sti policy rationales. part i : paradigms - l. bach 1 sti policy rationales. part i : paradigms...

STI Policy rationales. Part I : Paradigms - L. BACH 1

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STI policy rationales.Part I : paradigms

Laurent [email protected]

BETA, university Strasbourg

Pecs Session / Week 2 - July 2010


Public research infrastructure (universities, research centers, …)research activitiesincentives for researchers

Technology procurement policy

Purchase/pioneer use by public entities (administrations, organisms, public companies,

Support to cooperation between firms and public research"valorization" - Tech transfersjoint research activities

Support to cooperation between firms

Funding of S, T & I activitiesgrantsloans at preferential ratereimboursable advance (conditionned to success)loans garanteeequity fundings/seed, risk capitalexport credits

Setting the scene…


Tax systemresearch tax credittax relief for technology-related purchaseincome tax on funds providers (business angels, foundations…)

Legal and regulation aspectsIPRNorms, technical reglementationsReglementation on foreign trade (techno transfer, barriers,…)

Competences building(higher) education system

Diffusion of scientific and technical informationlibraries, data base, info network

Standard, plateforms, common langage

Supporting infrastructurestechnical, legal, management …assistance and servicesscientific/technical facilities


LEVEL OF INTERVENTION• up-stream = science / downstream = innovation • innovation in general / specific innovation• target population• creation / optimisation - adaptation - diffusion

RULES• creation or not of dedicated body • criteria and modalities of selection of beneficiaries • interactions between managing bodies and beneficiaries • interactions between beneficiaries (cooperation)• funding schemes• IPR / diffusion of outcomes …

Organisation, rules, modalities … = "institutionnal arrangement"

Sectoral policies : education, industry, regional, competition…

Entrepreneuriship "climate" (public administrative streamline-simplication, awards, labor market, etc)

Promotion of social consensus supporting science and technology

+


Long history, recent emphasis (WW II, 80/90s)Many different tools and combination of tools (cf Georghiou-Edler tab)

Fashion aspects, policy imitation and diffusionMultiple stakeholdersMultiple decision levels

A lot of typologies :Mission - diffusion, Vertical - horizontal,Supply side - Demand side, etc

NEED OF THEORETICAL BACKGROUND : IDENTIFICATION OF

RATIONALES, which to some extent are common to the "S", the "T" and the "I" dimensions of policy

Science - Technology - Innovation Policies :


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STI policy rationales.Part I : paradigms

•The basics : simple rationales for STI policy•The "traditional" opposition between paradigms•"Policy mix" and "rationale mix"

Pecs Session / Week 2 - July 2009


• Independance, security, prestige

• Growth / industrial development through competitivity

• Social development (education, health, jobs, Quality of Life,...)

• Scientific progress per se

« Simple » rationales for State intervention

in Science, Technology and Innovation (Pavitt - Walker)

1. The basics : simple rationales for STI policy


• High (and increasing) R&D costs• Uncertainty on feasibility, results, economic value• imitation, knowledge leakage etc• demand reaction

Lack of incentives for private R&D investment:= investment/profitabilty profile does not fit the "normal" private investment/profitability profile (NPV, payback, RoR…)

"too low" level of private investment as compared to the needs of society

PUBLIC INTERVENTION

<=> simpliest formulation of "market failure" argument

risk

• long term rentability

Investment in STI, from innovator standpoint:

STI Policy rationales. Part I : Paradigms - L. BACH 9Source : Philippe Bourgeois DGE/SPIC


Theoretical foundationsMain features

« Failures » justifying State interventionConsequences of these failures

Basic principles for State intervention(Tools / instruments)

Neo-classical / standard framework (NC) vs Evolutionist structuralist framework (ES)

• Detailed analysis of two paradigms

• Attempts to identify causal beliefs including :

2. The "traditional" opposition between paradigms


Standard / Neo-classical framework : theoretical foundations - 1

Neo-classical / main stream economics+Theory of incentives : information asymetries + optimal contractsTransaction cost theory : governance cost+« at the fronteer » :

(1) New growth theory (ROMER, LUCAS, AGHION, …) :Endogeneisation of S&TImportance of supply of knowledge (human capital,

education, RD, infrastructure…) as a source of growthBut focus on information, incentives, « mechanical »

aspects => real departure from standard approach ?


(2) (New) Economics of science (DAVID, DASGUPTA,…) :• inherent and specific properties of the information :

- Imperfect information (information paradox)- Non-rivalry and non-excludability (information as a "public good")=> problem of property right- Low cost of REproduction

• new line between S-related and T-related activities and outputs :- the practices of diffusion associated with incentive schemes - the choice of the optimal level of codification (cf reward system)- the higher uncertainty in the production and use of scientific results- the fact that results from basic research are considered mainly as a information input for applied research (more generic usefulness)- higher indivisibilities in science production- longer term perspective of science=> possible background for distinction between S and T and I policies

Standard / Neo-classical framework : theoretical foundations - 2


"Linear model"

• the "holy sequence" of clearly distinct steps• fit with classic distinctions :

technology push

BASIC RESEARCH

APPLIEDRESEARCH

DEVELOP-PMENT

"ON THEMARKET"ProductionSales

USE BY NON-INNOVATORSImitatosr,Adoptersclients

invention innovation diffusion

science technology market

demand pull

Nature of knowledge (public vs private), repartition of roles (State – univ - PROs vs firms), incentive mechanisms (Merton vs market) …


Comprehensive and extremely coherent « paradigm »

• Market : unique mode of coordination and of selection• State is « outside »• Equilibrium• Static analysis• Optimizing rationality• Input - output perspective / linear model of innovation• Central focus : optimal allocation of resources• Normative reference : welfare/Pareto analysis

• Research (S,T,I) as production of output = information+ information as an input for downstream activities

Standard / Neo-classical framework : Main features


Standard / Neo-classical framework :

Knowledge (scientific, technological, product-embedded etc) + production of knowledge + use of knowledge exhibit some characteristics not fitting with "ideal" characteristics => market/price mechanisms cannot work = market failures => consequences for social optimality => basic principles for public intervention


• Imperfect information(information paradox)• Non-rivalry and non-excludability=> problem of property right• Low cost of REproduction• Indivisibilities, long term

• Lack of information on results, use and demand => high risk• Long term rentability• High cost• Problem of appropriability of S&T “products” and of gains from innovation

=> knowledge externalities=> market externalities=> network externalities

Reducing uncertainty (environment, S, D)Substituting to the market (S and D sides)

(sharing risk and cost)Allowing for internalizing externalities

(property rights, cooperation)

Standard / Neo-classical framework :failures, consequences and principles for policy action


Evolutionary theory :focus on evolution of technology, firms, industries, etcdiversity generation / reproduction / selection processes

Systemic / Network approaches (N/L SI, clusters, etc) :

focus on coordination, complementarities,variety of institutions

Knowledge-based economics :focus on knowledge creation, sharing,

processing, access, diffusion, etc / cognitive processes

Evolutionist structuralist framework : theoretical foundations

Different approaches from different disciplines (mono or multi-disciplinary)with common features and specific focus


"interactive model"

•More complex processus : feedback, overlaps•"Innovation" at all stages•Specific role of knowledge base:

specific to each actor/organisationaccumulation processes (capitalisation, learning, forgetfulness) => "path-dependancy" (example : Kline-Rosenberg model)

•Classical distinction put in question•Linear model = one possible pattern within the interactive model•New perspectives on

Nature of knowledge, repartition of roles, incentive mechanisms …


NC framework

• Market : unique mode ofcoordination and of selection• State is « outside »• Equilibrium• Static analysis• Optimizing rationality• Input - output perspective /linear model of innovation• Central focus : optimal allocationof resources• Normative reference : welfare/Pareto analysis

• Research (S,T,I) as productionof output = information+ information as an input for downstream activities

• Variety of modes of coordination and of selection• State is part of the game• No equilibrium• Dynamic analysis / Path dependancy• Other forms of rationality• Inter-active model of innovation• Central focus : creation of resources + knowledge (≠ information) = fundamentalresource• Unclear normative reference :« adequate » system, processes, cognitive capacities ? environment ensuring « goodtrajectories » / « good paradigm » ?• Knowledge coming from anywhere in the system (not only Research)

Evolutionist structuralist framework : main features


• inadequate selection processes• lack of coordination, complementarities, lack of institutions, speed of adjustment between institutions and S&T...• misallocation of resources and cognitive attention between exploration and exploitation• knowledge creation, processing, distribution failures : codification, circulation, emitting/ absorptive / articulation capacity, structure of knowledge...

• lack of diversity• “negative” lock-in• difficulty for paradigmatic changes• knowledge, social, institutional..”gaps”

Not so coherent :Cognitive capacity of actors : development,orientation, adequate conditions of use...

Evolutionist structuralist framework : failures, consequences and principles for policy action


Common ?

Specific ? Specific ?

Reducing uncertainty (environment, S, D)Substituting to the market (S and D sides)

(sharing risk and cost)Allowing for internalization of externalities

(property rights, cooperation)

Cognitive capacity of actors : development,Orientation, adequate conditions of use...

ES frameworkNC framework

Tools / instruments

Optimal allocation by market(or pseudo-market) mechanisms

Social optimality

Diversity, selection, cohesion

« good » trajectories« good » transitionbetween paradigms

Normativereference ?

State "a priori" in/outof system ?

NoYes

Out In


Table 1.2 : The two dominant paradigms : failures, consequences and principles for policy actio

• Lack of information on results,use and demand => high risk

• Long term rentabil ity

• High cost

• Problem of appropriabili ty ofS&T “products” and of gainsfrom innovation => knowledge/ market / network externali ties

• Reducing uncertainty (environment, Supplyand Demand sides)

• Substituting to the market (Supply andDemand sides) : sharing risk and cost

• Allowing for internalization ofexternali ties : property rights, cooperation

• Misallocation of resources andcognitive attention betweenexploration and exploitation

• Inadequate selection processes

• Systemic/institutional failures :coordination, complementarity,lack of institutions, speed ofadjustment between institutions andS&T...

• Knowledge creation / processing, /distribution failures : codification,circulation, emitting / absorptive /articulation capacity, structure ofknowledge...

• Lack of diversity

• “Negative” lock-in

• Difficulty forparadigmatic changes

• Knowledge / social /institutional..”gaps”

Not so coherent :

• Cognitive capacity of actors: development, orientation,adequate conditions of use...

Diversity, selection, cohesionOptimal allocation by market (or

pseudo-market) mechanisms

Social optimality« Good » trajectories, « good »transition between paradigms

The NC framework :MARKET FAILURES

The ES framework :LEARNING/SYSTEM FAILURES

POLICY PRINCIPLES

POLICY TOOLS / INSTRUMENTS(see Table)

• Imperfect information(information paradox)

• Non-rivalry and non-excludability

=> problem of property right

• Low cost of reproduction

• Indivisibilities, long term

Failures and rationales for policy action


Interpretationin the NC framework

Interpretationin the ES framework

Diffusion ofInformation Knowledge

Public intermediaries ofInformation Knowledge

substitute to private investment for production of scientific output considered as public good

Public labs in Scienceincrease and change the available knowledge-base by reinforcing exploration; involves codification; change emitting/absorptive capacity of labs

partially substitute to private investment for production of technology considered as non-rival and partly excludable good

Subsidy to R&D activities of firmsincrease and change the available knowledge-base by reinforcing exploration; involves codification; change emitting/absorptive capacity of firms

substitute to private demand (limited in time)Public procurementorient selection process by reinforcing exploitation

full guarantee of appropriability of technology considered as non-rival and partly excludable good

Property rights partial change of emitting/absorptive capacity

Cooperationfirms, all typesfirms and public labs

substitute to private investment for production of human capital

Education increase cognitive capacity

Emergence of standardsand plateforms

orient selection process; involves codification

Norms, regulationsorient selection process; involves codificationOther related policiesorient selection process

internalize externalities : monetary (vertical coop.), knowledge (horizontal coop.); diffusion of information; risk/cost sharing

change distribution and sharing of knowledge; reinforce coordination and complementarity; change emitting/absorptive capacity

idem idem;reinforce coordination

Basic tools and instrumentsof S&T policy

reduce uncertainty and asymetries change the available knowledge-base; involves codification; change distribution of knowledge

STI tools re-interpreted


Different rationales adressing different dimensions ? ex extented from A. BONACCORSI :

Beyond this NC / EC opposition :

need to mix approaches ?

(a) Incentives: neoclassical theory of market failure

(b) Factors of production: endogenous growth

(c) Processes and coordination: neo-institutional and evolutionary

(d) Learning: knowledge-based economics

3. "policy mix" and "rationale mix"


Tools which aim at fostering cooperation between actors :sharing/complementarity of costs, risks, information, joint creation of / distribution of knowledge ?

Public research :beyond « pure public good argument » ?

Patents : Protection/diffusion dilemna, signaling, intangible base for cooperation ? (see slides at end)

Different (mix of ?) rationales underlying one given tool/instrument


• cooperative agreement /funding / IPR :NC : same failure adressed ? too many failure remedies ? (ex ante vs ex post reward vs patent ?; limit fundings to transaction/cooperation costs ?...)

• policy oriented towards SME :Are supposed SME specificities grounded in rationales ?

• Lisboa agenda and EC "policy mix": "the combination of policy instruments, which interact to infuence the quantity and quality of R&D investment in public and private sectors" (http://www.policymix.eu/policymixtool/)

• Research Infrastructures: sharing cost, create opportunity for networking, research outputs, research tools… (http://cordis.europa.eu/infrastructures/)

• The renewal of Demand side policy (cf Georghiou-Edler paper – next 3

slides)

Mixing tools/instruments and mixing rationales ?


More on the "I" sideReturn of Demand Side policy in the policy arena (EU, UK), while still present in US and Japan

Definition :All public measures to induce innovation and/or speed up diffusion of innnovations through increasing the demand for innovations, defining new functional requirement for products and services or better articulates demand

The case of Demand side policy


•Lack of incentives on demand side => fundings (NC)•Asymetries of information, transaction costs => increase and diffusion of info (NC)•Demand is often "local" and should be at least partly "locally" answered :

heterogeneity, path dependancy, idosyncracy etc local Innov System, spillovers, etc user-producer interactions, "lead" user, etc=> System and cognitive failures

•"Good directions" towards orienting innovation processes=> Selection failures

•Demand and Knowledge base should be aligned=> System and cognitive failures (standards, etc)

• Inter- gvtal department strategies and coordinations=> System failures

Mix of rationales :


Mix of STI policy tools:Basis = public procurement policies (general vs strategic, direct vs catalytic, commercial vs pre-commercial)Combined with supply side fundings - technology plateforms …

Policy mixes :Improvement of public services and policies : better answers to societal need through innovation = sustainable devlopment, health, etc backed up by STI policy


ST&I vs competition policy (monopoly, cartels, public

aids, public procurement…)

ST&I vs education policy (Univ.-PROs, longlife

training…)

ST&I and environmental/sustainable dvpt oriented

policy

ST&I and …

policy boundaries, overlaps, complementarity :


Interaction between two types of rationales in the policy design, making and implementation processes

Production policy rationales

Governance policy rationales

3. Towards a « rationale mix » framework for policy processes in reality(from EPOM / Prime NoE project http://www.prime-noe.org/)


Interaction between two types of rationales :

1. “Production policy rationales", i.e. causal beliefs, about the production of knowledge and set-up of policy instruments; providing a theoretical framework for understanding knowledge creation and justifying public intervention (failure argument) and the type of policy proposed

<=> what was covered in first part of lecture

Economics - Sociology of science"neo-classical paradigm" vs “evolutionist structuralist approach” (Lundvall & Borras 1997; Bach & Matt, 2005 …)


•Traditional paradigm (V. Bush)Focus on fundamental research, Justification of public research : defense, prestige, general welfare, knowledge per se + « pure public good »•Neo-classical / market paradigm (Arrow + Dasgupta-David)Distinction between fundamental research (open science, knowledge as public good) and technology (property right, Knowledge as private good) + competion / incentives / flexibility of resources / cost-cutting; Justification of public intervention : market failures•System / Network paradigm (Lundvall, Nelson, CSI…)Importance of the complementarity of /the links between multiple actors : coordination, alignement of objectives and resources…; Justification of public intervention : system failure•Evolutionary approach (Nelson & Winter, Dosi, Metcalfe…)focus on the generation (mutations), distribution (diversity) and diffusion (transmission) of changes + fitness and co-evolution as compared to the environment (selection mechanisms). diversity generation, diffusion•Knowledge-based approach (Cohendet Meyer-Krahmer)Knowledge as collectively produced, shared, distributed + multi-dimensional knowledge with tacit dimension + importance of learning processes; Justification of public intervention : learning (cognitive) failures


Strong connexions to sociology of science (Benner and Biegelbauer in EPOM [2005]) :

•the simplest linear model, distinguishing Research and Economy, then enhanced by the Mertonian tradition;•standard linear model of innovation, with sequential (technology push or demand pull) link, and clear distribution of roles between actors along the steps of the model;•the interactive model stream, including Gibbons mode 2, Triple Helix and the like;•the constructivist approaches.


• Interaction between the actors – the Triple Helix(Loet Leydedorff Henry Etzkowitz)

Research Politics

Business

Researchers who are prepared to exploit their knowledge. Universities that profile their education and research.

Legislators who influence the conditions under which companies and researchers are working. Politicians who allocate resources for research and development. Local authorities and county councils who set out to facilitate the establishment of new companies and make their local areas pleasant places to live.

Entrepreneurs who recognize the value of new knowledge. Managers who can identify market requirements and have the courage to invest their resources. Investors who are prepared to wait for a return on their investments.

Adapted from M. Benner [2005]

Separate institutions / intermediaries - Modes of direct communications - Mixed roles


Interaction between two types of rationales :

2. “Governance policy rationales”, reflecting the governance paradigms ruling state intervention in general; not policy sector specific but have encompassing validity; they often correspond to political traditions and culture

Political science - Public management


•Centralism / technocratic modelCentralization of decision processesHighly professionalized civil servantCommand & Control modelstrong hypothesis on the capacity of State in terms of access to information, processing of information and action•Network State modelwith a focus on coordination role, decentralisation, enablement skills, public/private cooperation, self-regulatory approach•New Public Management modelClear policy target/goalsClear budgetSystematic performance analysisClear and explicit decision processes•Decentralized multi-level model : multiple centers of decision with budget, staff…(not necessarily hierarchical)•Decentralized multi-space model : multiple and heterogeneous public & scientific interest groups (public opinion, consumers, patients, NGO,…)


Production

Rationales

GovernancePolicy

Rationales

Policy tools

Implementation

Policy-design

&making

PolicyDesign & making

frame

Policy-design

&making

Incl. Monitoring and evaluation tools(+ "no instrument")


•Public influence and the business point of view•"Fertile soil", i.e. background and receptivity of

policy makers (political preferences, culture, education,…) => selective attention and cognitive choices of policy makers

•Turnover of political personal and of technocrats•Policy entrepreneurs•Boundary institutions•Examples, images and stylised facts ("prototype

embodying knowledge")•Reports and other white papers•"Tactical interests" •Policy-making procedure and its "hidden side"•Competing rationales in government

Policy design/making frame


Not static / sequential / "once and for all"

Dynamics :•Path-dependancy •Learning and feed-back loops•Continuous (minor) changes•Major revisions triggered by :

inefficiency observed in the systemmajor changes in ideology or rationalesdiffusion of ideas (« emulation », benchmarking)pressure related to external shocks or the public

=> time matching between policy cycle / ideas cycle (windows of opportunity


mixdynamic coherence

co-evolutionProduction

Rationales

GovernancePolicy

Rationales

Policy-design

&making

Policy tools

Implementation

mix

mix

mix

mix mix


Production

Rationale

Governance

Rationale

Research &Innovation modes

Neo-classical / market New Public Management

ideal model 2

Standardlinear model

Merton

Knowledge-based

System /Network Network State

Decentralized multi-space

ideal model 2

Evolutionism Decentralized multi-level

Interactive model

/ Gibbons mode 2

Triple Helix

Constructivism

TraditionalCentralism / technocratic

ideal model 1

Simpliestlinear model

Research / Economy Command&Control

Towards « archetypal » mixes ? 3 coherent models


Knowledge as information + appropriability pb

Patents = appropriability means, strong property right=> to enhance individual motives (individual inventor),BUT should favour global knowledge production

+ appropriability / diffusion (+ cumulativeness) dilemna => Various length and scope of patent

Patent in NC revisited approach :

The case of patent : NC vs K.O. framework(based on [COHENDET-MEYER-KRAHMER, 2004 - PENIN, 2004])


Patents = appropriability + other dimensions:

o negotiation role (bargaining power)

o first step for cooperation/knowledge exchange (balance of power between members of network)

o Signalling/disclosure device/reputation

Example: communities (free-software) produce semi-public goods (common but not available to all)

Patent in Knowedge-based approach (1) :


the key role of institutional settings (IS=norms, rules, standard) IS govern incentives to produce and diffuse knowledge IS shape the codification processes and thus the costs of transfering knowledge (science vs. industry)

=> If incentives to build knowledge in a

community are strong, then appropriation is

marginal

Reconsidering incentives (ex. free software) :



Is patent still a valid policy tool ?

new dimensions of patents <=> new uses made by firms => new «K.O. failures» ? does patent help to overcome those «K.O. failures »? If yes, is it an appropriate tool? (ex. : too expensive as a tool to foster cooperation!)

Patents hamper diffusion (traditional view), BUT also the production of knowledge (ex: IPR on software; IPR on fragments of gene before identification of product => no product => go beyond cumulativeness of information : importance of common cognitive platforms).


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