The document discusses different types of policy instruments that governments use to promote innovation, including regulatory instruments, economic and financial instruments, and soft instruments. Regulatory instruments use legal tools to define rules for social and market interactions. Economic instruments provide incentives like funding and tax benefits. Soft instruments are more voluntary and aim to coordinate and facilitate actors through standards, certification, and cooperation between public and private groups. The document provides several examples of how different countries and industries have implemented these policy instruments.

1. Smart policy: Regulations as
enabler of local innovations
A.S.Rao
motguru.com
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3. Carbon economy takes new turn
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4. Public Policy
Innovation is rarely a goal in itself, but a means to
achieve broader political goals like economic
growth, increased employment, environmental
protection, military capacity or public health, to
name some of the most important ultimate
objectives. Hence, put in other words, innovation
policy instruments are intended to influence
innovation processes, and thereby contribute to
fulfilling these ultimate political goals by means of
achieving the direct objectives formulated in
innovation terms.
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5. Regulatory instruments
Regulatory instruments, use legal tools for the regulation
of social and market interactions. The logic behind this
type of instrument is the willingness from the
government to define the frameworks of the interactions
taking place in the society and in the economy. Naturally,
there are many different types, but common for them all
is that these regulatory instruments (laws, rules,
directives, etc.) are obligatory in nature, meaning that
actors are obliged to act within some clearly defined
boundaries of what is allowed and what is not allowed.
Obligatory measures are typically backed by threats of
sanctions in cases of non-compliance.
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6. Economic and financial instruments
Fundamental instruments using economic
incentives are competitive research funding
(industrial or basic research), tax incentives for R&D
performed at firm level, support to technology
transfer and support to venture and seed capital.
There has been a significant trend towards selecting
and designing ‘market-based’ or ‘market-like’
economic incentives in the past two decades. A
case in point is the relative reduction of institutional
support to research organisations in most OECD
countries, and the parallel increase of schemes
using competitive research funding.
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7. Soft instruments
The growing use of soft instruments is at the heart
of fundamental transformations in the public
administration of most countries (particularly
visible in Europe and the US). This has been termed
‘governance’, meaning that the extensive use of
these instruments has transformed the role of the
government from being a provider and regulator to
being a coordinator and facilitator. What is
important at this stage is to underline the fact that
there has also been a rapid growth in the number
of these types of instruments in the field of
innovation policy.
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8. Different forms of soft instruments
• Voluntary technical standards at the national or
international level,
• Support of innovation friendly private regulation
activities: The state stimulates self-regulation (norms,
standards) of firms and supports or moderates this
process and plays a role as catalyst by using standards.
• Standards to create a market: State action creates
markets for the consequences of the use of
technologies (emission trading) or sets market
conditions which intensify the demand for Innovations.
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9. Carbon credits market
The Carbon Neutral Protocol was launched in
2002. Foot-print, concerns a business’s own
emissions, either caused directly through its
own operations or indirectly through its use of
non-renewable energy and motorised transport.
Companies can reduce their footprints through a
mix of in-house reduction initiatives, purchasing
and generating renewable energy, and offsetting
emissions through low-carbon sustainable
development projects.
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10. Circular Economy
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11. Genetic engineering
Also in 2003 the Codex Alimentarius
Commission of the FAO/WHO adopted a set of
"Principles and Guidelines on foods derived
from biotechnology" to help countries
coordinate and standardize regulation of GM
food to help ensure public safety and facilitate
international trade. The European Union first
introduced laws requiring GMO's to be labelled
in 1997.
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12. Organ transplantation
For a number or reasons, including size, anatomical,
and physiological similarities with humans the pig is
the preferred donor species. Importantly, pigs can
be optimized by genetic engineering as a source of
cells, tissues, and organs for xenotransplantation.
Recent advances in gen(om)e editing are speeding
up progress in this field. Numerous genetically
(multi-)modified pig lines have been generated to
prevent immune rejection of xenotransplants, to
overcome physiological incompatibilities, and to
reduce the risk of transmitting zoonotic pathogens.
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13. Genes editing
CRISPR technology is a simple yet powerful tool
for editing genomes. It allows researchers to
easily alter DNA sequences and modify gene
function. Its many potential applications include
correcting genetic defects, treating and
preventing the spread of diseases and improving
crops.
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14. Data and privacy
Cloud computing is the storing of documents, photos,
music and files online. Governments, in possession of
citizen data along with their own national security
secrets, are increasingly utilizing cloud services for
internal government communications, hosting
documents and enabling the sharing of vast amounts of
data between government departments. One matter of
concern in Europe is that businesses, schools and
universities located outside the United States including
foreign governments which use cloud services offered by
a company that conducts business in the U.S., could be
forced by U.S. law enforcement to transfer data to U.S.
territory for inspection by law enforcement agencies.
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15. Algorithm wars
Chinese are more relaxed about data privacy
than Westerners, at least for now. What may be
viewed as a violation of privacy by some could
be advantageous for AI developers wanting to
extract a large amount of data. This situation
allows Chinese AI developers to achieve more
accurate machine learning models in areas such
as facial recognition, voice and gesture
recognition, consumer behaviour analysis and
robotics process automation.
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16. Crypto currency
Not all countries see the advent of block chain
technology and crypto currencies as a threat, albeit
for different reasons. Some of the nations while
not recognizing crypto currencies as legal tender,
see a potential in the technology behind it and are
developing a crypto currency-friendly regulatory
regime as a means to attract investment in
technology companies that excel in this sector. In
this class are countries like Spain, Belarus, the
Cayman Islands, and Luxemburg. Some jurisdictions
are seeking to go even further and develop their
own system of crypto currencies.
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17. Immigration
In a recent paper Nicholas Bloom, John Van Reenen
and Heidi Williams analysed different policy
instruments for promoting innovation and provided
a basic “toolkit” describing which policies are most
effective. In the short-run, R&D tax credits or direct
public funding seem the most productive, but in the
longer-run increasing the supply of human capital
(e.g. relaxing immigration rules or expanding
university STEM admissions) are likely more
effective.
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18. Global Value Chain (GVC)
GVCs have boosted employment, enabled increased
specialization and larger scale production, driven more
efficient geographical allocation of industrial activities,
and increased the availability of a variety of intermediate
goods in the developing world. As a result, GVCs tend to
“compress” the development experience, making non-
linear catch up possible, as has been the case in China.
The rise of GVCs, and the increasing competence of local
suppliers and transnational corporation (TNCs) affiliates
in developing countries suggests that trade in
“customized” intermediates should be increasing in
relation to “generic” products and commodities.
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19. SEZ (Special Economic Zone)
In Asia and in Latin America and the Caribbean,
some champions of GVC integration such as the
Republic of Korea, Malaysia or Mexico have
heavily relied on SEZs to sustain their GVC
integration strategy, but others have achieved
good results with a limited presence of SEZs
(e.g. Chile).
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20. Lead markets
Lead markets are countries that adopt
successful innovations quickly, despite the fact
that they did not necessarily invent the
technology. Frequently, users in other countries
have adopted rival innovation designs before
which never became a success abroad. But only
the innovation design adopted in the lead
market becomes adopted in other countries and
finally supersedes designs previously preferred
in other countries.
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21. Non-Tariff Measures (NTMs)
NTMs are categorized depending on their scope
and/or design and are broadly distinguished in
technical measures (SPS measures, TBTs and
pre-shipment inspections) and non-technical
measures. These are further distinguished in
hard measures (e.g. price and quantity control
measures), threat measures (e.g. anti-dumping
and safeguards) and other measures such as
trade-related finance and investment measures.
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22. Further Reading
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