The European Union realises that innovation is vital to maintain
competitiveness in the global economy. Therefore, the EU is investing in
policies and programmes that support the development of innovation to better
convert research into improved goods, services or processes for the market. Some
examples, Europe supports the development of innovation in priority areas
through the H2020 programme and fosters the commercialisation of innovation
through Public Procurement and Demand-Side Policies. It also monitors
innovation performance through the European Innovation Scoreboards at a
national and regional levels to identify where policy updates may be required. At
a UK level, the UK Research and Innovation body brings together 7 Research
Councils, Innovate UK and Research England to create the best possible
environment for innovation to flourish. Innovation is also supported at a
regional level. In North Yorkshire for example, the Biorenewables Development
Centre offers support to local SMEs for the scale-up of their innovation
through ERDF funding.
With multiple policies and innovation support programmes
across different EU countries and regions, it may be necessary to take a step
back and ask ourselves ‘what does the term innovation really mean? Innovation has been described in many ways; for example, as a new
creation of economic significance which can be formed by new elements or a
combination of existing elements. According to the European Commission,
innovation is the use of new ideas, products or methods where they have not
been used before.
However, despite all the initiatives supporting innovation, not
all promising ideas reach the market. What characterises a successful
innovation then? Are there any red flags that indicate a potential innovation’s
failure?
In the 80’s many people asked themselves these very same
questions attempting to understand the competitive advantage that Japan had won
over the US and Europe. Experts realised that the success of a specific idea
depended on many factors which, among others, include the organisations working
around a specific innovation, how these organisations interact with each other
and the policies surrounding the innovation which may help drive or hinder the
idea. Experts also realised that to be able to understand and even influence an
innovation process, it was necessary to study all the factors surrounding an
innovation, later labelled the Innovation
System. Chris Freeman, an academic at the University of Sussex studying
innovation, defined ‘Innovation Systems’ as the network of institutions in the
public and private sectors whose activities and interactions initiate, import,
modify and diffuse new technologies. The innovation system approach diffused
rapidly as it gave policy makers the necessary tools to compare different
innovation support methods.
Innovation systems can be analysed to understand its
strengths and potential red flags. Marko Hekkert from the University of Utrecht
put together a guide to help policy makers with the analysis of technology
innovation systems. Prior to the analysis, it is important to define the
boundaries of the innovation system including whether the object of analysis
will be a product/technology or knowledge field, or a region or nation. This allows
to differentiate between several types of innovation systems such as National or Regional Innovation Systems, which aim to understand a nation or
region’s innovation performance; a Sectoral
Innovation System which focuses on the assessment of a specific industrial
sector; and Technological Innovation Systems which circle around certain technological development.
According to Hekkert’s guide, the analytical process starts with
a structural analysis. This exercise
should provide info about the elements that comprise the system, including key
organisations, the relations among them and the rules that shape these
interactions. Any organisation that interacts with the innovation under study
is known as an actor of the innovation
system. Actors may include government bodies, knowledge institutes,
educational organisations and industry among others. Similarly, the rules that
shape interactions between actors are known as institutions of the innovation system. Institutions can be
classified as formal, those designed and enforced by an authority, and informal
which are shaped by human interactions (i.e. social norms, beliefs).
If we look at an innovation system as a set of building
blocks that you would like to use to construct something, defining the
boundaries of your innovation would be equivalent to decide what you are going
to build, its size and the purpose of the construction. Similarly,
understanding the structure of your system would be equivalent to get
familiarised with the type of blocks you have, the compatibilities between the
different blocks and the rules you are going to follow for your construction.
It is important to remember that the structural analysis of the
innovation system is not enough on its own to fully comprehend the complexity
of an innovation system, as systems with similar structures may function in
completely different ways if, for example, they are based in different
countries where different social norms or beliefs apply. In consequence, an
analysis of the activities carried out by the actors of the system is also
necessary. In an innovation system, these activities are generally called
functions. So, what are the key functions
of an innovation system?
Marko Hekkert defined seven main functions for the analysis
of a Technological Innovation System. These functions include the role of
entrepreneurs (1), who take ideas into actions and therefore reduce the
uncertainty about a specific technology. Other key functions of an innovation
system are knowledge development (2) and diffusion (3); understanding the key
research and development efforts being made towards a specific innovation, as
well as how the generated info flows between the actors involved is very
important. The functions of guidance on search (4) and resource mobilisation (5)
focus on resources; the former includes the activities in place (i.e.
incentives and pressures) to guide the use of resources towards a common
direction; the later analyses the potential of your innovation to mobilise a
series of resources. The last two functions, market formation (6) and
counteracting resistance to change (7), are related to the type of market
available for the innovation under study, and the mechanisms in place for the
innovation to be legitimated and accepted by consumers respectively.
The structural and functional analyses allowed us to
understand ‘how’ the system works. Now
we need to go a step further to learn how well the system functions. How do we
assess the ‘how well’?
We need to pay attention to the influence that each function
has over the other functions, to understand whether functions reinforce each
other, creating a positive or virtuous cycle loop, or on the contrary some
functions weaken the impact of other functions. It is important to realise that
the stage of development of an
innovation system will affect the dynamics of the system, and therefore
efforts should also be put towards determining the stage of development of the
innovation. In his guide, Marko Hekkert provided some diagnostic questions to
help with this. For example, is there a
working prototype? This will help establishing whether the innovation is at
a ‘pre-development stage’ or has, instead, reached the ‘development phase’. The
question is there commercial application? would help determining whether the transition to ‘take-off phase’ has occurred. Is there a fast-growing market? would
let us know if the innovation has reached the ‘acceleration stage’. At the formative or developmental phase all
functions can be critical, being entrepreneurial activities the most important
function at this stage. In later stages such as the take-off phase, entrepreneurial activities are still critical, but
their purpose has shifted from gathering info about the technology to legitimation
of the innovation. In the take-off phase, however, knowledge functions are not as
relevant anymore as plenty of information about the innovation has been
gathered in previous phases. Finally, during the acceleration phase of the innovation, the formation of a market for
the innovation becomes the priority function.
Figure 1: Diagnostic questions to determine the phase of development of an innovation
system.
By understanding ‘how
well’ a system works, we are making ourselves aware of any functions that
may be hampering the development of the innovation. This type of knowledge
about a system is critical as it can be used to remedy the problem hindering
the innovation’s development. The identified hampering function is generally
associated to a structural problem, and therefore it becomes necessary to find
out which structural component is the source of the issue.
Finally, it is important to understand whether the relevant policies
in place are capable of tackling the structural and functional barriers
identified, and to achieve this it is necessary to clearly understand the goal
behind a specific policy. This is, the expected end result being brought about
by the application of the policy.
To conclude, support for innovation is key to maintain the European
competitiveness in the global economy. However, not every single policiy or
support programme may be adequate to promote the development of a specific innovation.
Delivering policies capable of effective innovation support require a deep
understanding of the targeted innovation and the factors surrounding it (the Innovation
System). Innovation systems can be analysed, and the results of this analysis
can be particularly helpful for policy makers to understand where the key
barriers are in regard to the development of a specific innovation. Thus, the
results of the analysis will provide policy makers with the right tools to
deliver bespoke and effective policies to support a specific innovation.