The Extent and Effectiveness of Innovation Policy Interventions

Abstract

The extent and effectiveness of innovation systems are essentially a function of policy choice. Sustained efforts to strengthen the skill base with innovative policy interventions can convert enclave type labour-intensive operations into horizontally integrated manufacturing, with ever increasing development of manufacturing-complimentary service activities, which enable countries climb the ladder of value addition and technological sophistication. Innovation is imperative to turn out products, complying with international standards and quality control norms. Fiscal incentives like grants and tax incentives can be put into operation only after creating the required preconditions for innovation. In addition to the creation of a pool of technically trained personnel who would emerge as innovative techno entrepreneurs and skilled workers for effective networking, the State should encourage positive spillovers from foreign companies through a variety of instruments for fostering capacity and capability building. High level of education does not necessarily mean the automatic creation of technological dynamism and productivity catch-up if institutionalized inactivity in R&D is not averted. What is needed is the type of national innovation system that facilitates new knowledge being generated by universities, exploited by laboratories and commercialized by firms. With such an interactive framework for technological learning, innovation would occur as a dynamic source of sustainable growth.