S&T and Innovation in the 21st Century

By Dr David A. Wolfe

As Canada rides the current wave of global demand for our natural resources and commodities to higher levels of prosperity, some worry that this boom masks a continuing weakness in other sectors — particularly those with the greatest potential to sustain our future level of economic well-being. The late John de la Mothe calculated that the 2002 Innovation Agenda marked the 18th major science, technology and innovation policy paper or review prepared for the federal government since 1978.

That would make the recent strategy paper, Mobilizing Science and Technology to Canada's Advantage, 19th in the series. If the mere production of such reports was sufficient to guarantee success, our economic future would be assured.

There is a worrying sense that our preoccupation with strategy reports masks an underlying confusion about the relation between science, technology and innovation in a 21st century economy. The focus of many of these reports reflects a simple linear understanding of the relation between S&T and the broader structure of the economy.

Innovation and technical progress are increasingly generated by a complex set of institutions that produce, distribute and apply various kinds of knowledge. Central to this process is the complementarity between the institutions that perform this role and the way they adopt and diffuse technologies.

Over the past decade, a number of analysts and policy organizations have adopted the innovation systems approach to explore these relationships. This approach locates S&T policies in the broader context of the constituent element of the innovation system — in particular, the industrial structure and sectors of specialization within national economies, and their characteristic networks of knowledge creation and transmission.

The interconnectedness of these elements determines the distinctive areas of competence and specialization of national economies which tend to co-evolve over time. Particularly important is the balance between the operation of the science system, which is motivated by the search for new discoveries, and the world of technology, which is driven by the profit motive and operates with a shorter time horizon. The connection between the components of the system, and the ease with which applicable knowledge, scientific discoveries and the highly skilled resources to staff the system flow across those components, are critical for its success.

Science, technology and innovation policies each play a distinctive role within the innovation system. These three types of policy have assumed differing significance in successive stages of the postwar period and in various countries.

The roots of national science policy can be traced back to the Royal Society in the seventeenth century, while technology policies find their genesis in the development of the Humboldt model of universities in 19th century Germany and the land grant colleges in the U.S. World War II marked the watershed in the development of science and technology policies. The experience gained in financing and managing large scale science projects during the war carried over into a postwar surge of new investments that surpassed anything undertaken before.

In broad terms, postwar approaches to S&T are divided into two categories — mission-oriented and diffusion-oriented. In national systems dedicated to the mission-oriented approach, priority was placed on investments in radical innovations to reach clearly established national goals. In contrast, diffusion-oriented policies emphasized the diffusion of technological capability throughout the industrial structure to facilitate the incremental adaptation to technological change.

In the initial phase of the postwar period, policies to support S&T were strongly influenced by the US lead, with the predominance of public investment in the nuclear, military and space programs. Policies in the UK and France emulated the ‘big science' approach established by the Manhattan Project and that continued to be favoured in the US through the Apollo and other programs. Policies in Germany and Sweden more closely followed the diffusion-oriented model, with a focus on improving the technological capabilities of small- and medium-sized enterprises through vocational education programs, establishing a strong system of industrial standards and promoting cooperative R&D. Canada (with the exception of the NRC's IRAP and several provincial initiatives) fell more within the first category than the second.

The adoption of the innovation systems approach reflects the shift to a broader conception of innovation policy. In the language of evolutionary economics, national innovation systems are path dependent — they must be understood in terms of the complementary nature of the structure of their labour markets, the education and training system, internal firm organizational patterns and the external sources of firm finance.

These institutional structures, in turn, are shaped and constrained by broader social and political processes across diverse national economies, which condition their potential for change over time.

Effective national strategies need to review and redesign the linkages between institutional components of the national system. S&T strategies which fail to account for these distinctive features may suffer from a lack of fit with existing institutional structures. Among the features which influence the success or failure of policies to promote technological upgrading are the effectiveness of interactive learning, within and between organizations and the capacity for risk taking. The skills structure and ability to acquire new skills, and the extent to which training and labour market systems are integrated with internal firm dynamics are also critical.

In Canada, the specific features of our national innovation system are strongly influenced by the pronounced regional, urban and sectoral variations found across the country. To be effective, a national strategy must reflect these variations and involve relevant actors across all regions and levels of government. Otherwise, we risk adding further volumes to our already impressive collection of policy documents.

This is the first of a two part article for RE$EARCH MONEY exploring the implications of research by the Innovation Systems Research Network for innovation policies in Canada. David Wolfe is co-director, Program on Globalization and Regional Innovation Systems Centre for International Studies, University of Toronto.