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Rebalancing The Innovation Policy Debate


Mark Dames1, David Robson2, Madeline Smith3 and Tom Tumilty4
mark.dames@bt.com

ABSTRACT
Innovation, the successful exploitation of new ideas, is an important driver of economic
growth. The traditional view of innovation as a pipeline process based around
commercialising scientific or technological invention has today been replaced by a
broader understanding that innovation is not necessarily linear and reaches far beyond the
production of products to be focused on successful market outcomes. Based on the
authors’ experience of innovation policy development in Scotland, this paper concludes
that there needs to be a dramatic change in approach to innovation policy if Scotland is
to sustain long-term economic growth and competitive advantage.

1. INTRODUCTION
Innovation is one of the principal drivers of economic growth, standard of living and competitive
advantage. Successful innovation creates customer value through new products, services and processes,
giving rise to new markets and economic growth, as well as contributing to higher productivity, lower
costs, increased profits and employment. Firms that innovate have higher global market shares, higher
growth rates, higher profitability and higher market valuations. Innovation also generates spill-over and
cascading effects as competing firms absorb new innovations. As innovations are adopted and diffused,
the knowledge stock of the nation accumulates, providing the foundation for market growth, long-term
wealth creation and higher living standards.
The traditional conception of innovation as a linear process from research to invention, from
engineering to product, and from manufacturing to marketing is now outdated. That model would
suggest that the method for increasing innovation by increasing R&D inputs (technology push) would
be sufficient. It is now widely accepted that the emphasis on technology-based innovation and R&D is
necessary but not sufficient for success5. New knowledge can be an important ingredient for innovation
but it does not necessarily lead to innovation. Work undertaken by NESTA demonstrates that innovation
can result from a wide range of situation not all involving R&D [ref(1)]. What seems to be critical is
effective diffusion of knowledge, longer term engagement/interaction between a wide range of players
in the innovation system and a strong enterprise culture and capacity.
Government policy across Europe is currently being adapted to recognise innovation as a broadly spread
capacity that is about successful market outcomes and the process by which those outcomes are generated.
Here, innovation applies across the economy, including within the service sector and public services6, and
1Innovation and Enabling Technologies, Scottish Government, Business, Enterprise and Energy Directorate, 6 Cadogan St, Glasgow G2 6AT.
Seconded from British Telecommunications plc, 81 Newgate Street London EC1A 7AJ.
2Scottish Government, Business, Enterprise and Energy Directorate, 6 Cadogan St, Glasgow G2 6AT. Seconded from Scottish Enterprise.
3Head of Innovation, EKOS Ltd, St. Georges Studios, 93-97 St. George's Road, Glasgow G3 6JA.
4Head of Innovation and Enabling Technologies, Scottish Government, Business, Enterprise and Energy Directorate, 6 Cadogan St, Glasgow G2 6AT.
5The linear Science/R&D-push model has been losing support because it is not able to deal satisfactorily with the complexity in the innovation
system. The linear model is rooted in a very traditional and rational understanding of scientific research utilisation which assumes a simple model of
research producers on the one hand and research users on the other. It presupposes that knowledge created by the producers can be parcelled and
pushed out to the relevant users and that users know what knowledge they need to secure to create innovation in their businesses and so pull this from
the research base. As understanding of research utilisation and how innovation systems work has developed, it is clear that the push-pull model does
not satisfactorily describe the complex and contextually contingent way in which knowledge is created and used. The concept of knowledge exchange
is more helpful than the linear science-push model but even it is not fully satisfactory as a model for understanding the innovation process.
6The EU has acknowledged this shift and is working towards redressing the balance. A recent communication from the Commission to the Council
of Ministers and the European Parliament showed the extent to which this is changing. It acknowledged that existing EU or national innovation
policy instruments do not adequately take into account the overall importance and specific needs of the services sector, and they regularly fail to
acknowledge the need for innovation also in public sector services. It stated that there is a need to take a comprehensive look at policies relevant
for services and reassess their focus from the viewpoint of service-related and non-technological innovation.

Volume 1 · Number 2 · 2009


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