Innovation Policy

Policy can be defined as a purposeful course of action designed to address a concern with, in this case, innovation. Public policies are generally developed by government officials. Innovation policy usually refers to a policy designed to raise the quantity and efficiency of innovative activities. Innovation systems-related policies emphasize a holistic view of policy making. The whole combined set of organizations and institutions that are related to one another and that have the possibility of impacting or influencing innovation is being considered. The whole is greater than the sum of the parts. The individuals, institutions, interactions, and ideology all matter. Innovation systems-related policy is an attempt to get all of the actors within an innovation system to work in unison. Naturally, different actors, different organizations, and different institutions have different goals but, to the extent possible, the aim is to get everyone synchronized.

Innovation policy depends on evaluations of how specific structures contribute to the overall functionality or efficiency of the innovation system. Innovation systems view performance as a result of how well sets of organizations, actors, and institutions’ framework conditions work in conjunction with one another. These actors and these institutions do not work in isolation. They are connected to one another and their connections are important. Policy issues, therefore, turn on the nature of the components and how well the links work. Innovation performance can be seen as a coordination problem because innovation systems components must work together coherently and that's the idea of policy to get them to work together coherently so they can improve innovation performance with compatible processes and compatible objectives.

We're not talking about efficient functioning of markets. We're talking about problems related to coordination that come before the marketplace. We're talking about policy that creates a space for economic behavior. How to get these actors to engage in innovative activities in the first place? How to get them to engage in S&T or R&D in the first place? That's what we're talking about when we're talking about innovation systems policies.

Specific problems that innovation policy needs to address:

1.       Infrastructure provision and investment problem. It’s necessary for governments to provide the necessary physical infrastructure such as transport or communications infrastructure in order to create an environment in which the innovation system can function efficiently. Scientific infrastructure is another type of infrastructure for example high quality universities, research labs, and technical institutes, and so forth are also important components of infrastructure that the public sector can provide in order to enhance innovation problem innovation activity.

2.       Path-dependency-related problems derived from socio-technological inertia. When we engage in a certain path, as a society and we depend on certain technologies to the extent that our dependence on those technologies hamper our ability or our openness to the emergence or dissemination of more efficient technologies. A classic example is our over-dependency on fossil fuels which creates obstacles for the emergence of new types of technologies. Focus on existing technologies might blind companies to the emergence of new technological opportunities.

3.       Institutional or framework condition problems cover both formal and informal rules.  In terms of formal, we're talking about regulations, laws, technical standards, and public procurement policies. In terms of the informal, we're talking about tacit rules such as cultural norms, preferences, and social rules. The ability of policy to impact the first type, formal rules is much greater.

4.       Network problems arise with linkages that are too strong. Weak linkages can have a negative effect but overly strong linkages can create blindness to what happens outside of the network. It is very difficult to assess the adequate degree of strength. It is very subjective, context -dependent, and only answerable on a case-by-case basis.

5.       Capability and learning problems is related to the idea of absorptive capacity so it includes human, organizational, and technological competencies.

6.       Complementary problems occur when components are not connected to one another so that the positive effects of the connection are adequately exploited.

To help solve these types of problems, there are different policies that can be enacted by government. The formulation of policy should be based on theory, on indicators, plus subjective judgement. Innovation system theory and indicators are still relatively limited so judgment is required, based on common sense. This makes it necessary for policy makers to experiment, to tinker, when it comes to creating and enacting innovation policy. Mistakes are likely. As in the innovation process itself, there should be room for experimentation. We should learn from our mistakes when we're engaging innovative, scientific, and technological development. In order for this to be successful, evaluation is important. That information informs future policy making.

from Coursera course, Science and Technology and Society in China. Week 3. by Naubahar Sharif, The Hong Kong University of Science and Technology