Efficiency of Research and Innovation Systems for Economic Growth and Employment Introduction at the 2014 ERAC Mutual Learning Seminar on Research and Innovation policies - SESSION I March 20, 2014 European Commission, Berlaymont building, room SCHUM, Brussels, rue de la Loi 200 Charles Edquist CIRCLE, Lund University, Sweden 1

Themes 1. Transformation of innovation policy – from linear to holistic 2. Governance and coordination of research and innovation policies for pursuing a holistic innovation policy 3. Policy support to existing industries and/or to the emergence of new ones 2

A holistic innovation policy Defined as a policy that integrates all public actions that influence innovation processes (for example by addressing all the ten activities (Annex 1) in a coordinated manner It requires a very broad view of innovation systems, including all the determinants of innovation processes. It is about determinants and instruments and says nothing about the objectives of innovation policy 3

10 Important Activities in Innovation Systems: 1. R&D 2. Education and training 3. Formation of new product markets 4. Articulation of quality requirements 5. Creation and changing organizations 6. Interactive learning 7. Creating and changing institutions 8. Incubation 9. Financing of innovation processes 10. Consultancy services These activities are the hypothetical determinants of the development and the diffusion of innovations. Together, they may be said to define an innovation system. The list of activities/functions is preliminary, hypothetical and one of several. It will be revised as our knowledge of innovation processes and their determinants increase. Nonetheless the list can be seen as a “checklist” or “sign-post” of factors that (probably) affect innovation processes. 4

Objectives of Innovation Policy The ultimate objectives of innovation policy are politically determined. They can be economic, military, environmental, social, related to health, etc. But they have to be ’translated’ into direct objectives, i.e. into innovation terms = self-evident but rarely done. An direct innovation policy problem is a low performance (output) of the innovation system = a low innovation intensity for a certain category of innovations for which the direct objective is a high intensity. We need to know the main causes of the problems. The ultimate objectives are concerned with the consequences of innovations. 5

Theme 1: Transformation of innovation policy – from linear to holistic: Linear vs Holistic innovation policies – pros and cons? Why is policy lagging so much behind research? Or is it as it should be? How is the continuum linear/holistic related to whether research policies and innovation policies are integrated or kept apart in their design phases? Does an integration of research and innovation policies cement the linear character of the policy? 6

Is European Innovation Policy Holistic? Innovation researchers have abandoned the linear view We sent out a questionnaire to 22 EU Member States 18 of 22 (78%) MS’s responded 15 of 18 countries (83%) strive to develop innovation policy into a more holistic one However, only 4 countries (22%) use demand policy instruments to a considerable degree And provision of R&D results is the most important innovation policy instrument in 9 of 18 countries (50%) Answer: No – Innovation policy is dominantly linear, i.e. far behind innovation research! 7

WHY is innovation policy linear? Should innovation policy mainly be linear? Policy-makers who come to innovation research conferences have completely abandoned the linear view. Maybe politicians is the obstacle? And different views in finance ministries and other ministries? Conclusion: The division line is within the policy realm! Governance matters! = Theme 2. 8

Theme 2: Governance and coordination of research and innovation policies for pursuing a holistic innovation policy: Is a policy body placed above ministries called for in the field of innovation (and research)? Why should innovation and/or research policy be given a higher position than other policy areas in the political hierarchy of the country? What tasks should such a body be given? Should the tasks include the design of research and innovation policies? Is it easier to develop a holistic innovation policy if such a body exists? Should it have a secretariat? How are the objectives for research and innovation policies to be decided upon? Should the identification of innovation policy problems be performed at the supraministerial, ministerial or the agency level? 9

Lithuania Cyprus Ireland Finland The Czech Republic Estonia Portugal Countries with R&D policy body above Ministries 10

Priority of innovation policy 7 countries of 18 (39%) have created a public organization (Council) for innovation and/or research policy placed above Ministries, usually chaired by the PM Does this imply that these policies are given a higher status or priority in these countries – raised in the General Discussion. 11

Reasons for policy intervention Two conditions must be fulfilled for public intervention to be motivated in a market economy: (1)Private actors must fail to achieve the objectives formulated; i.e. a ’problem’ must exist. An innovation policy problem is a low innovation intensity for a certain category of innovations. (2) Public actors must have the ability to solve or mitigate the problem. 12

At what level should such ‘innovation policy problems’ be identified? Supraministerial? Ministerial? Subministerial (public agency)? Combination – which one? “Problems” - not the same as “objectives”. ‘Important’ sectors or activities – not the same as those that should be subject to policy. There should also be additionality! 13

Theme 3: Policy support to existing industries and/or to the emergence of new ones: What should the balance be between supporting existing (mature) industries and enhancing the emergence of new ones by means of research and innovation policies, to support growth, employment and mitigation of global challenges? Is the additionality argument a reason to only or mainly support the emergence of new products and industries? Is such a policy best formulated in terms of sectors of production, or in terms of activities, which may be bottlenecks for the development of (product) innovations? In what circumstances is a sectoral or an activities approach to be preferred? 14

Important issues Do additionality (i.e. non-duplication or non-crowding out of private initiatives) arguments constitute a basis for policy support to new and emerging industries rather than to existing ones? Should innovation policy instruments be focused on sectors or on activities (such as demand, seed financing, incubation, etc)? 15

List of countries with innovation strategy: Norwegian White paper on innovation policy 2009 The national Swedish innovation strategy

Non-priority of innovation policy In Sweden, not having a Council, innovation policy is not even prioritized within the Ministry of Enterprise (OECD 2013, 224) Neither is innovation policy prioritized by the Ministry of Education and Research which has the formal responsibility in the government also for innovation policy (OECD, 233, 224) 17