Innovation Policy and Knowledge
politics
NORSI LECTURE NO 2
OCTOBER 24 2012
BENGT-ÅKE LUNDVALL
AALBORG UNIVERSITY
Innovation Policy in the shadow of the
crisis
 The rich countries are stuck with low growth and
they look for innovation policy as a potential to get
back on track. See EU2020, Innovation Union,
ITIF, OECD-strategy. But ambivalence on public
investment in the era of public deficit reduction.
 Emerging economies grow but China and others
are not happy with their innovation record. Now
emphasis upon ‘independent innovation’. Cf for
Chinas 15 year plan for Science and Technology.
ITIF refers to it as ‘innovation mercantilism’.
A few words about the crisis
 First bank crisis (2007) now (2010) public finance


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crisis in Europe
At the root of the crisis is a dysfunctional finance
system and a dysfunctional euro-construction.
Dilemma – need for expansion of demand but no
room for fiscal expansion.
Euro-break down with potential global
consequences
Austerity in Europe will spill over on the rest of the
world.
Enhanced Competitiveness as a way out
of crisis
 Feather-bedding +Austerity strategy –
devaluation, lower taxes and less restrictions on
business (the firm as a rational optimising unit)–
perhaps with protectionism.
Vs
 Competition pressure + Investment strategy
– revaluation and opening to foreign competition
(the firm as a satisficing unit).
Excerpt from Obama’ 2011 State of the
Union speech
 The first step in winning the future is encouraging
American innovation………In America, innovation
doesn’t just change our lives. It’s how we make a
living………..throughout history our government
has provided cutting-edge scientists and inventors
with the support that they need. .
 We’ll invest in biomedical research, information
technology, and especially clean energy technology
– an investment that will strengthen our security,
protect our planet, and create countless new jobs
for our people.
China’s 15year plan
 On February 9th, 2006, the State Council presented
its strategy for strengthening China’s scientific and
technological progress in the coming 15 years (State
Council 2006a). The plan reflects ambitions to make
China one of the world’s most innovative countries..
Excerpt from the “EUROPE 2020"
STRATEGY
 The exit from the crisis should be the point of entry
into a new sustainable social market economy, a
smarter, greener economy, where our prosperity
will come from innovation and from using
resources better, and where the key input will be
knowledge. These new drivers should help us tap
into new sources of sustainable growth and create
new jobs to offset the higher level of
unemployment our societies are likely to face in
the coming years.
 BUT HOW DOES THE NEW EUROPEAN
STABILISATION PACT FIT?
Science policy
 In the US Annevar Bush at the end of the Second
World War produced the report:Science: The
Endless Frontier
 Bernal produced the first systematic measurement
of R&D in 1939 for UK.
 Both of them argued that a major reason for
supporting science was its economic impact but
none of them were economists.
 The aftermath of the War – not least the Los
Alamos project and the cold war gave strong
background for sectoral science policy especially in
the US.
Technology policy - From guns to butter
 1550 the King in England established a technology
policy program to develop guns made of iron – had a
dramatic impact in triggering the industrial
revolution.
 In Denmark dairy technology was developed and
diffused through the new co-operative movement
amopng farmers in the last half of the nineteenth
century.
Innovation as an interactive process
and innovation policy
 New developments where the forward and
backward links to production and market are
recognised.
 To develop new products you need to keep an eye
on the market and establish a relationship to the
most advanced users
 Combination of framework conditions (incentives
and competences) and promotion of private
initiatives – including R&D-efforts.
Multilevel governance and innovation
policy
 National governments commit themselves to
science and technology policy – for instance
through tax rebates for investors in R&D.
 Regional authorities engage in cluster building
and cities in attracting the creative class.
 EU in charge of Framework programs and
Regional funds to support demand oriented
research cooperation and competence building in
weak regions.
Innovation systems and innovation
policy
 Look for missing links, underutilized competencies
 Do not forget to build competence also on the user
side
 Low cost government operations can be to:
map the national innovation system
 pursue technological forecasting
 promote new network formations
 complement to cluster policy

Innovation is not just about science
 Need to promote science to enhance absorptive
capacity of the whole economy – STI.
 Need to promote competence-building and
organisational change in order to enhance
absorptive capacity at the level of firms- DUI.
 Need to combine intense competition with network
building to promote innovation at all levels.
 Need to ensure diversity in research funding in
order to assert diversity in search and solutions.
Probability to introduce product innovation
(with controles for sector, size and ownership)
STI
%-share 0.2797
Odds 1.710
ratios
P-value 0.0019
DUI/STI Low
DUI
learning
0.2623 0.2610 0.1970
5.217 1.000 1.798
<.0001
0.0016
Implications for innovation and
knowledge policy
Innovation policy needs to:
 Establish
the general knowledge base
through investment in basic research and
formal education.
 Establish links between public research
and industry.
 Combine the promotion of R&D efforts in
industry with the promotion of learning
organisations.
Innovation is relevant both for Low
tech and High tech-sectors
 Most attention so far to 4. Great potential also in 2
and 3.
Low tech
High tech
DUI-mode
1.
2.
STI-mode
3.
4.
The learning economy and knowledge
policy
 More rapid transformation
 Shorter product life cycles and shorter life time for
competences (halving time = 1 year for computer engineers)
 More frequent shifts in working tasks - the art of forgetting
The learning economy raises new
challenges
The learning economy calls for knowledge policy and
for new perspectives on:
 Education – life long learning
 Working life – learning while working
 Role of trade unions – promote access to learning
 Labour markets – their impact on competence
building
 Industrial relations – learning organisations as
common goal for management and workers.
From the Knowledge Triangle
to the Knowledge Rectangle
Innovation
Knowledge
Education
Organisational
Learning
Human resources and innovation policy
Human reosurces are key to innovation so we need
to focus upon the ’Innovation and Competence
Building System’ that includes:
 Labour market institutions
 Industrial relations
 Vocational training
Lessons to be learnt
 All dimensions of STIK-policy are necessary in the
learning economy
 Combining investment in knowledge with
strengthening the demand for knowledge.
 Need to promote DUI and STI-modes in Low Techas well as High Tech-sectors.
 Innovation policy need support from education and
labour market policy.
The ICT-experience and a new techno-economic
paradigm based upon eco-innovation
 Lesson from the information technology revolution
is that massive government intervention is
necessary – cf for the role of the US military in
ICT.
 A systemic effort with
Investment in science
 Investment in education
 New infrastructure
 New standards
 Subsidies
 Public procurement

Combining innovation policy with
industrial policy
1.
2.
3.
4.
5.
Select industries and technologies on the basis:
1. Needs and demand perspective
2. Underlying knowledge and learning and
competitive advantage (pharmaceuticals
versús mechanical engineering).
Invest in knowledge and promote
entrepreneurship and innovation in these areas.
Stimulate demand for these sectors
Build infrastructure in relation to these areas.
Establish new forms of private-public interaction
– not feather bedding but critical dialogue!
Broader than triple helics!
Rethinking innovation policy
 Strategies promoting innovation to stimulate economic
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growth may not be sustainable.
Certain innovation processes have negative impact upon
working conditions, climate change and quality of life.
Requires selective innovation policy with a more clear
direction toward ecological, social and human needs.
It also points to the need for an entrepreneurial state and
for the creation of markets through policy initiative.
It does not imply a big public sector – public ‘steering’
may take place without public ‘rowing’!
Limits of market failure perspective
 Especially in the current crisis situation it is a serious
mistake to see the role of goverment as limited to be
problem-solver and market failure fixer.
 There is a need for an entrepreneurial state that through
its initiatives helps the opening up of new technoeconomic trajectories – see the important booklet by
Mariana Mazzucato on the entrepreneurial state.
 Interesting case is the successful creation of markets for
green technologies in China.
 The North and West suffers more than ever from
neoliberal ideological bias and lack of pragmatism.
Intellectual property rights – The basic
dilemma

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Protection to give incentives to invest in the
development of new technology
Promoting the diffusion of new technology
On balance company lawyers favour protection
while economists favor diffusion
The two sides of patenting
 First we think about patents as barriers to access to
knowledge. A time limited monopoly to the use of
knowledge
 But they might also increase access to knowledge –
what might have remained secret is codified and put
into the public sphere.
Alternatives to the use of IPRs as incentives
 Government production of knowledge
 Government support to the production of knowledge
 Prizes to the one who first come up with a solution
or a new insight
Patents should not be allowed when the knowledge
involved is generic – of general interest – genes and
soft-ware.
The learning economy – differs from the
knowledge-based economy!
All economies are knowledge-based: what is new is the high
rate of change in competences required (depreciation rate
of knowledge investment is high!)
 The learning economy - a new perspective on economic
dynamics
Change and learning
 Selection, transformation and speed-up of change
 Social and economic exclusion in the learning economy
 Social dimension – trust and interactive learning


Competence building at the firm level
Implications for knowledge management
 Implications for policy making – including ‘new new deal’

Characterising the learning economy
 More rapid transformation

shorter product life cycles
shorter life time for competences (halving time = 1 year for computer
engineers?)

more frequent shifts in working tasks

 New kind of competition

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Learning based rather than knowledge based
Success of people, firms and regions reflect capability to learn
 Inherent polarisation in the Learning Economy
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Exciting but stressful for the rapid learners - exclusion of slow learners
End of European regional convergence
The learning economy perspective raises
new challenges
 The learning economy remains effective only as
long as it is rooted in social capital (trust, integrity,
solidarity and openness). Inherent forces in the
globalising learning economy undermine social
capital by increasing uncertainty and polarisation.
 The learning economy calls for new perspectives
on education, working life, labour markets and
industrial organisation - and for integrated
strategies in firms, trade unions and government.
Policy implications of the learning
economy-perspective
 Education: Educate in order to establish learning
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capability. Give access to life long learning.
Labour markets: Need for labour market institutions and
trade unions that support competence building (new
workers’ contracts emphasising competence building).
Firms: Promote the diffusion of learning organisations.
Income distribution: Need for new new deal with focus on
redistribution of learning capability.
Responsibility of last resort for the public sector –
otherwise only the already skilled get more training.
The four clusters

Discretionary learning


Lean production

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Job rotation, team work and quality control but little discretion
Taylorism

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A lot of learning, complex tasks and delegation of responsibility for
quality
No problem solving, no autonomy
Simple production

Little learning but some discretion and problem-solving
The national context affects what is good
practise knowledge management
 Education and labour markets differ (Lam –
Lundvall paper)
 The mode of learning in firms differs across
countries (Lorenz – Lundvall-Valeyre paper for
conference) – affects what is going on inside firms
 Social capital and networking opportunities differnetworks and alliances show different patterns.
Results: International diffusion – after
correcting for sector and job function
 Discretionary learning and lean production in Nordic
countries and Netherlands
 Little DL and a lot of Lean production in UK, Ireland
and Spain
 Taylorism and simple production in Portugal, Greece
and Italy.
 Germany and France in between 1 and 2 above.
Conclusion
 In order to explain how new ideas are brought to
the market and transformed into economic
performance it is necessary to take into account
how learning takes place in working life.
 National systems of work organisation and
learning are dramatically different.
 NSI is a useful perspective also for microstudies of
specific firms. In spite of globalisation the
management challenge is nation specific.
 THANK YOU FOR YOUR
ATTENTION