Transforming the Role of Public Policies for Innovation: Governing the Evolutionary Process

Abstract

While the role of public sector for innovation has been downplayed in the dominant, market-centered view, advanced economies are facing challenges to develop novel approaches to innovation policies. Reasons behind this include the changing focus of innovation and the catch-up by the latecomer countries. Based on a detailed case study of the implementation of a novel approach to innovation policy, demand- and user-driven innovation (DUI) policy, in EU and Finland, this paper examines how the role of the public sector has been transformed in implementing innovation policies and argues that the novel role of the public and semi-public sectors in a DUI policy can be understood as the governance of the evolutionary process of innovation, where the public and semi-public sectors should be deeply involved in the innovation process. This is contrary to the conventional role of the public sector to provide useful complementary resources such as institutional frameworks, funding, and education, while standing outside the innovation process. From institutionalist perspectives, the Nordic welfare and corporatist institutions, including the active third-sector organizations, might play a key role in implementing DUI policies.

Keywords: Demand- and user-driven innovation policy, Public procurement of innovation, Evolutionary process governance, Enabling welfare state

JEL Classification: O32, O38