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Gaétan de Rassenfosse @gderasse
École polytechnique fédérale de Lausanne
Innovation is the introduction of something new
A new/improved product or service, a new way of producing/organizing somet...
Why is Innovation Important?
Traditional View – Economic Growth
More of the same without innovation
Traditional View – Economic Growth
Up to the point at which sources of economic growth are exhausted
Traditional View – Economic Growth
Traditional View – Economic Growth
Traditional View – Economic Growth
Creation of new sources of growth
Traditional View – Economic Growth
Increase in quality / decrease in price with innovation
Traditional View – Economic Growth
Leading to an increase in the productivity of the economy
Modern View – Social Welfare & Human Progress
The case for innovation is even stronger
Why should Government
Support Innovation?
Market failures occur when private incentives are not aligned with social incentives
1. Address Market Failures
Individual...
Government can intervene and evacuate people in an orderly way
1. Address Market Failures
1. Address Market Failures
The innovation process is subject to market failures
1. Address Market Failures
Innovation is costly…
1. Address Market Failures
… innovation is risky…
1. Address Market Failures
… and innovation is prone to imitation
1. Address Market Failures
Thinking of all these hurdles, the inventor may decide not to innovate
Government can intervene by granting a patent, that is, a temporary monopoly right
1. Address Market Failures
The extra benefits provided by the patent may induce inventors to innovate
1. Address Market Failures
Left alone, the various actors of the innovation system will coordinate sub-optimally
2. Address Coordination Failures
Government can intervene by strengthening the links…
2. Address Coordination Failures
… ensuring that coordination occurs…
2. Address Coordination Failures
… and helping actors navigate through the system
2. Address Coordination Failures
However, Government Should not be a Burden
Government sets the legislation under which inventors and entrepreneurs operate
Some People Even Talk of Government Failure
Politicians have a tendency to promote their own policies,
which are often com...
What do we Know About the
Efficiency of Innovation Policy?
Not much
Innovation policy is the poor relation of policy research
We know little about the causal effect of innovation policy
The causal effect measures how much of the outcome is due to t...
The ‘treatment’ is an innovation policy intervention
We know little about the causal effect of innovation policy
Looking Ahead
Looking ahead
We need government to open its data
We need government to improve the quality of its data
Looking ahead
We need government to engage more with the academic community
Looking ahead
Thank you
The presentation is available at
www.slideshare.net/gderasse
Innovation Policy Explained
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Innovation Policy Explained

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This presentation provides a general introduction to innovation policy. It is structured in five themes:
1. What is innovation;
2. Why is innovation important;
3. Why should government intervene;
4. What do we know about the efficiency of innovation policy; and
5. A call for government to open its data.

Published in: Economy & Finance
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Innovation Policy Explained

  1. 1. Gaétan de Rassenfosse @gderasse École polytechnique fédérale de Lausanne
  2. 2. Innovation is the introduction of something new A new/improved product or service, a new way of producing/organizing something
  3. 3. Why is Innovation Important?
  4. 4. Traditional View – Economic Growth
  5. 5. More of the same without innovation Traditional View – Economic Growth
  6. 6. Up to the point at which sources of economic growth are exhausted Traditional View – Economic Growth
  7. 7. Traditional View – Economic Growth
  8. 8. Traditional View – Economic Growth Creation of new sources of growth
  9. 9. Traditional View – Economic Growth Increase in quality / decrease in price with innovation
  10. 10. Traditional View – Economic Growth Leading to an increase in the productivity of the economy
  11. 11. Modern View – Social Welfare & Human Progress The case for innovation is even stronger
  12. 12. Why should Government Support Innovation?
  13. 13. Market failures occur when private incentives are not aligned with social incentives 1. Address Market Failures Individuals have an incentive to rush out of a burning car, possibly stepping on others
  14. 14. Government can intervene and evacuate people in an orderly way 1. Address Market Failures
  15. 15. 1. Address Market Failures The innovation process is subject to market failures
  16. 16. 1. Address Market Failures Innovation is costly…
  17. 17. 1. Address Market Failures … innovation is risky…
  18. 18. 1. Address Market Failures … and innovation is prone to imitation
  19. 19. 1. Address Market Failures Thinking of all these hurdles, the inventor may decide not to innovate
  20. 20. Government can intervene by granting a patent, that is, a temporary monopoly right 1. Address Market Failures
  21. 21. The extra benefits provided by the patent may induce inventors to innovate 1. Address Market Failures
  22. 22. Left alone, the various actors of the innovation system will coordinate sub-optimally 2. Address Coordination Failures
  23. 23. Government can intervene by strengthening the links… 2. Address Coordination Failures
  24. 24. … ensuring that coordination occurs… 2. Address Coordination Failures
  25. 25. … and helping actors navigate through the system 2. Address Coordination Failures
  26. 26. However, Government Should not be a Burden Government sets the legislation under which inventors and entrepreneurs operate
  27. 27. Some People Even Talk of Government Failure Politicians have a tendency to promote their own policies, which are often complex and rarely called into question
  28. 28. What do we Know About the Efficiency of Innovation Policy?
  29. 29. Not much Innovation policy is the poor relation of policy research
  30. 30. We know little about the causal effect of innovation policy The causal effect measures how much of the outcome is due to the treatment
  31. 31. The ‘treatment’ is an innovation policy intervention We know little about the causal effect of innovation policy
  32. 32. Looking Ahead
  33. 33. Looking ahead We need government to open its data
  34. 34. We need government to improve the quality of its data Looking ahead
  35. 35. We need government to engage more with the academic community Looking ahead
  36. 36. Thank you The presentation is available at www.slideshare.net/gderasse

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