Lecture 1
Innovations are unpredictable and emerge in complex systems with many actors, interests,
organisations and expectations → new knowledge and innovations can create new problems and
disrupt economies → this course addresses the reasons, the methods and the results obtained
from government intervention in innovation trajectories.
Assignment: 2 types of policy instruments → examples at BB → about the development of
innovation policy in relation to one of the discussed themes.
Innovation basics: WHAT - WHY (and why not?) - WHO.
Innovation policy = government interventions that encourage and facilitate the generation,
application and diffusion of new ideas.
→ in a local, regional, national, supranational (EU) economy.
Policy instruments = a government measure/programme that aims to change the behaviour and
actions of the actors involved in the whole process from generating new ideas into innovative
market introductions and solutions.
Why innovation policy? → public policies to (a) earn our daily bread (competitiveness of the
private sector causes high productivity), (b) tackle societal challenges, not led by the market nor
by society.
→ different approaches to innovation policy: market perspective (narrow perspective,
considering invention only) → transformation to holistic perspective (broader perspective which
emphasises the importance of looking at the entire innovation cycle from the creation of novel
ideas to their implementation and diffusion → question whether one whould limit the analysis to
policies designed with the explicit intent of influencing innovation or also taking into account
policies created to other purposes → 3 main approaches:
1. Intervention-oriented policies: narrow focus - concentrate on R&D/intervention and
leave possible exploitation and diffusion of the intervention to the market.
2. System-oriented policies: focus on system-level features, such as the degree of
interaction between different parts of the system, extent to which some vital
components of a system are in need of improvement, or capabilities of actors that take
part.
3. Mission-oriented policies: aimed at providing new solutions to specific challenges that
are on the political agenda.
Market failure-approach to innovation policy = firms underinvest in R&D because of (a)
uncertainty and (b) knowledge spillovers → remedies: public R&D - R&D subsidies - patents.
Innovation-system approach to innovation policy = innovation depends on many factors and is
inherently multi-actor → the government should facilitate interactions in the innovation system.
Innovation = introduction of new solutions in response to problems, challenges or opportunities
that are in the social and/or economic environment → involves creative destruction → founding
father is Joseph Schumpeter, who introduced the distinction between invention (a novel idea for
how to do things) and innovation (carrying it out into practice).
→ process: (1) intro of a new consumer good, (2) intro of a new method of production for the
industry, (3) opening a new market for the industry, (4) conquest a new source of supply of
inputs, (5) new organisation of any industry.
Markets as efficient resource allocation: (a) there is a complete set of markets, so all supplied or
demanded goods and services are traded at publicly known prices. (b) all consumers and
producers behave competitively. (c) an equilibrium exists.
,Why not innovation policy? → uncertainty for Hayek means each individual decision maker only
has a small piece of the puzzle → the aggregated set of all decision makers have a complete set of
all relevant knowledge → market prices organize and synthesize the aggregate amount of
knowledge so market price signals knowledgeable entrepreneurs.
→ there is not always a market for innovation → there are new
opportunities, but there is imperfect knowledge of future events → so,
risk applies to situations where we don’t know the outcome, but can
measure the odds → uncertainty applies to situations where we cannot
know all info needed to set accurate odds → Knightian uncertainty =
can we invent it (discovery uncertainty, how much R&D to invest for a
solution) - can we make it (technical uncertainty, from invention to
innovation, R&D) - can we sell it (market uncertainty, from innovation
to diffusion).
Lecture 2 - guest lecture van der Veen
STI system in Myanmar is in its infancy stage → the political system around STI has been
established recently or is in preparation → education and research system is young, the focus on
STI is recent → there is a limited supply of students with business degrees → the business sector
is small, demand for STI is not well developed → IP and standardization laws are developed and
access to finance is an issue.
Questions: What is innovation? Why should it be promoted? Why should governments interfere?
- Innovation = promotes economic growth → limited quantitative evidence, strong
qualitative evidence → more and more seen as a way to achieve societal goals →
sustainable development goals (SDGs) → application of techs or practices that are new to
a given society.
- Application: having an idea is not innovation →
techs and practices.
- Not necessarily new to the world → not
necessarily science based →
there is a connection, but not
through a linear model →
systemic model (picture left).
- Incremental vs. radical → hightech vs. lowtech →
entrepreneurs vs. researchers.
National innovation systems = complexity of innovations
(picture right) → implications:
- Knowledge, learning and institutions are key.
- Institutions and their environments are interdependent → they co-evolve, so institutions
are always context dependent.
- In many cases, the relevant unit of analysis is not the
individual but networks, clusters and institutions.
- Governance and other
mechanisms create systemic cohesion
→ key system issues are balance and
policy mix.
, - Cannot deal with static optima, have to understand how to deal with system dynamics.
Intervention logic: picture right.
How to stimulate innovation? → policy instruments and policy mix.
→ policy instrument = means of government intervention in society to accomplish goals or solve
problems → main types:
- Regulation (commandments and prohibition), including enforcement governance.
- Info and communication.
- Financial instruments for engaging or discouraging actions.
→ developing policy instruments: policy goal (instrument goal), target
group, actor, choice of instrument (type of steering (hard/soft), broad
vs. specific, type of instrument (regulation, communication, financial),
use of selection criteria).
→ detailed design:
- Applicants are actors that have to realise the impact (friends,
not enemies), make sure everyone that belongs to the target group
gets a fair chance, take into account efficiency for applicant and
programme office.
- Think about budget, opportunities to apply: (a) continuous (advantage; applicants don’t
have a wall), (b) tender (advantage; proposals can be compared with each other) →
announcement, support offered to applicants, eligibility criteria (depending on goals
and target groups, can include financial and non-financial criteria).
- Procedure (one round (quick) or two more rounds with pre-proposals) → selection
criteria should be aligned with program goals, eligible costs (what kind of costs are
supported) → contribution (how much is the support), communication with successful
and unsuccessful clients → contracting.
- Project execution (deliverables (only ask for reports that are actually used), kind of
interaction (visits, events), obligations of awardees, payments (in advance, after receipt of
deliverables)) → evaluation.
Government approach: make sure innovation (or broader STI) is coherently addressed by all parts
of government → STI counsil is a mechanism that is used for that → STI councils are effective
only if they are supported from the highest level and show leadership to achieve goals (strong
core of STI policy with attention for the 3 pillars, active involvement
in other domains to promote innovation and create policy synergies,
systematic monitoring and reporting or efforts and achievements,
communication of efforts and successes is parliament and society →
consider specific STI committee in Parliament to safeguard and pay
attention and support.
Trainees are welcome: Geert van der Veen Technopolis The
Netherlands → - www.technopolis-group.com
Lecture 3
Why do we have govenment policy? → government = a means by which policies are enforced as
well as a mechanism for determining policy → concentrate power and allow the community to
deploy that power to enforce laws, keep the peace, defend itself against outside enemies and
provide necessary public goods.
Innovations are unpredictable and emerge in complex systems with many actors, interests,
organisations and expectations → new knowledge and innovations can create new problems and
disrupt economies → this course addresses the reasons, the methods and the results obtained
from government intervention in innovation trajectories.
Assignment: 2 types of policy instruments → examples at BB → about the development of
innovation policy in relation to one of the discussed themes.
Innovation basics: WHAT - WHY (and why not?) - WHO.
Innovation policy = government interventions that encourage and facilitate the generation,
application and diffusion of new ideas.
→ in a local, regional, national, supranational (EU) economy.
Policy instruments = a government measure/programme that aims to change the behaviour and
actions of the actors involved in the whole process from generating new ideas into innovative
market introductions and solutions.
Why innovation policy? → public policies to (a) earn our daily bread (competitiveness of the
private sector causes high productivity), (b) tackle societal challenges, not led by the market nor
by society.
→ different approaches to innovation policy: market perspective (narrow perspective,
considering invention only) → transformation to holistic perspective (broader perspective which
emphasises the importance of looking at the entire innovation cycle from the creation of novel
ideas to their implementation and diffusion → question whether one whould limit the analysis to
policies designed with the explicit intent of influencing innovation or also taking into account
policies created to other purposes → 3 main approaches:
1. Intervention-oriented policies: narrow focus - concentrate on R&D/intervention and
leave possible exploitation and diffusion of the intervention to the market.
2. System-oriented policies: focus on system-level features, such as the degree of
interaction between different parts of the system, extent to which some vital
components of a system are in need of improvement, or capabilities of actors that take
part.
3. Mission-oriented policies: aimed at providing new solutions to specific challenges that
are on the political agenda.
Market failure-approach to innovation policy = firms underinvest in R&D because of (a)
uncertainty and (b) knowledge spillovers → remedies: public R&D - R&D subsidies - patents.
Innovation-system approach to innovation policy = innovation depends on many factors and is
inherently multi-actor → the government should facilitate interactions in the innovation system.
Innovation = introduction of new solutions in response to problems, challenges or opportunities
that are in the social and/or economic environment → involves creative destruction → founding
father is Joseph Schumpeter, who introduced the distinction between invention (a novel idea for
how to do things) and innovation (carrying it out into practice).
→ process: (1) intro of a new consumer good, (2) intro of a new method of production for the
industry, (3) opening a new market for the industry, (4) conquest a new source of supply of
inputs, (5) new organisation of any industry.
Markets as efficient resource allocation: (a) there is a complete set of markets, so all supplied or
demanded goods and services are traded at publicly known prices. (b) all consumers and
producers behave competitively. (c) an equilibrium exists.
,Why not innovation policy? → uncertainty for Hayek means each individual decision maker only
has a small piece of the puzzle → the aggregated set of all decision makers have a complete set of
all relevant knowledge → market prices organize and synthesize the aggregate amount of
knowledge so market price signals knowledgeable entrepreneurs.
→ there is not always a market for innovation → there are new
opportunities, but there is imperfect knowledge of future events → so,
risk applies to situations where we don’t know the outcome, but can
measure the odds → uncertainty applies to situations where we cannot
know all info needed to set accurate odds → Knightian uncertainty =
can we invent it (discovery uncertainty, how much R&D to invest for a
solution) - can we make it (technical uncertainty, from invention to
innovation, R&D) - can we sell it (market uncertainty, from innovation
to diffusion).
Lecture 2 - guest lecture van der Veen
STI system in Myanmar is in its infancy stage → the political system around STI has been
established recently or is in preparation → education and research system is young, the focus on
STI is recent → there is a limited supply of students with business degrees → the business sector
is small, demand for STI is not well developed → IP and standardization laws are developed and
access to finance is an issue.
Questions: What is innovation? Why should it be promoted? Why should governments interfere?
- Innovation = promotes economic growth → limited quantitative evidence, strong
qualitative evidence → more and more seen as a way to achieve societal goals →
sustainable development goals (SDGs) → application of techs or practices that are new to
a given society.
- Application: having an idea is not innovation →
techs and practices.
- Not necessarily new to the world → not
necessarily science based →
there is a connection, but not
through a linear model →
systemic model (picture left).
- Incremental vs. radical → hightech vs. lowtech →
entrepreneurs vs. researchers.
National innovation systems = complexity of innovations
(picture right) → implications:
- Knowledge, learning and institutions are key.
- Institutions and their environments are interdependent → they co-evolve, so institutions
are always context dependent.
- In many cases, the relevant unit of analysis is not the
individual but networks, clusters and institutions.
- Governance and other
mechanisms create systemic cohesion
→ key system issues are balance and
policy mix.
, - Cannot deal with static optima, have to understand how to deal with system dynamics.
Intervention logic: picture right.
How to stimulate innovation? → policy instruments and policy mix.
→ policy instrument = means of government intervention in society to accomplish goals or solve
problems → main types:
- Regulation (commandments and prohibition), including enforcement governance.
- Info and communication.
- Financial instruments for engaging or discouraging actions.
→ developing policy instruments: policy goal (instrument goal), target
group, actor, choice of instrument (type of steering (hard/soft), broad
vs. specific, type of instrument (regulation, communication, financial),
use of selection criteria).
→ detailed design:
- Applicants are actors that have to realise the impact (friends,
not enemies), make sure everyone that belongs to the target group
gets a fair chance, take into account efficiency for applicant and
programme office.
- Think about budget, opportunities to apply: (a) continuous (advantage; applicants don’t
have a wall), (b) tender (advantage; proposals can be compared with each other) →
announcement, support offered to applicants, eligibility criteria (depending on goals
and target groups, can include financial and non-financial criteria).
- Procedure (one round (quick) or two more rounds with pre-proposals) → selection
criteria should be aligned with program goals, eligible costs (what kind of costs are
supported) → contribution (how much is the support), communication with successful
and unsuccessful clients → contracting.
- Project execution (deliverables (only ask for reports that are actually used), kind of
interaction (visits, events), obligations of awardees, payments (in advance, after receipt of
deliverables)) → evaluation.
Government approach: make sure innovation (or broader STI) is coherently addressed by all parts
of government → STI counsil is a mechanism that is used for that → STI councils are effective
only if they are supported from the highest level and show leadership to achieve goals (strong
core of STI policy with attention for the 3 pillars, active involvement
in other domains to promote innovation and create policy synergies,
systematic monitoring and reporting or efforts and achievements,
communication of efforts and successes is parliament and society →
consider specific STI committee in Parliament to safeguard and pay
attention and support.
Trainees are welcome: Geert van der Veen Technopolis The
Netherlands → - www.technopolis-group.com
Lecture 3
Why do we have govenment policy? → government = a means by which policies are enforced as
well as a mechanism for determining policy → concentrate power and allow the community to
deploy that power to enforce laws, keep the peace, defend itself against outside enemies and
provide necessary public goods.
