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Systems thinking, market failure, and the development of innovation policy: The case of Australia

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  • Dodgson, Mark
  • Hughes, Alan
  • Foster, John
  • Metcalfe, Stan

Abstract

Innovation policy is increasingly informed from the perspective of a national innovation system (NIS), but, despite the fact that research findings emphasize the importance of national differences in the framing conditions for innovation, policy prescriptions tend to be uniform. Justifications for innovation policy generally relate to notions of market failure that are applicable in all nations in all conditions. In this paper we develop a broad framework for NIS analysis, involving free market, coordination and complex-evolutionary system approaches. Within this framework we explore the evolving relationship between market failure and systems approaches to innovation policy in the case of Australia. Drawing on information and analysis collected for a major review of Australia's NIS, and the government's 10-year plan in response to it, we show how the free market trajectory of policy-making of past decades is being extended, complemented and refocused by new approaches to complex-evolutionary system thinking. These approaches are shown to emphasize the importance of systemic connectivity, evolving institutions and organizational capabilities. Nonetheless, despite the fact that there has been much progress in this direction in the Australian debate, the predominant logic behind policy choices still remains one of addressing market failure, and the primary focus of policy attention continues to be science and research rather than demand-led approaches. We discuss how the development and elaboration of notions of systems failure, rather than just market failure, can further improve policy-making in the future.

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Bibliographic Info

Article provided by Elsevier in its journal Research Policy.

Volume (Year): 40 (2011)
Issue (Month): 9 ()
Pages: 1145-1156

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Handle: RePEc:eee:respol:v:40:y:2011:i:9:p:1145-1156

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Web page: http://www.elsevier.com/locate/respol

Related research

Keywords: Innovation policy; National Innovation Systems; Market failure; Systems thinking; Complex-evolutionary perspectives; Australia;

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References

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  1. Akkermans, Dirk & Castaldi, Carolina & Los, Bart, 2009. "Do 'liberal market economies' really innovate more radically than 'coordinated market economies'?: Hall and Soskice reconsidered," Research Policy, Elsevier, vol. 38(1), pages 181-191, February.
  2. John Foster, 2005. "From simplistic to complex systems in economics," Cambridge Journal of Economics, Oxford University Press, vol. 29(6), pages 873-892, November.
  3. Markus Balzat & Horst Hanusch, 2004. "Recent trends in the research on national innovation systems," Journal of Evolutionary Economics, Springer, vol. 14(2), pages 197-210, 06.
  4. Dodgson, Mark & Mathews, John & Kastelle, Tim & Hu, Mei-Chih, 2008. "The evolving nature of Taiwan's national innovation system: The case of biotechnology innovation networks," Research Policy, Elsevier, vol. 37(3), pages 430-445, April.
  5. Metcalfe, Stan & Ramlogan, Ronnie, 2008. "Innovation systems and the competitive process in developing economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(2), pages 433-446, May.
  6. Freeman, Christopher & Soete, Luc, 2009. "Developing science, technology and innovation indicators: What we can learn from the past," Research Policy, Elsevier, vol. 38(4), pages 583-589, May.
  7. Mytelka, Lynn K. & Smith, Keith, 2002. "Policy learning and innovation theory: an interactive and co-evolving process," Research Policy, Elsevier, vol. 31(8-9), pages 1467-1479, December.
  8. Florence Jaumotte & Nigel Pain, 2005. "An Overview of Public Policies to Support Innovation," OECD Economics Department Working Papers 456, OECD Publishing.
  9. Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
  10. Partha, Dasgupta & David, Paul A., 1994. "Toward a new economics of science," Research Policy, Elsevier, vol. 23(5), pages 487-521, September.
  11. Sharif, Naubahar, 2006. "Emergence and development of the National Innovation Systems concept," Research Policy, Elsevier, vol. 35(5), pages 745-766, June.
  12. Hart, David M., 2009. "Accounting for change in national systems of innovation: A friendly critique based on the U.S. case," Research Policy, Elsevier, vol. 38(4), pages 647-654, May.
  13. Bergek, Anna & Jacobsson, Staffan & Carlsson, Bo & Lindmark, Sven & Rickne, Annika, 2008. "Analyzing the functional dynamics of technological innovation systems: A scheme of analysis," Research Policy, Elsevier, vol. 37(3), pages 407-429, April.
  14. Nill, Jan & Kemp, Ren, 2009. "Evolutionary approaches for sustainable innovation policies: From niche to paradigm?," Research Policy, Elsevier, vol. 38(4), pages 668-680, May.
  15. Dore, Ronald, 2000. "Stock Market Capitalism: Welfare Capitalism: Japan and Germany versus the Anglo-Saxons," OUP Catalogue, Oxford University Press, number 9780199240616.
  16. John Foster, 2000. "Competitive selection, self-organisation and Joseph A. Schumpeter," Journal of Evolutionary Economics, Springer, vol. 10(3), pages 311-328.
  17. Bengt-�ke Lundvall, 2007. "National Innovation Systems—Analytical Concept and Development Tool," Industry and Innovation, Taylor & Francis Journals, vol. 14(1), pages 95-119.
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Citations

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Cited by:
  1. Mark Dodgson & Jonathan Staggs, 2012. "Government policy, university strategy and the academic entrepreneur: the case of Queensland's Smart State Institutes," Cambridge Journal of Economics, Oxford University Press, vol. 36(3), pages 567-585.
  2. Lee, Keun & Juma, Calestous & Mathews, John, 2014. "Innovation capabilities for sustainable development in Africa," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  3. Enrico Deiaco & Alan Hughes & Maureen McKelvey, 2012. "Universities as strategic actors in the knowledge economy," Cambridge Journal of Economics, Oxford University Press, vol. 36(3), pages 525-541.
  4. repec:cge:warwcg:178 is not listed on IDEAS
  5. Bleda, Mercedes & del Río, Pablo, 2013. "The market failure and the systemic failure rationales in technological innovation systems," Research Policy, Elsevier, vol. 42(5), pages 1039-1052.
  6. John Foster, 2014. "The Australian growth miracle: An evolutionary macroeconomic explanation," Discussion Papers Series 521, School of Economics, University of Queensland, Australia.
  7. John Foster, 2014. "The Australian multi-factor productivity growth illusion," Discussion Papers Series 520, School of Economics, University of Queensland, Australia.
  8. Crafts, Nicholas & Hughes, Alan, 2014. "Industrial Policy for the Medium to Long-term," CAGE Online Working Paper Series 179, Competitive Advantage in the Global Economy (CAGE).

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