policy approaches for innovation René Kemp Presentation 10 UNU-MERIT Phd Programme Innovation Studies and Development ( )

Innovation is many things

Innovation is created in distributed systems of knowledge and its success depends on economic frame conditions and many other factors not under the control of the innovator

Rationale for innovation policy: market failure private markets provide too little incentive for innovation, because of: knowledge spillovers Market entry barriers Information imperfections This is the traditional economic argument which is used by policy makers As a guide to policy it is poor

System failures refer to inappropriate infrastructure of knowledge, poor capabilities to adapt, institutional barriers and lock-in Here it is not so much the divergence between private benefits and social benefits but the innovation system itself that is a hindering factors, by being insufficient developed for certain types of innovation System failure as a rationale for innovation policy

Smith (2000) distinguishes the following forms of system failure: Infrastructure problems about inadequacies in the physical infrastructure (transport, etc), the scientific infrastructure (high-quality universities and research labs, technical institutes, etc) and the network infrastructure (IT, telecom). Transition problems: difficulties that arise when firms and other actors encounter technological problems or face changes in the prevailing technological paradigms that exceed their current capabilities. Lock-in problems derived from the socio-technological inertia Hard and soft institutional problems linked to formal rules (regulations, laws) as well as more informal and tacit ones (social and political culture for instance).

Because of the many factors shaping innovation Countries have multiple policies for innovation: - Support of R&D - Knowledge transfer - Investment support - Green taxes - Science and technology programmes - Skills and educational policies - Competition policy - Regulations for the uptake of clean technologies

Government policy and sustainable innovation in the Netherlands Courtesy of Geert van der Veen

There has been a shift towards more integrated approaches Which combine push and pull having a long-term focus Involving a platform of interaction Bringing together different knowledge holders With government as a facilitator (asking the platforms to define programmes and offer suggestions to policy)

Long term programming Courtesy of Geert van der Veen

Long term programming DTO-programme (Sustainable Technology Development) in the NL Scope: 2040 Factor 8-thinking Approach towards either functions in society (living, food, transport) or sectors (chemical sector) Backcasting Stake holder involvement in idea generation Technological focus Courtesy of Geert van der Veen

The Dutch transition approach

Top-down elements 26 transition paths Platforms for energy transition themes new gas sustainable mobility green resources chain efficiency Sustainable electricity Interdepartmental programme directorate energy transition (IPE)

Improving the innovation system Butter argues for a three layered approach: - Layer 1: Innovation climate: the creation of a supportive generic climate for sustainable innovations. Layer 2: Singular innovations: the development, dissemination and adoption of singular innovations in individual organisations. Layer 3: System innovations: the stimulation and alignment of singular (individual) innovations that will contribute to the system innovation.

Technology-specific innovation systems (TIS) … network(s) of agents interacting in a specific technology area under a particular institutional infrastructure to generate, diffuse and utilize technology (Carlsson and Stankiewicz, 1991) Components are: Actors Artefacts Networks Regulations Attitudes Formal knowledge (Bergek, Jacobsson and Sanden, 2006)

Key processes (functions) of TIS i. Informing the direction of search ii. Market formation iii. Development of formal knowledge iv. Entrepreneurial experimentation v. Resource mobilisation vi. Materialisation vii. Legitimation viii. Development of positive externalities

Niche policies A focal point for transition policy could be the creation of niches for promising technologies. Historical analysis of the innovation process across a large number of industries shows that new technologies typically commercialise initially through small niche markets, in which experience is gained and cost reductions through learning can be made (see Utterback, 1994; Kemp et al., 1998; Foxon, 2003) Market development is driven not just by price signals and expectation of profits, but also by the development of appropriate knowledge and skills bases, and the formation of institutional structures which support the emerging new technologies (cf. Norberg-Bohm, 1999a,b; Hoogma et al., 2002).

Strategic niche management? Cartoon: Paul Hoogma

What is SNM? SNM is a method for introducing new technologies in society, which relies on the real use of new technologies in selected settings (niches). The niches consist of selected domains of application in which the technology (or new mobility system) is already attractive to use due to specific circumstances. Experiences in the niche are used to inform decisions about technical improvement and support policies. Strategic niche management is thus a concentrated effort to create niches for promising technologies. The niche may be a technological niche or market niche.

The aims of SNM are to articulate the necessary changes in technology, and in the institutional framework that are necessary for the economic success of the new technology; to learn more about the technical and economically feasibility and environmental gains of different technology options i.e., to learn more about the social desirability of the options; to stimulate the further development of these technologies, to achieve cost efficiencies in mass production, promote the development of complementary technologies and skills, and stimulate changes in social organisation that are important to the wider diffusion of the new technology; to build a constituency' behind a product of firms, researchers, public authorities whose semi-coordinated actions are necessary to bring about a substantial shift in interconnected technologies and practices.

Innovation journey in context

Cartoon: Paul Hoogma

…the innovation should be able to survive without protection measures… Cartoon: Paul Hoogma

SNM is being used successfully in Bangladesh for treadle pumps and for micro-irrigation (i) A research and technology development function. Identifying a niche technology and undertaking adaptive research and development to ensure that it works in the smallholder context. (ii) A marketing, production and distribution function. Establishing the mechanisms/facilities/ skills by which the technology can be produced and distributed. Together with a marketing/ promotion function, generating awareness of the technology and creating a demand for it among smallholders. (iii) A sustainability function. Disengaging itself from intensive involvement in facilitating both technology promotion and marketing functions, so that the program is ongoing even after IDEs involvement is fully withdrawn. Source: Clark, Hall, Sulaiman and Naik