Why innovation policy fails …

Often times, the theory is one thing, and its application is something entirely different. Innovation policy is no exception, so that the transfer of conceptual ideas into practice is fraught with unpleasant surprise. I’d suggest two specific challenges to successful policy making in support of innovation: one is related to integrity, the other to competition.

Integrity of innovation policy

Innovation is an important topic to a number of stakeholders, each with different their own specific interests, needs, and means. In this complex setting, innovation policy must itself be innovative to cover the entire innovation landscape. To be successful, such policy must inevitably touch upon a multitude of conventional policy stove-pipes; at a governmental level, it will reach into the responsibilities of an impressive number of Ministries, including Economics, Finance, Education, Research, Labor, Commerce, and even Defence.

Defining and then implementing policy that cuts across so many domains and boundaries presents an obvious challenge; as a major consequence, this cross-cutting nature of innovation policy also presents its biggest risk: the risk of fragmentation, in developing such policy, in implementing it, and in the outcome as well. Societies around the globe have tackle this problem employing different approaches; those are either process-oriented or structural in nature.

At the process-end of that spectrum, you’ll find most Western societies with the industrialised economies. They tend to view innovation predominantly through the lens of its economic and business utility. Consequently, they leave the leadership in innovation policy to the Ministry of Economics, but might supplement this business focus with an innovation strategy that could serve as a bracket across all Ministries involved in innovation. That way, the conventional structures and responsibilities are largely untouched, and the outcome is at least a coordinated approaches towards innovation.

At the structural end of the spectrum, the emerging economies tend to consider innovation from a more holistic perspective, combining micro- and macro-economic elements with aspects of basic and higher education, thus seeking a genuine whole-of-government approach. In the extreme, they might establish one dedicated Ministry for Science, Technology, and Innovation (as for example in Brazil) that concentrates important policy responsibilities that would otherwise be dispersed over several Ministries. This approach creates an organisational structure that is clearly in charge of innovation policy, which should result in a more inclusive, better integrated innovation policy.

Both approaches have their merits and risks, and their success will always depend upon the specific circumstances under which they are implemented. But they both build on the understanding that fragmented policy initiatives will not achieve the desired outcome: a society that is fit for innovation across the entire landscape.

Competition of interests

Policy making in the real world is always faced with resource constraints that create the need for picking and choosing, for setting priorities. Even though policy is “only” meant to set the conditions, i.e., defining the rules of the game and ensuring a level playing field for all participants, the reality of constrained resources often creates the impression that policy itself would pick the winners in the game. The result is a competition of policy approaches, and it is only natural that the main stakeholders seek to influence policy making to achieve favourable policy objectives.

Of course this applies to innovation policy as well: the innovation protagonists will try to shape innovation policy in their specific favour. However, their abilities to do so are quite different. At one end of the spectrum is society itself: society is the main beneficiary of innovation, and society also holds the key to all policy making. Hence it should be straightforward for society to just dictate the ideal innovation policy. However, given the complexity of the topic and its often very long time horizon, innovation is not an attractive subject for politicians to build a career on. Rather, innovation as a policy topic tends to be left for later, or to somebody else. As a result, society’s need to promote innovation across the entire landscape is seldom cast into a truly systematic, integrated innovation policy.

At the other end of the spectrum are the entrepreneurs. These are essentially individuals who pursue the potentially game-changing, disruptive innovation. But when it comes to policy making, entrepreneurs usually lack the time and energy to get engaged. And there is no dedicated lobby that would pick up a fight on their behalf. No big wonder then that policy makers struggle to establish favourable conditions for disruptive innovation.

In the middle of the spectrum, we find those who actually have and use the means to shape innovation policy: organisations. Of course there is a wide variety of organisations involved in innovation, but for the purpose of this discussion I’ll single out those organisations that are most actively engaged in policy making: companies. They have a clear micro-economic interest in innovation, with a natural focus on business as usual. Most importantly, they have lobby groups that promote the needs of corporations and enterprises across all policy fields, including innovation policy. Consequently, most innovation policies promote or at least protect business interests.

Conclusion

Obviously, the interaction between the need for policy integrity and the competition of interests can be a curse. If business lobby groups gain undue influence over policy decisions, the result will be a partial and fragmented innovation policy that favours the conventional business interests at the expense of society’s need for an integrated, cross-cutting innovation policy. At the same time, this outcome would certainly work against the need of the entrepreneurs for at least a level playing field in which their disruptive innovations can challenge the market incumbents.

On the other hand, an integrated innovation policy actually offers the means to balance the competing interests. Focusing on meeting society’s overarching needs with utmost priority will ensure the necessary support to the entrepreneurs. At the same time such a balance will give appropriate room for the micro-economic business interest.

For innovation policy to be successful, it must avoid the pitfalls of competing interests and strive for a truly integrated approach, from inception all the way through to implementation.