An overview of public policies to support innovation

Innovation is a broad topic, about which much has been written. Almost every kind of public policy has either a direct or an indirect impact on factors that affect innovative activity. The purpose of this paper is to draw out the key implications from selected studies concerning a small number of science-related policies that are widely employed in order to deal with perceived market failures in the innovation process. The main issues considered are fiscal incentives for private R&D, the role of public research organisations, the regulation of intellectual property, the availability of finance, and the supply of skilled human resources for science and technology. Two central themes developed in the paper are the need for accurate evaluation of all these policies, since each may have costs as well as benefits, and the likely enhancement of the wider social benefits from innovation if knowledge is able to diffuse freely, and if potential beneficiaries have sufficient absorptive capacity to be able to understand and use new knowledge productively.