Lecture 10: The policy relevance
     of innovation studies
Comments on the 11/10 debate
The search process…
Our “current state of the art”
Our elusive target - or how the world
   will look like in May 2007…
Innovation policy: a definition

Innovation policy refers to elements of science, technology and industrial
policy that ex...
Innovation Policy Instruments
Policy Tools             Examples
Public enterprises: Innovation by publicly owned industrie...
Innovation Policy Trends
1960s: Basic research and human capital

1970s: Emphasis on macroeconomic adjustment and
competit...
Economic rationales for innovation policy

• Market failures

• Co-ordination failures [a special case of market
  failure...
Invention, co-invention and co-
      ordination failures.
 Back to our 11/10 Debate…
Innovation Policy and Phases of Economic Development
PHASE I: INFRASTRUCTURE DEVELOPMENT FOR FDI
• Solicitation of FDI
• C...
Innovation Policy and Industrialization
Objectives/Targets             Obstacles Market failures & Policy      Policy Appr...
Challenges for Developing Countries

• New areas of co-ordination failures
   –   Skills
   –   Infrastructure and logisti...
Different Views on Innovation Dynamics and
               Innovation Policy
                      • SYSTEMS APPROACH
• NEO...
Policies affecting the pressure for change, the ability to
        change and the consequences of change

Transformation p...
Is that enough?
                Six Myths about Technology
           and their influence on Industrial Policy

(i) Techno...
Technology Policy Implementation

BEST PRACTISE                ENDOGENOUS NEEDS

• Well defined targets       • Links loca...
Readings…
• Westphal



  – Additional readings Martin, Metcalfe, Aghion,
    et al. (2006)
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
Lecture 10 - Innovation studies and technology policy
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Lecture 10 - Innovation studies and technology policy

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Lecture 10 - Innovation studies and technology policy

  1. 1. Lecture 10: The policy relevance of innovation studies
  2. 2. Comments on the 11/10 debate
  3. 3. The search process…
  4. 4. Our “current state of the art”
  5. 5. Our elusive target - or how the world will look like in May 2007…
  6. 6. Innovation policy: a definition Innovation policy refers to elements of science, technology and industrial policy that explicitly aim at promoting the development, spread and efficient use of new products, services and processes in markets or inside private and public organisations. The main focus is on the impact on economic performance and social cohesion. Innovation policy has wider objectives than those of science policy and technology policy. It includes policies which aim at organisational change and the marketing of new products. Many other policy areas affect innovation. This is true of competition policy and macroeconomic policy, but it is also true of sectoral policies like environment, energy, transport and communications and most importantly it is true of human resource development policy.
  7. 7. Innovation Policy Instruments Policy Tools Examples Public enterprises: Innovation by publicly owned industries, setting up of new industries, pioneering use of new technologies Financial: Grants, loans, subsidies, financial sharing arrangements, export credits, loan guarantees Procurement: Government purchases, prototype purchases, R&D contracts Commercial: Trade agreements, tariffs, currency regulations Public services: Purchases, maintenance, construction, innovation in health services, public buildings, transport, telecommunications Taxation: Tax allowances, company taxation Scientific research: Research laboratories, support for research associations, professional associations, research grants Education: General and technical educations, universities, apprenticeship schemes, retraining Information: Information networks and centres, consulting services, databases Regulation: Patents, environmental and health regulation, monopoly regulation
  8. 8. Innovation Policy Trends 1960s: Basic research and human capital 1970s: Emphasis on macroeconomic adjustment and competitiveness (neglecting the micro-level) 1980s: Technological change challenges Technological leadership (Japan vs. US) The <peace dividend>: declining military R&D Diffusion-oriented policies Environmental issues Regulatory frameworks 1990s: The learning economy and innovation driven growth Exogenous shocks and complex learning processes Emphasis of the efficiency of policy portfolios
  9. 9. Economic rationales for innovation policy • Market failures • Co-ordination failures [a special case of market failures involving failures in the innovation process] • Path-dependence in the evolution of institutions and industries • Complementarities with other policies
  10. 10. Invention, co-invention and co- ordination failures. Back to our 11/10 Debate…
  11. 11. Innovation Policy and Phases of Economic Development PHASE I: INFRASTRUCTURE DEVELOPMENT FOR FDI • Solicitation of FDI • Creation of attractive investment and regulation regimes • Public investment on IT, energy and transportation infrastructures PHASE II: LOCAL CAPABILITIES AND TECHNOLOGY ACQUISITION • Offset policies for market access • Technology transfer and technology acquisition strategies • Expanded incentives to local producers • Incentives for increasing local value added PHASE III: INDIGENOUS R&D AND COMMERCIALISATION PROCESSES • Government funding of R&D • Investment in technology commercialization • Investment in higher education and human resources • Targeted promotion of innovation at the sectoral level
  12. 12. Innovation Policy and Industrialization Objectives/Targets Obstacles Market failures & Policy Policy Approach & Policy Components Constraints Widespread Lack of good R&D projects Learning Approach: Government Agency becoming Endogeneization of the an N3 network entrepreneur; generating relevant R&D process Pervasive market failure project taxonomies; codification of policy experience Assemble networks - User-producer - Exchange if ideas - Collective, Absence of R&D (and search) Massive and flexible support Multidisciplinary & routine at firms Cumulative Learning Process Achieving ‘critical mass’ Underdeveloped R&D Mix between finance/monetary incentives and of projects Consultancy/advisory services and institutional/market building policies financial services markets Developing Policy Partially inadequate institutional Predominance of Neutrality in incentives/finance Capabilities framework Defining the specifics of Inadequate policy approach and Proactive policies (project generation) firm based incentives policy capabilities at Government Investment in new policy capabilities (training, staff work etc.)
  13. 13. Challenges for Developing Countries • New areas of co-ordination failures – Skills – Infrastructure and logistics – Capital markets – Ability to adjust • The lack of space for macroeconomic adjustment, i.e. the absorption of exogenous shocks – Interest rates fluctuations in the global economy – De-regulation facilitating innovation driven growth in advanced countries
  14. 14. Different Views on Innovation Dynamics and Innovation Policy • SYSTEMS APPROACH • NEO-CLASSICAL – Co-ordination failures APPROACH – Knowledge externalities – Diffusion of technology – Market failures – Institutional competences • POLICY AGENDA • POLICY AGENDA – Adjustment to institutional – Innovation=R&D change – Human Capital – Proactive diffusion policies – Institutional learning – Property rights – Networking policies
  15. 15. Policies affecting the pressure for change, the ability to change and the consequences of change Transformation pressure Macro-economic policies Competition policies Trade policies ↓ Ability to innovate [broadening vs. deepening] and adapt to change Human resource development policies Labour market policies Innovation policies ↓ Redistribution of costs and benefits of change Tax and other income transfer policies Social policy Regional policy
  16. 16. Is that enough? Six Myths about Technology and their influence on Industrial Policy (i) Technology is (just) Applied Science Set up R&D Institutes (ii) Technological Self-reliance is Key, period Indigenization as end in itself (iii) More Technology is always Good Focus on R&D Spending, not Content or Value Added (iv) High tech is the Best technology Expensive, high-tech Champions, State or Private (v) Technology is well understood and easily transferred Focus on Regulation (vi) R&D is Key, and led by Research Focus on Research, not Development
  17. 17. Technology Policy Implementation BEST PRACTISE ENDOGENOUS NEEDS • Well defined targets • Links local needs and complementary policies • Already available expertise • Consensus building • Limited requirements for • Adjustment to exogenous new institutional shocks arrangements • Limited local resources • Lack of priorities for policy analysis • Difficulty to adjust to • Lack of policy exogenous changes implementation institutions
  18. 18. Readings… • Westphal – Additional readings Martin, Metcalfe, Aghion, et al. (2006)
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