Innovation: an outsized ambition?

"Innovation has become the industrial religion of the 20th century."

The economist, 1999

            Innovation Union flagship initiative. EU            

          Heating, labour division, plastic, internet... innovation has always played a capital role in the development of societies. Since the 70s, economists also acknowledged its key significance for economic development, and more recently, the EU has called innovation to play an eminent role in the achievement of smart, sustainable and inclusive growth, insomuch that it has become ubiquitous across policy discourses, offering solutions to very different challenges. Putting the available scientific knowledge and policy discourses face to face, what are the actual potentials and limitations of innovation processes?

         Innovation is the creation of new products, services, organisations, or processes capable of generating added economic value in the market. Face to inventions, innovation is not only about the occurrence of a new idea, but it is about the first attempt to carry it out in practice. Sometimes, inventions and innovations are closely linked, but in many cases a considerable time lag divides the two (Fagerberg, 2006; 6). 

           Innovations such as fire domestication, potable tap water or electricity have had an undeniable positive effect on humans' well-being. However, besides its positive effects, cars or pesticides are some examples of innovations that have also had unintended negative consequences for society and the environment (Van den Hove et al., 2011; 73).

               Innovation Union flagship initiative              

      An heterodox Schumpeter introduced the concept 'innovation' in 1911, as the trigger for economic development. He gave the entrepreneur the central role in the production of such innovations, and "emphasised the fundamental uncertainty inherent in all innovation projects" (Fagerberg, 2006; 13). However, the concept of innovation in orthodox neoclassical economics has long been disregarded until the 70s, because innovation meant incremental, but also structural change, thus causing disequilibria, whereas mainstream economic though in Europe, keynesianism after WW2, based its analysis on static equilibrium. The economic crisis in the 70s contested the scientific macroeconomic mechanisms broadly used at the time, and the neoliberal ideas replaced the old paradigm. In this context of accelerating globalisation, affecting industrialised regions with economic decline and high unemployment, researchers and policy-makers rescued the Schumpeterian ideas in order to responde to these new challenges (Lamboy 2005). Restructuration resulted and knowledge-based activities became the most competitive in both the US and the EU.

          Drawing on the success of innovation during the last decades, policies in the US and the EU have placed the concept of innovation in a core position to achieve growth. Brussels is guided by the EU 2020 Strategy, calling for smart growth -developing an economy based on knowledge and innovation-, sustainable growth -more competitive, more efficient and greener economy- and inclusive growth- high employment across all the regions (EC, 2010). The key tools to deliver these policy goals are innovation, education, research and technology (EC, 2011; 16). Ehat is more, as the Innovation Union flagship initiative stressed, innovation was 'the answer' not only for "increasing competitiveness, creating millions of new jobs" and maintaining or improving the "living standards", but also for "successfully tackling major societal challenges, such as climate change, energy and resource scarcity, health and ageing" (EC, 2010b).

                Innovation Union flagship initiative              

         Economists conceive nowadays innovation as a means towards growth, through the profits made from short-term monopoly on new products and services, intellectual property rights, lower cost procsses or higher efficient organisation. After the large amount of research on innovation during the past fifty years, we know well how innovation leads to economic growth in firms and aggregated economies (Fagerberg, 2006). However, economic science has a much fuzzier idea about the elements why and the mechanisms how innovation effectively occurs (Fagerberg, 2006), and remarkably, about the positive impact of any innovation in the creation of more or better jobs. Many of the new products and services will indeed require an input of highly skilled labour from their realisation, but "they will not necessarily lead to higher numbers of jobs: some will, some will not, and some will destroy jobs" (Van den Hove et al, 2012; 76; Cooke et al. 1997).

         In the same vein, tackling global challenges such as environmental protection or the reduction of socioeconomic and territorial disparitites as by-products of innovation seems extremely optimistic since innovation is initially meant to generate economic growth, and some contradictions between these goals have been widely acknowleged (Stiglitz, Sen and Fitoussi, 2009; Jackson, 2009; Van den Hove et al, 2012).

       All in all, it is important for analysts and policy-makers to understand the limitations of innovation processes, face to the current discoursive euphoria around a concept that has been heightened to panacea for multiple and extremely complex problems. However, this does not overturn the value of the concept whatsoever. Indeed, innovation is widely acknowledged as a highly relevant means to generate gains among economic actors, and the large research undertaken allows us to better understand how it occurs, and particularly,  how to foster milieus that favour the burgeoning of innovation.
 

Cooke, P., Gómez Uranga, M., Etxebarria, G. (1997) “Regional Innovation Systems: Institutional and Organisational Dimensions” Elsevier. Research Policy 26, 475-491

European Council (2010) ”Europe 2020: A strategy for smart, sustainable and inclusive growth”. Brussels.

European Council (2010b). “Europe 2020 Flagship Initiative: Innovation Union”. Communication from the Commission, COM (2010) 546 final.

European Council (2011) “A Resource-Efficient Europe – Flagship Initiative under the EU 2020 Strategy. Communication from the Commission” COM (2011) 21.

Fagerberg, J. (2006) “Innovation: a guide to literature” in “The Oxford Handbook of Innovation”, Oxford University Press.

Jackson, T. (2009) “Prosperity without growth: economics for a finite planet” Earthscan, London.

Lambooy, J. (2005) “Innovation and knowledge: Theory and regional policy”, European Planning Studies, 13:8, 1137-1152

Stiglitz, J., Sen, A., Fitoussi, J.P. (2009) “Report by the Commission on the Measurement of Economic Performance and Social Progress”, Paris.

The Economist (1999) “Innovation gets Religion”, The Economist. Accessed on March 4^th 2013 at: http://www.economist.com/node/186620

Van den Hove, S., McGlade, J., Mottet, P., Depledge, M.H. (2011) “The Innovation Union: a perfect means to confused ends?” Environmental Science & Policy 6, 73-80. Elsevier.