Innovation systems – from analysis to policy Keith Smith Imperial College London/TIK Oslo

A basic question… To what extent is innovation performance of an economy (regional or national) an effect of individual entrepreneurship? How significant is the individual innovating firm?

Some historical foundations The scientific revolution and industrialisation. Role of knowledge institutions. The rise of mass education Late 19 th century – the revolution in innovation methods The creation of infrastructural institutions – in metrology, oceanography, weather, geology, chemistry, etc. By end C19 all industrialised economies had these institutions. (NB Paul David on US geological survey)

Some analytical foundations Collective invention. Time horizons and geographical spreads. Technological evolution – increasing complexity and scale, multitechnology firms, interactive technological development (Babcock and the inclined boiler – role of Singer etc) Clustered development – regional embeddedness and labour markets, education, specialised suppliers etc

Institutional frameworks New regulatory frameworks – health, safety, labour laws, IPRs Financial and accounting law Corporate governance and ownership systems State-corporate interactions Resource law and allocation Infrastructure funding and regulation

Infrastructures Physical: roads, harbours, energy supply etc. Knowledge: universities, research institutes, knowledge repositories Infrastructures improve the capcity and cohesion of the economy

Some empirical aspects of innovation The prevalence of interactive learning Persistence of supply chains and trade relationships The pervasiveness of public-private interactions, and the ‘developmental state’ The existence and roles of knowledge institutions The trajectories of ‘core’ or ‘macro’ innovations

‘Macro’ innovations – where do they come from Railroads, shipping, etc The modern era – computing, pharma, large commerical aircraft, jet transport, digital telecoms, space-based communications, GPS, the mobile telephone, health innovations (lenses) The pattern here is interactive. Many originate with public support, public institutions, procurement, regulatory support.

Innovation systems Stable created structures of institutions, organisations and infrastructures that provide innovation components and shape the innovation environment at regional, national or supranational levels.

Innovation systems literature Friedrich List on German growth, Alfred Marshall on industrial districts Lundvall, Nelson on descriptive approaches to specific systems Edquist on components of systems Jackobsson et al on systems and policy

Systems and policy Policy makers attracted to systems approaches because policies tend to be integrated suites of instruments, not a single measure Problems then concern what set of instruments, what relative balance between them, what composition, what dynamics etc.

System functionality and policy One approach is to think of functions of a well- performing system. For example: Identifying opportunities Allocating resources Building competence and capability Securing legitimacy Creating infrastructures

A strategic framework: UK priorities Strengthening the sharing and disssemination of knowledge (Issue: collaboration/competition) Supporting a coherent and integrated knowledge infrastructure (Issue: science base/Information infrastructure/Catapult centres) Encouraging business investment in all forms of innovation (R&D tax credits, corporate governance issues) Improving the innovative capacity of the public sector (procurement/services/technology selection)