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Explore the theoretical developments and policy trends in innovation, and assess who is winning and what needs to be done next. This paper discusses changes in firm behavior, outsourcing, networking, and the internationalization of innovative activities, as well as the role of technology in enabling these changes. It also examines the failures in market, systems, and institutional aspects of innovation, and the shift in focus from the market to the system. Finally, the paper discusses the national innovation system, the links formed through institutional linkage, and the integration of engineering and business in policy practice.
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Is Innovation Theory Yet CatchingUp with Policy Practice? Erik Arnold Six Countries Programme 25th Anniversary Conference Stockholm 15 - 16 January 2001
Tell them what you’re going to say. Say it. Then tell them what you said … • Theoretical developments • Policy trends • Who’s winning? • What do we do next?
It must be easier in physics. In economics, the facts keep changing … • Firm behaviour is changing • Outsourcing • Networking • Externalisation and internationalisation of innovative activities • Changes in industrial structure • Primaries to secondaries to tertiaries • Shifts in branch composition within these • Changes in spatial relationships • Transport (some of which may be environmentally unsustainable) • Telepresence, tele-X … • Technology an important factor enabling such changes in ‘facts’
Then it got more complex … and we almost began to notice stocks as well as flows of knowledge
The firm has been reinvented - from rational robot to an institution containing people • Bounded rationality • Learning and ‘intellectual capital’ • Capabilities • Path dependence and technological trajectories • Interdependence of internal capabilities, external networks, infrastructures and history
Market failure - mostly about basic research Indivisibility Inappropriability Uncertainty Systems failure - mostly about inadequate performance Failures in infrastructural provision and investment Transition failures Lock-in failures Institutional failures Moving the focus from the market to the system changes rationales for policy
The New Production of Knowledge has given us a less ahistorical account of knowledge production and the knowledge society than the Endless Frontier ...
Railway Technology Light Weight Construction Adtranz Banverket Sound and Vibration JVG SJ Electrical Machines Drives KFB Transport & Traffic Planning ‘80% Mode 1’ ‘80% Mode 2’ Mode 2 Of course, reality is not binary - welcome to Modes 1.2 and 1.8!!
Demand Consumers (final demand) Producers (intermediate demand) Education and Research System Company System Large companies Professional education and training Framework Conditions Financial environment Taxation and incentives Propensity to innovation and entrepreneurship Mobility ... Intermediaries Research Institutes Brokers Mature SMEs Higher education and research New, Technology- Based Firms Public sector research Infrastructure Banking, venture capital IPR and information systems Innovation and business support system Standards and norms Descriptively, the National Innovation System is a huge leap forward, though there is a lot to do to make it more predictive
Innovation theory and policy alike have been getting increasingly complex ...
Since Vietnam, science has become repoliticised under the banner of ‘relevance’ • From science policy to innovation policy • Programmes • Explicit links to social needs - foresight, consensus conferencing, societal (especially industrial) representation in the governance of science and innovation • New Public Management • Evaluation
Electorate Parliament Government Ministries Programme managers Under New Public Management, stakeholders should be better connected to those who execute policy Delegated Authority Responsibility Projects or actions
And a programme management process allowing monitoring and learning
Innovation policy has focused strongly on linkage ... • Institutional linkage • Science parks • Technology Bridges • Industrial Liaison • ‘Competence centres’ • R&D linkage • Collaborative R&D • Link programmes • Network R&D • Innovation linkage • Developmental procurement • ‘Demand management’ • Supplier development • Network and cluster programmes
Policy makers have begun to reintegrate our understanding of ‘technology’ ... • Away from a narrow focus on hardware and software • Towards “the scientific study of the practical or industrial arts” • Starting to heal the rift between engineering and management in the 1920s • Learning from the example of the ‘soft’ production technologies imported from Japan • Putting in place a policy practice that (re)integrates engineering and business
Policy makers have got to grips with company capabilities in rather more specific way than the theoreticians
And developed a wide repertoire of policy instruments to develop capabilities
OECD countries increasingly use mechanisms for user-direction of state R&D
So who’s winning - innovation theoreticians or policymakers? • Policy seems to have been theory- and ideology-led in the post-War period • Policy makers drew ahead in the 70s and 80s • Partly out of a determination to make the linear model work (eg science parks) • Partly through imitation of catch-up tactics from Japan • NIS thinking starts to ‘explain’ why many recent policy actions make sense • Spill-overs now happening, eg to funding for development • ‘Rebalancing’ of basic science funding taking place without theoretical basis
What’s missing? • Moving from description to prediction • Moving from an indicators-based approach (CIS, etc) to explain the innovation-performance link at the micro level, to generate more concrete policy recommendations • Articulating the meaning of the NIS in contexts - branches, stages of catch-up and development • Conceptualising the ‘stock’ of knowledge, as against the flow • Operationalising the opportunity to do kan-ban on the NIS
