Demand-side Innovation Policies

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Author(s):
OECD
Publication Date :
17 May 2011
Pages :
188
ISBN :
9789264098886 (PDF) ; 9789264098879 (print)
DOI :
10.1787/9789264098886-en

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Demand-side innovation policies have been receiving increasing interest from a number of OECD countries in recent years in the context of slow growth and lagging productivity performance. Pressures on fiscal budgets in the aftermath of the financial crisis have also motivated governments to seek ways to boost innovation without necessarily engaging in new programme spending, primarily to meet social demands in areas such as health, energy or the environment.

This book examines dynamics between demand and innovation and provides insights into the rationale and scope for public policies to foster demand for innovation. It shows the potential - but also the limits - of using public procurement, regulations or standards to stimulate public and private demand for innovation, including among SMEs. Drawing on country experience and case studies, this report illustrates good practices for designing, implementing and evaluating demand-side innovation policies.

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    Foreword
    In the context of lagging innovation and productivity performance, policy makers seeking to boost innovation are increasingly looking beyond traditional supply-side policies such as R&D support to demand side in order to accelerate innovation. Many OECD countries are using public procurement, regulation, standards and lead market initiatives as well as consumer policies and user-led innovation initiatives to stimulate innovation. They are not alone in so doing, as emerging economies such as China and Brazil have recently implemented more targeted demand-side innovation policies, notably in areas where societal needs are high and not met by market mechanisms alone. This report draws both on the theoretical and empirical literature as well as country experience to provide insights and examples of good practice policies to increase demand for innovation and thus enhance productivity and growth.
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    Executive summary
    The OECD Project on Demand-Side Innovation Policies was launched in 2008 under the auspices of the Working Party on Innovation and Technology Policy (TIP) and the Committee on Industry, Innovation and Entrepreneurship (CIIE) as input to the OECD Innovation Strategy. This final report provides insights into the rationale and scope for public policies to foster demand for innovation and draws on country experience and case studies to illustrate the risks and opportunities for demand-side innovation policies.
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  • Expand / Collapse Hide / Show all Abstracts Demand-side innovation policies: theory and practice in OECD countries

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      Dynamics of demand and innovation
      One of the key findings of the OECD Innovation Strategy is that despite the increasing variety of actors in the innovation process, firms remain the pre-eminent means for translating good ideas into jobs and wealth. This clearly implies that the policy environment in which firms operate, on both the supply and demand sides, is fundamental to innovation.
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      Demand-side innovation policies and instruments
      Recent trends in innovation policy place growing emphasis on demandside policies and instruments. A number of OECD countries, from the United Kingdom to Finland, Spain and Japan, as well as the European Commission, have made explicit policy statements on the need to give greater importance to demand-side innovation policies. Japan, for example, has recently re-oriented its innovation strategy towards a series of demandoriented national goals such as the transition to a low-carbon economy and tackling the challenges of an ageing society. Finland has adopted a general plan for demand-side innovation – The Finnish Policy Framework and Action Plan for Demand and User-Driven Innovation Policy (2010). And the United Kingdom’s plan, Innovation Nation (2008), introduced demand-side initiatives affecting public procurement and regulation. Spain is currently implementing the State Innovation Strategy (2010) which has a programme oriented towards public procurement. Demand-side innovation policies are now increasingly integrated in the full portfolio of government policies on innovation in a number of OECD countries.
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      Evaluating demand-side innovation policies
      Effective evaluation of policies and programmes to stimulate innovation has become increasingly important for policy makers given constraints on discretionary public spending, a greater focus on accountability and transparency in policy, and the desire to minimise distortions arising from government actions, while maximising their impact. As the ultimate gain to be achieved from evaluation is to allow learning, it is important that a large range of stakeholders (besides managers of programmes and policy areas) can learn from and utilise past evaluations.
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      Challenges for demand-side innovation policies
      Some demand-side innovation policies arguably carry the risk of excessive government intervention in comparison with policies to stimulate the supply of R&D and foster knowledge spillovers. Demand-side innovation policies also face design and implementation challenges. The systemic nature of this type of policy implies that more co-ordination is needed than for traditional supply-oriented innovation policy. In particular, demand-side measures need to be closely articulated with supply-side measures. However, matching supply with demand is not an easy task and requires building bridges along the value chain, which takes time. Moreover, several demand-side innovation policy measures imply a lead role for a public sector that is not always best placed to support the innovation process. Thus, new capacities may need to be developed to implement innovation-friendly regulations, standards or procurement practices.
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      Key messages and recommendations
      The success of demand-side innovation policies will depend on a number of factors. Policy measures need to be clearly targeted and take into account sector and market specificities. The most promising level for demand-side policy making may be the sectoral level, as it is easier to match demand-side innovation policies with supply-side policies in specific sectors. The combination of different policy measures to support demand for innovation also makes policy co-ordination and good governance essential.
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    Demand-side innovation policies in Australia
    This chapter presents four Australian programmes with significant demandside components. They address R&D and commercialisation for green passenger motor vehicles, pre-commercial procurement of R&D to drive technology development and commercialisation in SMEs, development of green technologies by SMEs through R&D and/or proof of concept, and/or early stage commercialisation, and improved access to public sector information.
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    Demand-side innovation policies in Flanders
    This chapter discusses the Flanders Action Plan on Public Procurement of Innovation which has adopted a horizontally integrated approach in order to help government to identify public demand and define purchasing needs and increase the public commitment to procurement of innovative solutions from the private sector. It describes the use of innovation platforms for involving stakeholders and exchanging information between the demand and supply side throughout the process.
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    Demand-side innovation policies in Denmark
    This chapter presents the result of the midway evaluation of the Danish Programme for User-Driven Innovation which uses grant funding to help companies become more user-driven and develop user-driven innovations. With the government’s renegotiated globalisation strategy, of which the programme was a part, funding for projects already under way has moved to a new government-sponsored fund for green business development and change.
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    Demand-side innovation policies in Finland
    This chapter discusses Finland’s approach to encouraging the procurement of innovation by the public sector. It pays particular attention to the challenges involved in achieving greater response from procuring agencies at the various levels of government.
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    Demand-side innovation policies in France
    This chapter discusses a preferential measure adopted by France to facilitate innovative SMEs’ participation in public procurement. The measure contributes to convergence of innovation policies and procurement strategies and leads to greater attention to the role of SMEs in innovation. A promotion campaign was launched to make the measure better known both to SMEs and to potential procurers.
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    Demand-side innovation policies in Italy
    This chapter discusses Italy’s efforts to move towards a low-carbon economy. It focuses on measures to support green energy. Demand-side innovation can be used to address global challenges.
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    Demand-side innovation policies in Japan
    Japan considers that demand-side innovation policies can address global and social challenges such as climate change and ageing populations. In addition to supporting human-resource development and technology development for "green innovation", "life innovation", and other strategic innovation fields, the government can generate demand and encourage user demand for innovation and support individuals who take on challenges in new fields. Demand-side instruments such as regulation and standardisation, which do not rely on financial resources, can also be used to promote innovation.
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    Demand-side innovation policies in Korea
    The aim of Korea’s New Technology Purchasing Assurance Programme for public procurement of SME technology products is to stimulate more active technology development. This chapter describes Korea’s experience in this area, with particular attention to modifications made to deal with the weaknesses of an earlier version of the programme. It also describes the measures taken for procurement-conditioned R&D by SMEs and the efforts made to improve the programme’s effectiveness.
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    Demand-side innovation policies in Spain
    This chapter describes Spain’s procurement of the world’s largest singleaperture optical telescope as a way to promote high-technology innovation. This scientific facility was developed through international co-operation as a way to raise Spain’s innovative capacity. User demand for further instrumentation is an impetus to continuing innovation and an example of the use of public procurement as a tool for driving innovation as well as international partnerships.
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    Demand-led innovation policies in the United Kingdom – Biometrics standardisation
    This chapter describes government support for standards development in the area of biometrics in the United Kingdom. It shows that standardisation can play a significant role in creating and developing emerging technologies and can help ensure more efficient and cost-effective procurement.
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    Demand-side innovation policies in the European Union
    The EU Lead Market Initiative uses demand-side instruments – regulation, public procurement, standardisation – to facilitate the uptake of new innovative products and services in the market. This chapter describes the networks of public procurers created under this initiative to set up common learning platforms and consolidate expertise in the area of government procurement, in order to advance the goal of innovative procurement in the lead markets identified by the LMI.
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