Innovation research

Report of the thematic expert group: Innovation research

The role of innovation in economic development
- Scope for mutual policy learning through innovation research

The need for innovation policy learning
Sustainable economic development can only be achieved through smarter use of limited resources, i.e. innovation. For this reason, innovation is high on the agenda of all advanced economies, as demonstrated by the current OECD Innovation Strategy project.
While the concept of “market failure” may justify that there is a role for government innovation policy, it gives no guidance to how governments might intervene (or how much, as the socially desirable level of investment is unknown). For this reason, innovation policy in most countries is based on evolutionary and institutional economics. This line of inquiry also provides a broader set of  justifications for government policy. Firms are seen as boundedly rational: They make competent decisions based on available knowledge, however this knowledge is bounded, and increasing the knowledge base costs time and resources. Current competence also affect the ability to make use of knew knowledge, thus firms will diverge in capability over time. There is a possible role for government to help improve this learning process, which goes beyond financial subsidy.
With this evolutionary perspective, whether a policy intervention is justified and what form it should take cannot be decided a priori, from theoretical considerations. The best we can do is to observe whether previous policy actions appear to have contributed to a better functioning innovation system, and draw lessons from this. Policymaking needs to be based on learning.
Since theory can only give limited guidance on what is an “optimal” policy, comparing your performance with others is an important mode of policy learning. In order to be meaningful, such comparisons must go beyond simplistic benchmarking exercises, and include a deep understanding of the differing contexts in which policies have been applied.

Innovation research and policy learning
This need for contextual understanding has motivated a number of countries to invest in research on innovation, in addition to Sweden and Finland:

• In the US, the National Science Foundation has initiated a program the “Science of Science & Innovation Policy (SciSIP)
• In the UK , a new innovation research center has been set up jointly by DIUS, NESTA, the Economic and Social Research Council and the Technology Strategy
• The Danish strategy paper “Forsk2015” issued by MVTU, identifies research on “innovation and competitiveness” as one of six priority areas
• The Norwegian Research council funds two competence centers on the role of innovation for economic growth, through the VEKSTFORSK program.

Innovation research in Sweden
VINNOVA’s predecessor organizations have funded policy motivated innovation research since 1981. Initially a small scale effort, this was expanded in 2000 to a competence center program, which is now approaching the end of its second round.  According to a mid-term evaluation of the second round, by Advansis OY (Tarmo Lemola and Kimmo Halme), “The Innovation System Research on R&D and Growth Programme of VINNOVA has been a broadly successful initiative. In a short time the four centres have been able to establish and develop strong, creative and attractive intellectual milieus for research and education.” VINNOVA plans to issue a new call for proposals, for a new four-year period, in May 2009.
In last year´s government research and innovation bill, the budget for the Swedish Research Council also included a new strategic program for “research on the conditions for economic growth”.

Innovation research in Finland
As central policy makers, Ministry of Employment and the Economy (MEE) and Tekes have assumed central role in the building of Finnish knowledge base for innovation policies. While they have avoided direct institution building, MEE and Tekes have been in charge of cooperation, coordination, and financing of research on innovation.

Since the early 1990s, the predecessor ministry of Ministry of Employment and the Economy (MEE) and Tekes initiated national research funding (programs) on technology and innovation policy as a response to the increased importance of technology and innovation for Finnish society. Policy making bodies, such as MEE and Tekes, had contracted for individual research projects, and regarded national research program as an improved tool understand the relationship between technological and social change. In particular, well-structured research programs improved agencies ability to identify emerging trends, focus future research needs, and apply strategic knowledge in policy making and thereby develop the Finnish system of innovation.
Reorganization of research funding and contracting into national research programs allowed policy makers also to foster competence building within Finnish research community, as well as target research in critical and most policy-relevant issues. Three major research programmes on technology and innovation policy have been implemented, the ProACT research programme 2001-2005 being the last one. Currently, Tekes is running well-organized and systematic calls for innovation research, whereas ministry research efforts have been re-focused around the new National Innovation Strategy.

Systematic development of capabilities in evaluation of innovation environment, agencies, and policy instruments has been essential element of the building of Finnish knowledge base. MEE has conducted regularly evaluations of institutions under its administration, and Tekes established Impact Analysis unit in 1999 to benchmark the innovation environment (e.g. by indicators). The unit evaluates the impact of Tekes funding and has contributed to the development of technology programmes as a key policy instrument for innovation. Finnish efforts have emphasized the benefits of close linkages between evaluation activities and other research on innovation.

Suggestions for future cooperation
We see interesting policy learning opportunities between the Swedish and Finnish innovation research programs, both in terms of program organization and content, and both between funding organizations and between research groups/programs. Sweden and Finland share enough conditions to make comparisons meaningful, while there are enough differences to make comparisons interesting.

As a first step, we should develop contacts between VINNOVA and TEKES, to compare management strategies, selection of research themes, and methods for assimilating research results in policy practice.
As mentioned previously, VINNOVA´s Innovation Centers program is in the final year of its second four year cycle, and a new call for proposals is being planned for May this year. This means that currently VINNOVA is thinking both about the form and content of the next generation, but have not reached any final conclusions.
The new National Innovation Strategy of Finland, which was launched in the Fall 2008 has refocused Finnish innovation knowledge needs. The strategy argued that Finland needs to emphasize more strongly emerging, new areas of innovation activities, such as user-driven innovation, services, collaborative innovation communities, as well as pursue more aggressive international activities in innovation policies. The strategy establishes in an important way the framework for Finnish innovation policy intelligence and research activities.
One major vehicle of international cooperation in innovation studies has been the VISION Era-Net “Shared Knowlegdebases for Sustainable Innovation Policies,” co-ordinated by Ministry of Employment and the Economy and key innovation policy actors from 10 countries as partners, including Tekes and VINNOVA. This four year exercise has been a major learning and knowledge sharing experience, and will held its final conference in Helsinki on 30-31st March 2009. The project has also identified broad set of mutual potential cooperation areas between European countries.

In the longer term, a comparison of our research portfolios will help us jointly identify research areas of common interest, where we can foster cooperation through joint workshops, mobility of researchers etc.