Modernizing governance of innovation policy through ‘decentralization’: a new fashion or a threat to state capacities?
Erkki Karo
Research Fellow, Department of Public Administration, Tallinn University of Technology, Estonia
Abstract
This paper contributes to the current debates on the relevance of economics research for innovation policy in two ways. First, the paper argues that innovation policy debates in economics are converging on a 'decentralization thesis', which posits that globalization and decentralization of production and innovation systems should be paralleled by decentralization of innovation policy systems. By analyzing the 'systems of innovation' literature the paper highlights the weaknesses of this thesis from the perspective of public policy making. Second, the paper argues that by integrating economics-based discussions of innovation policy with the 'public management' perspective of policy systems, innovation research has better potential to open-up the 'black-box' of policy making than by using the 'policy studies' perspective, which has been already introduced to innovation policy literature.
Keywords
innovation policy; innovation governance; systems of innovation; policy capacity; administrative capacity; public management
Article Text
Over recent years the system-level approaches to innovation - systems of innovation, regional innovation systems, (neo-) developmental state, open innovation etc. - have been converging on a common notion that globalization and decentralization of production and innovation systems should inevitably be paralleled by (if not leading to) national and international decentralization of innovation policy systems. These ideas can be found both in the literature of developed economies (e.g., Block 2008; Block & Keller 2011; Borras 2009; Breznitz 2007; O'Riain 2004) and developing economies (e.g., Chaminade et al. 2009; Lundvall et al. 2009; Radosevic 2009; Rodrik 2004; also Rodrik and Hausman 2006)[1]. In this paper this consensus is described as 'decentralization thesis' positing that traditional hierarchical government structures (classic institutions of industrial policy) are not suitable for supporting private sector activities, which are characterized by growing modularity, decentralization, networking, unpredictability, experimentation etc. Therefore, political systems need to develop more flexible, adaptive, networked, experimental and decentralized policy institutions to parallel the techno-economic and private sector dynamics. Different approaches emphasize decentralization of both institutions and processes of innovation policy to provide greater access for new ideas and relevant stakeholders, which would ideally lead to higher levels of policy capacities for designing and implementing policy measures and mixes. [2]
In this context, the key academic challenge of the economics research on innovation is to extend the economic theories closer to the policy-making realities (e.g., Chaminade & Edquist 2005; Edquist 2001a; 2001b; Edquist & Chaminade 2006; Mytelka & Smith 2002; Smith 2000). In recent years, innovation policy scholars have developed new approaches to refine the traditional economic analysis of innovation policy from explaining the rationales for public policies towards understanding the 'black box' of policy making. On the one hand, studies like Flanagan, Uyarra & Laranja (2011), Laranja, Uyarra & Flanagan (2008), and Uyarra (2009) have used the 'policy studies' perspective of policy systems. This approach seeks to explain how certain policy ideas emerge within and 'travel' through the policy-making system and it places the key emphasis on agenda setting, policy actors and agents, and interactions as the key variables of the policy systems. On the other hand, studies like Karo & Kattel (2010a; 2010b), Suurna & Kattel (2010) and to an extent Braun (2008a; 2008b) use 'public management' perspective. This approach places the key emphasis on institutional constraints and the 'transformative' power of the politico-administrative system, which in turn shape policy ideas and its' acceptance within the policy-making and implementation systems. This paper claims that public management perspective offers more useful tools for increasing the policy-level relevance of innovation policy research. The analytical lenses of this perspective are able to explain the institutional constraints of the policy systems and assess the emergence of recent fashions in innovation policy governance - such as the 'decentralization thesis' - more contextually than the policy studies perspective.
This paper reviews the 'systems of innovation' (SI) literature as one of the key perspective for innovation policy design and governance, at least at the national level.[3] The aim is to provide a critical analysis of the policy relevance of the SI literature and the coherence and relevance of the 'decentralization thesis' in relation to innovation policy making (see Borras 2009 and Chaminade et al. 2009 as recent examples of the analysis of the 'decentralization thesis' in the context of SI research). The next section discusses the rationale and limits of the SI research in the context of innovation policy. This will be followed by the introduction of the public management perspective of policy systems into the SI based policy approaches. The concluding sections highlight the benefits, limits and implications of the broader approach to innovation policy studies and the 'decentralization thesis'.
[1] Note that the discussion of this paper is limited to the nation state level. Thus, the popularity of sectoral or regional perspectives on innovation (implying systemic analysis on these levels) does not fall under the 'decentralization thesis'. Rather, on the sectoral and regional level the 'decentralization theses' is revealed in politico-administrative developments, where differences between national and regional policy contexts and institutions matter. This is not explicitly discussed in this paper.
[2] In this article 'innovation policy' is understood in broad terms, i.e.: 'actions by public organizations that influence the development and diffusion of innovations' (Edquist & Hommen 2008b: 8-9).
[3] Since the end of the 1980s the SI approach (i.e., Lundvall 1992; Nelson 1993) has emerged as the key theoretical or conceptual approach for discussing innovation policy (for overviews see Godin 2009; Sharif 2006; Lundvall 2010; also organizations such as the OECD and the EU are consciously using SI as the analytical framework; countries like Finland and Sweden have used the SI framework as the explicit and symbolic policy model etc.).
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