Design And Evaluation Of Innovation Policy: A Conceptual Framework 1-Jun-19 Design And Evaluation Of Innovation Policy: A Conceptual Framework Bart Verspagen UNU-Merit and Maastricht University, Department of Economics 1-jun-19 DEIP Jordan, B. Verspagen - Policy

DEIP Jordan, B. Verspagen - Policy Reading list B.-A. Lundvall & S. Borras, "Science, technology and Innovation Policy", in Oxford Handbook of Innovation (eds. Fagerberg, Mowery, Nelson) J.-E. Aubert, "Promoting innovation in developing countries: a conceptual framework" L. Georghiou, "Impact and additionality of innovation policy" 1-jun-19 DEIP Jordan, B. Verspagen - Policy

DEIP Jordan, B. Verspagen - Policy 1-Jun-19 Outline Evolution of Policy for Innovation Innovation Systems Innovation Systems and Policy General notions Innovation in development contexts Evaluation of innovation policy 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Evolution of Policy for Innovation (in the developed world…) 1-Jun-19 Evolution of Policy for Innovation (in the developed world…) The post WW2 broad development The rise of the Science Push idea The Technology Policy realm Innovation policy: a system’s view 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Origins and implications of the Big Science idea 1-Jun-19 Origins and implications of the Big Science idea Francis Bacon (1627), J.D. Bernal (1939) and V. Bush (1945) The social and economic utility of science Large scale projects: Manhattan Project, nuclear energy, Apollo programme (Big Science) Little science and the linear model 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Science policy in the Big Science model 1-Jun-19 Science policy in the Big Science model Setting goals, either very specific (“Man on the moon”) or broader (“Science as a way to end hunger”) Challenge is the mobilization of sufficient funds, and allocation to projects / disciplines Fundamental problem: Serendipity vs. demand steering 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Technology policy: a logical extension 1-Jun-19 Technology policy: a logical extension Science based technologies as an engine of growth Technology policy because of the extension of science to the commercial domain Extension of the policy to economic issues, such as trade and industrial policy 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Technology policy questions 1-Jun-19 Technology policy questions Which technologies? Idea that “high-tech” is good for growth “Key-technologies” such as ICT and biotech At what stage of the technology life cycle? What about competition? Trade policy: infant industry? The market knows best? Can government pick winners? 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Innovation policy – 3 main ideas 1-Jun-19 Innovation policy – 3 main ideas Innovation as a broad phenomenon (not only high-tech sectors) Innovation systems: Interaction (public-private) systemic failures (lack of coordination) Learning and education 1-jun-19 DEIP Jordan, B. Verspagen - Policy

DEIP Jordan, B. Verspagen - Policy 1-Jun-19 Innovation systems Innovation is not done in isolation Knowledge flows between actors in the system Complementary capabilities Actors: firms, policymakers, universities, consumers, public research organizations 1-jun-19 DEIP Jordan, B. Verspagen - Policy

DEIP Jordan, B. Verspagen - Policy 1-Jun-19 Systemic failure Each of the actors categories may perform very well when viewed in isolation But a change in behaviour of one category may have a beneficial effect on the other category Example: industry – university interactions (“European Paradox”) 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Collaboration and systems 1-Jun-19 Collaboration and systems Linked to the management of innovation resources Missing system elements: are all relevant knowledge sources present? Set up new research organizations Entrepreneurship Missing connections: opportunities and incentives for collaboration Enhancing awareness Removing barriers to collaboration 1-jun-19 DEIP Jordan, B. Verspagen - Policy

A more mainstream view on innovation policy: market failure 1-Jun-19 A more mainstream view on innovation policy: market failure Spillovers and the lack of incentives Basic science R&D subsidies The implementation of policies Tax cuts vs. subsidies Additionality of R&D subsidies? “Picking winners”? and generic vs. specific policies 1-jun-19 DEIP Jordan, B. Verspagen - Policy

The link between innovation policy and development policy 1-Jun-19 The link between innovation policy and development policy Development Policy has moved away from large scale structural policies In a way, these were similar in ambition to science / technology policy The alternative development policy: More markets (Washington consensus) or institutions (incl. innovation)? 1-jun-19 DEIP Jordan, B. Verspagen - Policy

The idea of Innovation Systems in a development context 1-Jun-19 The idea of Innovation Systems in a development context A broad view of innovation Innovation systems within the broader context Actors are different in development contexts 1-jun-19 DEIP Jordan, B. Verspagen - Policy

A broad view of innovation 1-Jun-19 A broad view of innovation New to the local environment (imitation) Adaptation to the local environment (intermediate step) Innovation at the global frontier All 3 forms are found at all levels of development, but the mix changes along the development axis 1-jun-19 DEIP Jordan, B. Verspagen - Policy

DEIP Jordan, B. Verspagen - Policy 1-Jun-19 The broader system Innovation systems operate in a broader system, which is often “weak” in development countries Education Business environment (incl. capital markets) Infrastructure (incl. ICT) The difficulty of improving the general development level is a challenge for innovation in developing context (low development trap) 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Development and innovation strategy 1-Jun-19 Development and innovation strategy Exports as a springboard FDI and sourcing of technology Turning point agenda (creating proprietary technology based on local capabilities) Domestic R&D a changing role for FDI 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Actors in Developing Innovation Systems - Firms 1-Jun-19 Actors in Developing Innovation Systems - Firms Micro-firms (in the informal sector), SMEs (often low capabilities, but sometimes learning), larger firms, foreign firms A role for business information policy as well as policies aimed at learning Spillovers from foreign firms (FDI) are often very weak, dependent on absorption capabilities (and a role for IPRs, next lecture) 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Actors in Developing Innovation Systems - Universities 1-Jun-19 Actors in Developing Innovation Systems - Universities Primary role in education Problem/challenge: braindrain Research important, but interaction with local industry is often difficult There are successful examples (see Aubert paper) 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Actors in Developing Innovation Systems – technology institutes 1-Jun-19 Actors in Developing Innovation Systems – technology institutes Often construed from a “technology policy” point of view (big science) Risk of being a “white elephant” Financing mix important (interaction with markets) Create variety, but admit failures 1-jun-19 DEIP Jordan, B. Verspagen - Policy

Innovation policy evaluation 1-Jun-19 Innovation policy evaluation Not a very advanced field of activity (even in developing countries) Risk: evaluation often initiated by policymakers, who do not like to admit their policies don’t work When does a policy work? When firms use it? (low level of ambition) Evaluation is as important in developing contexts as it is in the developed world 1-jun-19 DEIP Jordan, B. Verspagen - Policy

The basic idea of Additionality 1-Jun-19 The basic idea of Additionality A policy works if it induces the subject of the policy to change behaviour in the way intended Example: R&D subsidy The policy works if the firm now undertakes the marginal R&D project that it would not have undertaken without the policy The policy doesn’t work if the firm uses the money to finance a project it would even have undertaken without the policy 1-jun-19 DEIP Jordan, B. Verspagen - Policy

The difficulty in establishing additionality 1-Jun-19 The difficulty in establishing additionality We only observe one world (not the counter-factual that additionality asks for) Methodological innovations: Econometric models (partly inspired by medicine) “Experimental policy” In-depth case studies 1-jun-19 DEIP Jordan, B. Verspagen - Policy