Scaling up and sustaining experimental innovation policies with limited resources: Peripheral Schumpeterian development agencies

This chapter examines how two historically low-technology economies, Finland and Israel, assumed leadership in new and rapidly evolving innovation- based industries. It argues that “Schumpeterian development agencies”, the Finnish Fund for Research and Development and the Israeli Office of the Chief Scientist in the Ministry of Trade and Industry, played a transformative role, by introducing new science and technology policies and facilitating industrial restructuring. However, in contrast to the literature on the developmental state, these agencies were located on the periphery of the public sector and had few hard resources. The chapter describes how their peripheral location facilitated successful experimentation. It also explains how ostensibly marginal agencies were able to scale and monitor new initiatives successfully. More specifically, it shows that reform-oriented policy makers in small states were able to leverage extensive inter-personal networks to facilitate scaling and international openness to ensure monitoring. In identifying the specific mechanisms used by policy makers to introduce, scale and monitor policies, it also shows why these two historically innovative economies have struggled to support experimentation in recent years.