital component of the
system is in need of improvement; or the capabilities of the actors that take part.
Why?
The modern state has always, as part of its core policy missions, supported the
generation of scientific knowledge, technology and innovation. An important instance of
an ex-post rationalization was the creation of what became known as the ‘market
failure’ approach to innovation policy in the decades following the end of 2nd world
war. Although the returns to society as whole could be very high, private returns – and
hence investments – may be low, leading to underinvestment in the creation of new
knowledge in relation to what would be desirable for society as a whole. Such ‘market
failure’, it was argued, may justify policy intervention aimed at increasing the
investment in science towards the socially optimal level.
• The state needs to invest in the public production of knowledge, in, say,
universities and other public research organizations to safeguard innovations
based on science in the future
• Subsidizing R&D in private firms as this may introduce the firms to undertake
more R&D than they otherwise would have done
, • Since the nature of the problem was identified as incomplete legal protection of
knowledge and its exploitation, strengthening the IPR (intellectual property
rights) regime may be seen as another possible avenue
However, the market failure approach has been criticized:
• Government can also make it worse by intervening → policy advice is vague
(what is the optimal amount of investment?)
• Information & knowledge are different → information may be easily accessible,
knowledge not, while market failure says so
• Only focuses on the earlier stages in the innovation process. This focus is clearly
not in accordance with Schumpeter (1934)’s innovation theory, which pointed to
the implementation (commercialization) phase and inert selection environments
at the most challenging.
Innovation-system approach: policymakers started to become more concerned about
how (and if) policy can contribute to raise innovation activity and thereby revitalize the
economy. The national innovation system (NIS) approach to innovation policy emerged
during the late 1980s and early 1990s in response to the need of a new framework to
discuss these challenges. The suggestion from the literature is that the state should not
limit itself to provide funding for basic knowledge and help to protect innovation
through implementation of IPRs, as the market failure perspective would suggest, but
also identify and rectify systemic problems.
Variety-creation is the source of long run-growth; selection processes promote
economic efficiency but may give raise to path—dependency, particularly where so-
called network-externalities prevail, which make it difficult to change course at a later
stage. This is not necessarily a problem, as long as the conditions that led to the original
selection of the key technology, standard etc. are still valid. But if these conditions
change a problem may occur.
How?
While policies refer to goals that policy-makers have for society’s development, making
it more innovative for example, policy instruments may be defined as techniques
developed in order to achieve such goals.
Evaluating the effects of innovation policy interventions is difficult. First, while it may
be possible to assess the immediate effects, such as whether R&D support leads to more
R&D performed or not, it is much more challenging to assess the wider effects, for
example on innovation, productivity and jobs, which presumably is what policy makers
,are interested in. Furthermore, different policy instruments may interact, making it
difficult to distinguish their individual effects. Moreover, the impact of any innovation
policy instrument is likely to depend on the working of the wider innovation system into
which it is sought introduced.
Hence, the available evidence on innovation policy impacts at the national level seems to
suggest that a holistic – or systemic – perspective in policy is important, that sensitivity
to context is essential and that mechanical transfer of policy practice from one national
system to another (without concern for contextual factors) is highly problematic.
While strong involvement of government in the shaping of innovation policy may be a
good thing, lack of independence at the agency level may be a problem if it leads to be
very risk averse as politicians generally are.
A suggestion to achieve more coordination in innovation policy is the establishment of
innovation councils – existing in several countries already – in which representatives of
relevant ministries, public research organizations, business and NGOs come together to
discuss guidelines for innovation policy.
The idea that innovation policy may contribute to solutions for urgent societal
challenges has further led to an increased involvement of non-state actors in
innovation policy decisions and design, co-financing and implementation of innovation
policy instruments. Finally, there is a persistent governance problem in innovation
policy, which has to do with a lack of concern for the international dimension. In fact,
while many challenges as well as major innovations and their impacts are transnational
by nature, public innovation policy is still largely organized nationally.
, Lecture 2 – notes
Myanmar → neighbors: Bangladesh, India, China, LaoPDR, Thailand. Intention: inclusive
policy
Investment in STI (science technology innovation) very low
We were there to implement a plan
2018: Myanmar STI low adopted, STI council
2019: Myanmar asked UNESCAP to support in developing STI policy
2020: Co-creation of STI policy (with stakeholders from private sector, academia etc.)
We started with training: what is innovation, what does it and why should governments
intervene?
Innovation = application of technologies or practices that are new to a given society →
has to do with science but you don’t need much fundamental research to catch up
So there is a connection between science and innovation but it is not through a linear
model → the complexity drives us to think in terms of NIS
Knowledge, learning & institutions are key
Key system issues are balance and we need policies
3 generations of failure justification for invention
Market failure, System failure, Transition failure
3 generations of innovation system governance
Scientific community based on linear model,
science policy and eventually innovation systems,
Societal challenges which need various degrees of
transition between socio-technical systems
(engagement of many more stakeholders)
Policymaking as a cycling process (Myanmar never
heard of it)
Intervention logic
A public action is undertaken for a reason
It has objectives which addresses needs
It provides inputs which lead to activities
It achieves outputs
Which leads to outcomes leading to impacts
