The progressive evolution of innovation policy towards societal challenges

Go to the profile of Ian Hughes
Nov 27, 2018
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For many years, policymakers have developed innovation models and policy instruments to target investments in science and technology in order to maximise their economic impacts. More recently, the focus of innovation policy has broadened significantly not only to include innovation for economic growth, but also to address the formidable twin challenges of environmental sustainability and sustainable development. This expanded scope means that policymakers increasingly need to use multiple policy framings to achieve the diverse outcomes many governments are now demanding from their investments in innovation.

Innovation for economic growth

For decades, the National Innovation System (NIS) framework, aimed primarily at fostering economic growth, has dominated innovation policy. Innovation policies within the NIS framework aim to stimulate firms to increase their innovation activities in order to spur job creation, boost competitiveness and increase gross domestic product (GDP) growth. The policy instruments under the NIS model include support for basic research in universities; favourable tax treatment and direct subsidies for R&D in firms; and support for creating linkages between the various actors in the system to build their innovative capacities. Such policies include cluster policies, to stimulate collaboration between firms; research centres, to increase links between firms and higher education institutions; education policies, to support firms’ absorptive capacities; support for high-growth innovative firms; and support for the commercialisation of public research. The NIS framework remains the central framing used by innovation policymakers today. Its continued importance is reiterated in the OECD Innovation Strategy 2015, which stresses that innovation must continue to provide the foundation for new businesses, new jobs and productivity growth, and is an important driver of economic growth and development.

Innovation for environmental sustainability

The emergence of acute environmental challenges – including climate change, resource depletion and pollution – has led to the recent development of System Innovation (SI), a second framework for innovation policy. SI is a horizontal policy approach combining technologies and social innovations to tackle systemic problems, such as sustainable housing, mobility and health care. It involves many actors outside of government (as well as different levels of government) and takes a longer-term view. While the NIS framework aims to strengthen and enhance the productivity of an existing innovation system, the challenge of attaining environmental sustainability has shown that many current sociotechnical systems are no longer environmentally sustainable. An SI approach, designed to bring about fundamental change in the systems that provide us with energy, food, health and transport (among others), is necessary. Recent OECD work on SI shows that policies aimed at transitioning sociotechnical systems to more environmentally sustainable configurations differ significantly from policies aimed at increasing the economic performance of existing systems (OECD, 2015). Among the challenges facing policymakers in the context of SI is the need to develop a vision of what future sustainable systems will look like, including which technologies are likely to play important roles in the future system; what infrastructures will be needed; and how business models and behavioural patterns will need to change. To facilitate the transition, policymakers will need to lengthen planning and investment horizons; co-ordinate across government ministries and levels; establish and maintain long-term collaborative partnerships; place increased emphasis on diffusing knowledge and existing technology, as well as inventing technology; and manage and overcome resistance to sociotechnical change. As countries respond to the pressing challenge of environmental sustainability, OECD countries are increasingly adopting SI as a supplemental framework to the NIS for guiding innovation-related investment decisions and setting policy objectives.

Table Source: OECD System Innovation Synthesis Report (2015)

Innovation for sustainable development and human well-being

With the signing of the UN 2030 Agenda for Sustainable Development, a third challenge for innovation policymakers has emerged, namely innovation for sustainable development. Agenda 2030 aims to deliver a more sustainable, prosperous and peaceful global future, and sets a framework for achieving this objective by 2030. This framework comprises 17 SDGs, which cover the social, economic and environmental requirements for a sustainable future. Innovation will play a key role in achieving the targets across all of the SDGs, most notably concerning good health and well-being; affordable and clean energy; clean water and sanitation; decent work and economic growth; industry, innovation and infrastructure; sustainable cities and communities; responsible consumption and production; and climate action.

A range of emerging disruptive technologies, including AI, robotics, terotechnology, gene editing and biotechnology, have the potential to address many of the challenges in Agenda 2030 and the SDGs. More rapid and equitable diffusion of these technologies will be needed if sustainable development is to be achieved in practice and within the timeframe set down. At the same time, emerging technologies are also raising major ethical, legal, economic, policy and social issues. Anticipating and addressing the wider societal implications of disruptive technologies in both developed and developing countries will be important, not only for protecting the public good, but also for realising the full social and economic potential of technological development.

Both the NIS and the SI frameworks are well articulated, and are increasingly being used by innovation policymakers across the OECD to meet the goals of environmental sustainability and economic growth. A policy framework granting equal weight to sustainable development in decision-making, and placing justice and inclusion at its core, still needs to be developed.

For many years, policymakers have developed innovation models and policy instruments to target investments in science and technology in order to maximise their economic impacts. More recently, the focus of innovation policy has broadened significantly not only to include innovation for economic growth, but also to address the formidable twin challenges of environmental sustainability and sustainable development. This expanded scope means that policymakers increasingly need to use multiple policy framings to achieve the diverse outcomes many governments are now demanding from their investments in innovation.

Table source: UN Sustainable Development Goals Knowledge Platform


Innovation for economic growth

For decades, the National Innovation System (NIS) framework, aimed primarily at fostering economic growth, has dominated innovation policy. Innovation policies within the NIS framework aim to stimulate firms to increase their innovation activities in order to spur job creation, boost competitiveness and increase gross domestic product (GDP) growth. The policy instruments under the NIS model include support for basic research in universities; favourable tax treatment and direct subsidies for R&D in firms; and support for creating linkages between the various actors in the system to build their innovative capacities. Such policies include cluster policies, to stimulate collaboration between firms; research centres, to increase links between firms and higher education institutions; education policies, to support firms’ absorptive capacities; support for high-growth innovative firms; and support for the commercialisation of public research. The NIS framework remains the central framing used by innovation policymakers today. Its continued importance is reiterated in the OECD Innovation Strategy 2015, which stresses that innovation must continue to provide the foundation for new businesses, new jobs and productivity growth, and is an important driver of economic growth and development.

Innovation for environmental sustainability

The emergence of acute environmental challenges – including climate change, resource depletion and pollution – has led to the recent development of System Innovation (SI), a second framework for innovation policy. SI is a horizontal policy approach combining technologies and social innovations to tackle systemic problems, such as sustainable housing, mobility and health care. It involves many actors outside of government (as well as different levels of government) and takes a longer-term view. While the NIS framework aims to strengthen and enhance the productivity of an existing innovation system, the challenge of attaining environmental sustainability has shown that many current sociotechnical systems are no longer environmentally sustainable. An SI approach, designed to bring about fundamental change in the systems that provide us with energy, food, health and transport (among others), is necessary. Recent OECD work on SI shows that policies aimed at transitioning sociotechnical systems to more environmentally sustainable configurations differ significantly from policies aimed at increasing the economic performance of existing systems (OECD, 2015). Among the challenges facing policymakers in the context of SI is the need to develop a vision of what future sustainable systems will look like, including which technologies are likely to play important roles in the future system; what infrastructures will be needed; and how business models and behavioural patterns will need to change. To facilitate the transition, policymakers will need to lengthen planning and investment horizons; co-ordinate across government ministries and levels; establish and maintain long-term collaborative partnerships; place increased emphasis on diffusing knowledge and existing technology, as well as inventing technology; and manage and overcome resistance to sociotechnical change. As countries respond to the pressing challenge of environmental sustainability, OECD countries are increasingly adopting SI as a supplemental framework to the NIS for guiding innovation-related investment decisions and setting policy objectives.

Read: OECD Science, Technology and Innovation Outlook 2018

Innovation for sustainable development and human well-being

With the signing of the UN 2030 Agenda for Sustainable Development, a third challenge for innovation policymakers has emerged, namely innovation for sustainable development. Agenda 2030 aims to deliver a more sustainable, prosperous and peaceful global future, and sets a framework for achieving this objective by 2030. This framework comprises 17 SDGs, which cover the social, economic and environmental requirements for a sustainable future. Innovation will play a key role in achieving the targets across all of the SDGs, most notably concerning good health and well-being; affordable and clean energy; clean water and sanitation; decent work and economic growth; industry, innovation and infrastructure; sustainable cities and communities; responsible consumption and production; and climate action.




A range of emerging disruptive technologies, including AI, robotics, terotechnology, gene editing and biotechnology, have the potential to address many of the challenges in Agenda 2030 and the SDGs. More rapid and equitable diffusion of these technologies will be needed if sustainable development is to be achieved in practice and within the timeframe set down. At the same time, emerging technologies are also raising major ethical, legal, economic, policy and social issues. Anticipating and addressing the wider societal implications of disruptive technologies in both developed and developing countries will be important, not only for protecting the public good, but also for realising the full social and economic potential of technological development.

Both the NIS and the SI frameworks are well articulated, and are increasingly being used by innovation policymakers across the OECD to meet the goals of environmental sustainability and economic growth. A policy framework granting equal weight to sustainable development in decision-making, and placing justice and inclusion at its core, still needs to be developed.

Go to the profile of Ian Hughes

Ian Hughes

Senior Research Fellow, SFI MaREI Centre, Environmental Research Institute, University College Cork

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