Initiatives to promote research, development, and technological advancement.
Innovation policy encompasses government actions aimed at stimulating, supporting, and accelerating innovation processes in the economy. It involves measures to promote research and development, technology transfer, and the commercialization of new ideas.
The main goals include enhancing national competitiveness, addressing societal challenges, creating high-value jobs, and driving long-term economic growth through technological advancement.
Innovation policy employs a mix of instruments including R&D tax credits, direct grants, public procurement for innovation, support for research institutions, and measures to strengthen intellectual property rights.
Modern innovation policy often adopts a 'systems of innovation' approach, recognizing the importance of interactions between different actors (firms, universities, government) in the innovation ecosystem.
In an increasingly globalized world, innovation policies often aim to position countries or regions as attractive locations for innovative activities within global value chains.
Innovation policy is grounded in innovation economics, evolutionary economics, and the economics of technological change. It draws on concepts such as knowledge spillovers, path dependency, and systems of innovation.
If governments set ambitious, cross-sectoral innovation missions (e.g., addressing climate change), then they can mobilize diverse actors and resources towards common goals. The European Union's Horizon Europe program includes several 'missions' in areas like cancer research and climate-neutral cities, aiming to drive innovation with clear societal benefits.
If innovation policies encourage collaboration between public research institutions and private firms, then they can accelerate knowledge transfer and commercialization of research. Germany's Fraunhofer Institutes, which conduct applied research in partnership with industry, have been crucial in maintaining the country's technological competitiveness, particularly in manufacturing.
If regions focus their innovation efforts on areas of existing strength and potential competitive advantage, then they can more effectively build critical mass and foster innovation ecosystems. The European Union's Smart Specialization approach has helped regions across Europe identify and develop their unique innovation capabilities.
If innovation policies provide targeted support for small and medium-sized enterprises (SMEs) and startups, then they can foster a more dynamic and diverse innovation ecosystem. Israel's Yozma program, which kick-started the country's venture capital industry, has been crucial in making Israel a 'startup nation' with a high concentration of innovative tech companies.
If innovation policies are closely aligned with education and skills development initiatives, then countries can build a workforce capable of driving and adapting to technological change. Finland's consistent investment in education and lifelong learning has contributed to its high innovation performance and successful transition to a knowledge-based economy.