Abstract
The paper addresses the shift from a moderate innovation policy to a more radical one, aimed at radical transformations of existing structures, such as accelerating innovation to address grand societal challenges or to modernize a traditional sector. In this paper, we propose an analytical framework based on the identification of three constitutive rationales of policy intervention in the domain of innovation. This approach introduces the distinction between moderate and stronger modes of intervention. Stronger modes are characterised by a higher degree of intentionality, centralization and focus. The last part of the paper is devoted to certain principles of policy design under which the risks of such a shift can be minimized and positive effects can be maximized.
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Notes
On the contrary, the case of increasing returns to adoption leading to sub-optimal outcomes and lock-in is weaker in terms of using it to build a policy rationale. While the whole mechanism leading to potential inefficiencies (such as in the QWERTY case of Paul David) is correct, as Arrow (1995) writes, “it’s hard to believe that you are losing a great deal. Well, it would be very interesting to see whether you could find an example where the result of this dynamic led to a great inefficiency .. the theory is pretty good, the empirical evidence may be by definition hard to come by, not just a practical question”. The nature of the harm is rather unclear.
Rodrik (2007) argues: « Horizontal interventions are a limiting case more than a clear-cut alternative to sectoral policies. In fact, very few interventions are truly horizontal. They almost necessarily favour some activities, even if the main goal was not to create such discrimination”.
Paul David (1993) distinguishes between the stage model of innovation policy (which tends to characterize the policies in the central sphere that focus on certain stages or certain actors of the innovation process) and the systems model of innovation policy that recognizes the importance of questions of complementarity, coordination and connection between innovation and diffusion and thus characterizes any policy aiming at accelerating innovation within a predetermined field or sector. More recently, such a system model of policy is also addressed by Elsner (2012).
We do not mention here one classic policy problem because this problem is not specific to stronger modes of policy interventions. This problem regards project selection. The point is to minimize the risk of supporting projects that would have been undertaken anyway, turning the policy into a simple mechanism of funding transfers from the public to the private sector, without any additional effect. See Stiglitz and Wallsten (1999). This problem applies both to moderate and stronger modes of intervention.
- Based on a seminal policy paper (Foray et al. 2009), the Smart Specialization Strategies (S3) approach was integrated into the reformed cohesion policy of the European Union for 2014–2020. Member States and regions have developed over 120 S3 s, establishing priorities for research and innovation investments for the 2014–2020 period. Throughout this period, more than EUR 40 billion (and more than EUR 65 billion including national co-financing) allocated to regions through the European Regional Development Fund will fund these priorities. The impact of the S3 concept has been significant in terms of the design and implementation of regional smart specialization strategies. This large-scale European experience provides a unique case study of a new type of industrial policy particularly oriented towards the modernization of industrial sectors (Foray 2015).
Rammer’s recent works provide a good basis for the development of subsidy mechanisms for R&D projects, allowing certain flexibility in the allocation of resources: instead of one single financing decision, made at the start of the project, Rammer elaborates a multiple and sequential decision model that allows unsuccessful projects to be interrupted sooner and to allocate more financing to successful projects (Rammer and Klingebiel 2012).
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Acknowledgements
Earlier versions of this paper were presented at several workshops and seminars in 2016 and 2017: “Incentivizing the Grand Challenges” (Geneva, November 11th 2016), “Evaluation des politiques publiques” (Paris Bercy, November 15th, 2016) and “Evolutionary Economics and Policy” (Marburg, July 8th, 2017). The author would like to thank all seminar and workshop participants for their suggestions and comments and gratefuly acknowledge scholarly advice and great support by David C.Mowery, Tim Swanson, Philippe Aghion and Thomas Brenner, as well as by two anonymous referees.
Funding
This paper has been supported by an SNSF (Swiss National Science Foundation) Grant (n°CRSII1_147612).
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Foray, D. On sector-non-neutral innovation policy: towards new design principles. J Evol Econ 29, 1379–1397 (2019). https://doi.org/10.1007/s00191-018-0599-8
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DOI: https://doi.org/10.1007/s00191-018-0599-8