The IPL newsletter: Volume 8, Issue 152

INTRODUCTION

This newsletter is published by The Innovation Policy Lab at the Munk School of Global Affairs, University of Toronto, and sponsored by the Ministry of Research and Innovation. The views and ideas expressed in this newsletter do not necessarily reflect the views and policies of the Ontario Government.

ONRIS Discussion Papers

This group of four discussion papers was prepared for the Ontario Ministry of Research and Innovation by ONRIS members in the summer of 2006. They deal with knowledge and innovation policy in Ontario. Papers include: “Structuring Innovation in Knowledge Economies: A Comparative Look at the Collaborations and Related Policies Supporting Ontario’s Innovation Capacity”; “Knowledge Transfer and Innovation: A Review of the Policy Relevant Literature”; “Creativity, Culture and Innovation in the Knowledge-Based Economy: Opportunities and Challenges for Ontario”; and “Knowledge and Innovation: A Discussion Paper”.

National Innovation System: Analytical Focusing Device and Policy Learning Tool

Bengt- Ake Lundvall, MERIT
This paper focuses on the concept of national innovation systems and innovation policy. It tracks the evolution of the concept in the scholarly and policy literature and identifies some analytical difficulties with the way the term has come to be used. It combines both micro and macro approaches to policy and argues that without a basic understanding of the combination of organizational and interorganizational learning it is impossible to establish the link from innovation to economic growth. Briefly, the focus should be much more on people and competence and upon how the relationships and interactions between people promote learning. This is especially important in the current era of the globalizing learning economy where the key to success for individuals, firms, regions and national systems is rapid learning

The most relevant section of the paper deals with the link between innovation systems and policy. It is particularly useful for Canadian innovation policy to the extent that analysis is focused on the small, open economies of Nordic countries. These are often interesting comparators for the Canadian context.

First, the paper argues that a broader definition of innovation policy is required. Innovation policy is too often based on too narrow an understanding of concepts such as innovation and knowledge. International organizations dominated by big and medium-sized countries including OECD and the European Commission tend to contribute to such narrow perspectives and this may prove especially harmful for small countries. Another bias is the focus on the competitiveness of High-Technology sectors to the neglect of the knowledge base of all the sectors.

A New Concept of Innovation
The policy recommendations build upon a broad definition of the innovation system that encompasses not only radical change in technology but also incremental technical change, diffusion of technology as well as the introduction of products and processes new to the firm. One assumption is that at least for small countries the major economic impact of innovation comes from incremental innovation and intelligent use of new technologies. In the current global economy we should not expect to witness major
domestic technological innovations with great impact on economic performance of the domestic economy.

Small Countries 
It has been shown that small countries are handicapped in international competition in high technology or science-based economic activities (Fagerberg 1995). The argument is that it is much more expensive to produce new knowledge than it is to replicate and use it on a wider scale. Therefore there is an expectation of significant scale economies in all knowledge-based activities. In spite of this findings indicate that among the ten countries in the world with the highest GDP per capita at least 6 must be characterized as small countries. Medium-sized countries in Europe do not do better than small European countries in this respect. Looking at a broad set of indicators of the new economy OECD also finds that many small countries are doing surprisingly well (OECD 2001). This suggests that there is much to learn from smaller economies.

Universities
This type of learning capacity has to be understood in light of institutions for training, research and education. Universities are key in the learning economy – but their role must be understood in terms of their broader social function. Strategies of alliance and networking have become a key factor behind the success of universities. But it is fundamentally important that the universities most significant contribution to society and the economy remains well-educated graduates with critical minds and good learning skills in the future. It is also worth noting that merely to expose the universities to market processes or to political interventions from governments is not tenable. The report argues that human resources are the key to linking universities with industry.

Organizational Change in the Private Sector
This report suggests that the bottlenecks for knowledge transfer and collaboration are often in the private sector. Data presented in the study indicate that firms that combine functional flexibility with investment in human resources; incentive systems and networking are much more prone to innovate irrespective of sector and size. It also illustrates that there is no clear distinction between innovation management and knowledge management or between organizational characteristics that promote adaptive learning and also promote innovation.

Policy Co-ordination
The concept the learning economy has its roots in an analysis of globalization, technical innovation and industrial dynamics. But the concept also implies a new perspective on a broad set of policies including social policy, labour market policy, education policy, industrial policy, energy policy, environmental policy and science and technology policy. Specifically, the concept calls for new
European and national development strategies with co-ordination across these policy areas.

Each of these areas of analysis includes a variety of policy recommendations that have relevance for the Canadian, as well as provincial contexts.