Design and Evaluation of Innovation Policy in Latin America

Argentina, December 2006

Challenges for the Design of Innovation Policies: Lessons from Europe

Claire Nauwelaers UNU-MERIT

Plan1 Changing framework for innovation and

innovation policy

2. State-of-the-art in innovation policy in EU

3. Examples of innovation policy instruments

4. Lessons from European Structural Funds

5. Policy challenges: the way forward

The changing framework for innovation

1. Increased awareness of the role of innovation as crucial ingredient for economic development

2. Interactive view of innovation - innovation differs from R&D

3. System-based approach to innovation, emphasis on learning and diffusion / absorption of knowledge

4. Mobility of tacit knowledge embedded in humansbecomes a key performance factor

5. Glocalisation : localised nature of (tacit) knowledge spillovers - importance of global connections

Science and Innovation Systems

Public R&DPublic R&D

EducationEducation & Training& Training

Firms Firms systemsystem

Large, small, MNCs, NTBFs, …

VentureVentureCapitalCapital

InnovationInnovationpolicypolicy

IntermediariesIntermediaries

Incubators,Incubators,Mentoring…Mentoring…

BusinessBusinesssupportsupport

MARKETSHuman

Rules &Rules &RegulationsRegulations

Framework conditions

ScienceSciencepolicypolicy

Firms R&D

capital

Policies for innovation systems

From “stocks” to “flows” as main focus of policy attentionFlows in the system need to be addressed in priority

From “raising resources” towards “promoting change”Performance is affected by learning abilities of firms and others

From “best practice” towards “context-specific” solutionsPolicies should be fine-tuned to specific system failures

From “standard” policy-making towards policy “learning process”There is a need for more strategic intelligence in policy-making

Policies for “activating knowledge”

Traditional innovation policy Innovation policy scene : dominated by linear

tools, addressing inputs in the innovation process rather than the functionning of the system, providing support to firms in isolation rather than to networks of actors

Policy instruments that address changes in behaviour for innovation, dealing with strategic, informational, or organisational or needs : rare and immature

Lack of strategic approach to policy system

Traditional innovation policy instruments in EU regionsFORM AND FOCUS OF SUPPORT

Target of support

Input resources

Behavioural additionality

firm-oriented A

B

(regional) system- oriented

C

D

Behavioural additionality in firmsMoving towards a learning organisation implies :• Internal changes : flat hierarchies, devolution of

responsibilities, multi-functional teams, new competencies (flexibility, responsibility…), « second loop » and « on line » learning, quality management, human resource development, …

• External changes : inter-firms relationships, external networks

Empirical analysis of 2000 Danish firms (2001 survey) : firms combining several of the organizational traits

of the learning organization are more innovative (incremental) innovation and learning are two sides

of the same coin

Nielsen and Lundvall, DRUID Working Paper N°03-07

Policy instruments targeting innovation in SMEs

• Focus of policy instrumentsFinance - risk sharingTechnology - technical know-howQualifications - personnelMarket access - informationTime constraints - Organisation - Strategic

capabilities• Lack of "market orientation" of policy tools• Accent primarily on innovation hardware

Policy instruments targeting innovation in SMEs

• Value of “umbrella” instruments • Appropriate policy portfolio : based on

combination of regional and firm’s deficits• There is no one-size-fits-all policy system • Policy designers and implementers need :

high degree of understanding of the innovative firm's behaviour, self-reflexive capacity and openness to evaluation

• Division of labour within government causes policy fragmentation

RITTS Success and failure factors

RTDI Capacity

Institutional Capacity

 Economic

conditions

 Region Capacity

RITTS driving force

Experience in

strategy

Legitimacy Political backing

Openness Inclusive-

ness

RITTS Manage-

ment

Management of

consultants

Political backing throughout

RITTS

 Legitimacy of project

leader

Inclusiveness of

process

                              

RITTS outputs : examples (with a policy learning dimension) Voucher scheme in Uusimaa (Finland)Evolution towards more demand-led scheme Spiegel (= Mirror) project in Limburg (NL)Improving strategic thinking in SMEs Clusters in Overijssel (Netherlands)Interactive policy – making Competence centres in Berlin (Germany)Global approach to innovation

Common features of successful instruments

Background : interactive innovationCoordination and synergy of supportTarget = SMEs needs, bottom-up definedBehavioural additionality Focus networks of actors (system oriented)Learning in policy making

Innovation policy trends in Europe• Similar mix of policy instruments : « copy-paste »

rather than « intelligent benchmarking » ?• Variation in modes of implementation and in relative

effectiveness (… often unknown !)• Major accent on Bridging initiatives between Public

and Private Creators of Knowledge (heritage from linear thinking)

• Crucial need : Reinforcement Policies for Private Knowledge Users (absorption)

• « Systemic policies » in the core : growing new trend

Need for bridging initiatives between ALL actors

• Clusters programmes• Regional growth initiatives• …

Challenge for Innovation policy : organise complementarity and synergy between policy areas

« Systemic » innovation « Systemic » innovation policiespolicies

Implications for Science ParksThe BRIDGE

Technology transfer From source to recipient A specific place Focused support Material support In-house support Technology gap

The CLUSTER of COMPETENCE

Dialogue creation Multilateral exchanges A node in a system Multiple support “Learning support” Clearing house …and managerial gap

S&T intermediary system in WalloniaFirms’ needs

AA

BB

CC

Raise their numberResearch commercialisation, spin-offs…

Move to Atechnology diffusion ,find new opportunities…

Move to BRaise innovation awarenessmentoring…

A: Innovative and R&D-intensive cies

B: Innovative adaptive companies

C: Potentially innovative cies, not well structured for innovation

S&T intermediary system in WalloniaOrganisation of support

AA

BB

CC

University interfaces, IP management,science parks, venture capital, RDT aids, access to EU R&D, …

Collective research centres,Technology centres, technology audits,SMEs aids…

Scattered support, unprofessionalSmall cies networks…

A: Innovative and R&D-intensive cies

B: Innovative adaptive companies

C: Potentially innovative cies, not well structured for innovation

Structural Funds for the knowledge economy2000-2006: 5.5% of total EDRF resources devoted to RDTI

Objective 1 zones: 5% - Objective 2 zones: 10%

PT

GR

ES

FI

IE

HU EELT

SIPL LV

AT IT

DE

LUCZ SKMTNL

CY

DKUK

FR

SEBE

EU25 WEIGHT = SF/GDP

EFFO

RT

= R

TDI S

F/PO

P

Above average weight of SF

Below average RTDI effort (Ū per person)

Above average weight of SF

Above average RTDI effort (Ū per person)

PT

GR

ES

FI

IE

HU EELT

SIPL LV

AT IT

DE

LUCZ SKMTNL

CY

DKUK

FR

SEBE

EU25 WEIGHT = SF/GDP

EFFO

RT

= R

TDI S

F/PO

P

Above average weight of SF

Below average RTDI effort (Ū per person)

Above average weight of SF

Above average RTDI effort (Ū per person)

Source: Technopolis, UNU-MERIT, Lacave, Ismeri, Logotech (2006)

Structural Funds for the knowledge economy

Main bottlenecks to efficient absorption of funds and effective outcomes of RTDI measures:Administrative rather than strategic management of RTDI measuresLack of expertise at national and regional levels in managing RTDI measuresContinuing dominance of supply-side measures with poor linkages to regional innovation systemsLimited interest for many ‘softer’ ‘demand-side’ measures aimed directly at enterprises

There is path dependency: share of SF devoted to RTDI higher where national innovation policy is more intense, and lower where national policy is weaker. Difficulties for the SF to modify national strategies.

Source: Technopolis, UNU-MERIT,Lacave, Ismeri, Logotech (2006)

-5,00 -4,00 -3,00 -2,00 -1,00 0,00 1,00 2,00 3,00 4,00 5,00

Manufacturing Platforms

Tertiairy oriented Cohesion

Science&Service

Central Techno

Employability

Experienced and Qualif ied

Accession

Peripheral & Rural

Government Services

German High-tech

Hubbing Dynamics

Public know ledge Urban services Private Technology Employability

The diversity of European regions

Source: Wintjes (2006)

Key challenges for ERDF

Need for differentiated policiesmove towards supporting more demand than

supply side of innovation (ex ante analysis !)balance technology focus with other forms of

innovationconsider ‘downstream’ research developed for

the needs of marketsgive preference for competitiveness when

developing strategiesfocus on social capitalInnovative and more complex projects should be

favoured over focus on funds absorption

Source: Technopolis, UNU-MERIT,Lacave, Ismeri, Logotech (2006)

Inside the black box of policy-Inside the black box of policy-making making

Innovation policy design

Policy evaluation

Policy implementation

NIS analysis

International benchmarking

Other policy considerations

Stakeholders pressure

Strategy making

How to reinforce this loop ?

Tensions in policy-making

• Competing rationalities across policy fields and different schools of thoughts

• Short-termism in resources allocations

• Innovation as a “homeless” policy

• New Public Management and need for coherence

• Individual ambitions versus grand visions

Source: OECD MONIT study

(2004)

National Reform Programmes:towards improved policy governance ?

“The Open Method of Coordination is a powerful instrument to assist Member States in their efforts to adopt a more strategic and integrated approach and to deliver more efficient polices” (European Commission 2005).

• Aim of NRPs: to identify coherent and integrated mix of policies which together would bring the leverage effects towards the Lisbon objectives

• Gaps in the strategic loop: diagnosis – broad routes - instruments

• Prioritisation and effectiveness of policy mix ??• Continuum science – technology – innovation

(despite Commission guidelines !)

Source: Lisbon expert group

(2006)

National Reform Programmes:towards improved policy governance ?

• Positive correlation between RDTI performance and priority on knowledge policies

• Administrative versus strategic policy implementation• New coordination structures but few “policy mix”

considerations • Ex post appropriation process of NRPs • A current limited role of indicators to monitor policy

success • Policy evaluation does not appear prominently • Weak visible impacts of OMC so far• Marginal internationalisation trends

Source: Lisbon expert group

(2006)

Innovation Policy :The way forward (1)

• Effectiveness of innovation systems depends on balanced combination of 3 capacities :– creation of knowledge– diffusion of knowledge– absorption of knowledge

• Growing importance of framework conditions– entrepreneurship– competition rules– labour market conditions– financial market– social capital, ...

• Government’s role shifts from investor to facilitator - promotion of public/private partnerships and interface management

• Improving knowledge governance in firms and clusters of firms becomes a key issue

• Policies need to "open borders" : between : traditional fields of policy intervention industries traditionally defined various forms of knowledge production and

diffusion

Innovation Policy :The way forward (2)

• More efficiency through “Policy packages” rather than isolated instruments – Consider Policy Mix

• Demand oriented innovation policies: a “set of public measures to induce innovations and / or speed up diffusion of innovations through increasing the demand for innovations, defining new functional requirement for products and services or better articulating demand.” (Edler 2007)– Public procurement. – “Soft steering" concepts geared to the willingness and

ability to accept, demand and apply innovations– Measures stimulating the articulation of needs,

preferences, ideas and fears of potential users – Shaping of regulations and norms

Innovation Policy :The way forward (3)

• Need for more strategic policy intelligence

– monitoring and evaluation of policies– sound analyses of innovation systems– « intelligent » benchmarking practices– long term views– inclusive policy design processes

Innovation Policy :The way forward (4)