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CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 391:
An Innovation Policy Framework: Bridging the gap between industrial dynamics and growth

Pontus Braunerhjelm () and Magnus Henrekson ()

Abstract: This paper examines policy measures that foster the creation of innovations with high inherent potential and that simultaneously provide the right incentives for individuals to create and expand firms that disseminate such innovations in the form of highly valued products. In so doing, we suggest an innovation policy framework based on two pillars: (i) the accumulation, investment, and upgrading of knowledge and (ii) the implementation of mechanisms that enable knowledge to be exploited such that growth and societal prosperity are encouraged. Knowledge is a necessary but far from sufficient condition for growth. To secure industrial dynamics and growth in the long term, institutions must be designed both to encourage sophisticated knowledge investments and to stimulate the creation, diffusion and productive use of knowledge in all sectors of the economy. We argue that the latter area has been overlooked in the policy discussion and that a coherent innovation policy framework must include tax policy, labor market regulation, savings channeling, competition policy, housing market regulation, and infrastructure to foster growth and future prosperity.

Keywords: Entrepreneurship; Innovation; Institutions; Innovation policy; R&D; Technology transfer; University-industry relations; (follow links to similar papers)

JEL-Codes: J24; O31; O32; O57; (follow links to similar papers)

42 pages, January 13, 2015

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This paper is published as:
Braunerhjelm, Pontus and Magnus Henrekson, (2016), 'An Innovation Policy Framework: Bridging the gap between industrial dynamics and growth', Essays in Public Sector Entrepreneurship, pages 95-130



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