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Abdullah Gök

Innovation inducement prizes are among the oldest types of innovation policy measures. The popularity of innovation inducement prizes gradually decreased during the early twentieth century. However, innovation inducement prizes have regained some of their popularity since the 1990s, especially in the US and UK. Despite the growing popularity of innovation inducement prizes, the impact of this innovation policy measure is still not understood. This chapter brings together the existing evidence on the effects of innovation inducement prizes by drawing on a number of ex-ante and ex-post evaluations as well as limited academic literature. As well as developing the particular technology that the innovation inducement prizes produce, they create prestige for both the prize sponsor and entrants. Prizes might also increase public and sectoral awareness on specific technology issues. Design issues are the main concern of the prizes literature. A number of studies point out that sometimes prizes should be accompanied or followed by other demand-side initiatives to fulfil their objectives, mostly on the basis of ex-ante evaluations. Finally, prizes are seen as a valuable opportunity for experimentation in innovation policy. Prizes can overcome some of the inherent barriers to other instruments, but if prizes are poorly designed, managed and awarded they may be ineffective or even harmful.

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Paul Cunningham and Ronnie Ramlogan

Networks (as distinct from geographically co-located clusters) have become an important component of technology and innovation policy in several countries and at the supranational level. However, it has been noted that the issue of appropriate policies for network formation and development is not clear cut and that there is a need to clarify both their rationale and the available instruments for facilitating networking. The chapter focuses on the evaluation of network policies and their role and impact on innovation, particularly since innovation is now understood to depend on a variety of feedback loops within the context of the structured relationships that constitute the so-called innovation ecology. We examine the historical development of industrial network policies and their rationales, such as their later adoption by governments to address the policy goal of increasing the exchange of knowledge between actors in the public and private sectors. The range of typical policy instruments is examined and the challenges for their evaluation assessed, before proceeding to a review of the evidence arising from a number of important studies. We conclude with a number of general lessons concerning specific network characteristics from examples where particular policy models have been successful.

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Paul Cunningham and Abdullah Gök

Measures to foster longer-term cooperation between science and industrial actors represent a significant part of the innovation policy portfolio. Governments support these links to achieve economies of scope and scale, to overcome disincentives of transaction costs and knowledge spillovers and to provide support for knowledge transfer. The evaluations of collaborative schemes share several challenges common to the evaluation of other innovation support schemes, such as problems of time lag, spillovers and behavioural effects, with the added challenge of defining the scope of impact across and beyond the cooperation. Providing a broad evidence base, the chapter nevertheless focuses on a number of extensive evaluations of high-level R & D collaboration. The chapter provides a set of general lessons for the design and implementation of collaborative support instruments, such as alignment of collaboration programmes with other programmes, some provision of formation and education within the programme, and support of managing collaboration projects while keeping bureaucracy at a minimum. Future evaluations of collaboration programmes need to take account of the specificities of each programme and its context much better, and need more convincing ways of demonstrating the causality and contribution of programmes.

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Jakob Edler

This chapter reviews policy instruments that are primarily geared towards supporting private demand for innovation. It starts by introducing the logic of demand-side innovation policy. It defines demand-side innovation policy as all public action to induce innovation and/or speed up the diffusion of innovation through increasing the demand for innovation, defining new functional requirements for products and services and/or improving user involvement in innovation production (user-driven innovation). A typology of demand-side instruments is suggested. The core of the chapter is the discussion of the effects of the main demand-side instruments. The chapter also highlights evidence and intelligence gaps in the literature. It finally demonstrates that innovation policy has still to learn from other policy domains with regard to the design and effects of demand-side measures, and, conversely, domain policies have to improve their appreciation of the potential of demand-side measures to support innovation.

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John Rigby

Pre-commercial procurement is procurement by public sector organisations of research and development services with the aims of developing the prototype of a product or service for which the public sector may be a customer, or where there is a public policy need for that good or service to be produced, and with the additional effect of supporting industry in its attempts to innovate. Pre-commercial procurement is typically conducted through an R & D competition, usually in two stages. In Europe, the European Commission has defined a specific pre-commercial procurement procedure, and the Community supports such procurements in a limited number of cases. Member states have also developed their own approaches, and in the UK and the Netherlands the naming of these approaches (the SBRI in the UK, the SBIR in the Netherlands) indicates that such schemes are based on the US SBRI programme. Pre-commercial procurement normally results in a contract being placed for an R & D service, although the US scheme includes both contract- and grant-based financial support. Both contract and grant approaches are discussed in the chapter. Pre-commercial procurement is a demand-side measure when, as in the case of contract-based procurements, a specification is used to identify a need; but it may also exhibit supply-side aspects when grants are issued and specifications are informed by industry or technology priorities. Recently, within the European context, pre-commercial procurement has been formally linked to procurement of actual goods and services within a complex legal process which is part of the new procurement directives. This development, known as the Innovation Partnerships Procedure, is new and as yet untried and untested.

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Elvira Uyarra

Policy makers at all policy levels have in recent years shown an increased interest in the use of public procurement to harness innovation. The aim of this chapter is to review the upsurge of initiatives to support public procurement of innovation and to offer insights into the effectiveness of these policies. To do so, it proposes a delineation of these policies, including their academic rationales for intervention and the types of instruments used. The chapter further considers the specific conceptual and methodological issues characterising the assessment of such policies. It examines a variety of measures to facilitate the promotion of innovation through public procurement, ranging from legislative measures to financial incentives, targets, information provision and mechanisms to secure dialogue between users and producers. They range from more formal interventions, to umbrella programmes and strategies, to concrete instruments. Evidence of impact is fragmented. The effectiveness of certain instruments such as procurement plans in national ministries has been hampered by a lack of key performance indicators and a clear commitment and sanction mechanisms. More promising have been initiatives to support training and networking to support capability building in the public sector. Instruments to support the joint definition of needs and solutions, such as the competitive dialogue and the Lead Market Initiative of the European Commission, have been found to be conceptually sound and to be able to deliver, but have often been applied inappropriately. Finally, instruments seeking to deal with the risks associated with procuring innovations, such as forward commitment procurement (UK) and a Korean insurance programme, have had positive impact. But, for most of the measures for which some evidence exists, the main problem is not the basic concept, but the lack of rigorous implementation and assessment.

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Knut Blind

Regulatory framework conditions have been identified as important factors influencing the innovation activities of companies, industries and whole economies. Using an endogenous growth approach this chapter delivers a conceptual analysis of the impacts of economic, social and institutional regulations on innovation. Economic regulations tend to keep a high level of competitive pressure, which forces companies to realise innovations. Social regulations mainly addressing negative external effects have strong impacts on the direction of innovation activities towards the protection of the environment, the health and safety of citizens and the like. The chapter also presents some evidence on the very heterogeneous institutional regulations, including mixed evidence on the innovation effects of intellectual property rights. Overall, the evidence on the impact of different types of regulation on innovation is patchy regarding the type of regulation, the sectors, the companies and the time horizon of the impacts. In general, the short-term impacts of regulations are often negative for innovation, in contrast to their often positive long-term implications. The chapter highlights research gaps such as the lack of appropriate indicators of the regulatory framework, and a better understanding of the strategies of companies to comply with and to influence regulation. It finishes with a set of policy recommendations, including a stronger mutual recognition of the interplay of existing and new regulations with innovation and innovation policy instruments, as well as improving the implementation of regulations to foster innovation.

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Barbara Jones and Damian Grimshaw

Skills and innovation are often claimed to be the twin engines of economic growth, but there is a surprisingly limited appreciation in the literature on innovation and innovation policy of how these core features combine and interact both at the firm level and at the interface between tertiary education and industry. Because of that lack, this chapter develops a number of key analytical concepts to make the relevant links between skill formation and innovation performance. The chapter in particular reports the relative merits and challenges of two important areas of education and training policy, that is, levy schemes for enterprise training and policies for high-level skill formation. Against the background of little systematic evidence as to the link between skill formation and innovation performance, two strong key findings emerge: a positive association between innovative firms and the level of expenditures on formal and informal training compared to non-innovative firms; and that firms benefit from a significant positive effect by developing their ‘knowledge pool’. Overall, there is an apparent need for policy to support high skill-mixes as well as intermediary technical skills within firms – rather than through buy-in – through better incentives. Moreover, there is a strong need to develop improved concepts and empirical research to better understand the benefit of skills for innovation performance, not least in order to help firms to better grasp the overall benefit of skills and thus invest in them.

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Knut Blind

In the past, standardisation and standards have often been perceived as a contradiction to innovation. This chapter provides conceptual arguments and empirical evidence that standardisation as such and standards can be used to promote innovation. After a brief section on the general economic functions of standards, the relationship between research and standardisation is examined by first showing both standardisation as a technology transfer channel and standards as enablers and facilitators for research. The chapter then focuses on the difficult but promising issue of transferring intellectual property rights (IPR) into standards, especially via standard essential patents, and shows how this can be beneficial both for IPR holders and for standards implementers. A newly emerging field concerns the role of standards and standardisation in procurement processes, which are more and more forced to address and promote innovation. In the final section, the results are summarised and recommendations for policy makers are derived.

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Philip Shapira and Jan Youtie

This chapter considers the available evidence on the impact of technology and innovation advisory services. Technology and innovation advisory services are services provided directly by specialists particularly to small and medium-sized enterprises to support and stimulate improvements in business operations including productivity, efficiency, production, quality, waste reduction, information technology and logistics. The review focuses on developed economies where well-established technology and innovation advisory services are found. We provide an overview of technology and innovation advisory services, including the major types of approaches and services adopted and the rationale for public support. This is followed by a discussion of leading examples of technology advisory and innovation services in the UK and in other developed economies. The chapter then collates and examines the available literature, including formal evaluation studies, selected academic papers and accessible grey literature, to assess the evidence on impact. The reviewed studies generally find that technology and innovation advisory services provide positive benefits for participating firms. The types of benefits achieved include reductions in costs, improved quality, reduced waste and improved environmental performance, higher productivity, and new product development and innovation. Levels of investment involved (by both the public sector and private participating firms) are typically not high. Similarly, the net benefits achieved are often relatively modest for individual projects, although such incremental improvements add up and can make the difference to SME survival or decline. Lessons and insights for policymakers are highlighted.