The Politics of Innovation (by Mark Z. Taylor)

During the last two-three decades innovation has become a more central issue on policy makers’ agendas, and the interest for innovation policy has increased a lot. The agendas of policy makers and researchers have also been broadened, from focusing mainly on technological advances in “high tech”, to also include innovation in services; organizational innovation;  social innovation; and innovation in poorer environments/countries, which – although less spectacular technologically – may be  very important economically. To improve the knowledge base for policy making many countries, also developing, regularly conduct surveys in which firms are asked to identify factors that support or hamper their innovation activities. Dedicated public sector organizations focusing on innovation support have been established in many countries. Innovation policy has also attracted the interest of the OECD which during the last decade has produced numerous surveys of how innovation policies evolve in different nations with particular emphasis on the challenges for policy and governance in this area.

One might have expected a book on “The Politics of Innovation” to engage with these recent trends but this is only the case to a quite limited extent. As explained in part one of the book (and discussed in more detail in the appendices), the author, Mark Z. Taylor, operates with a rather narrow perspective on innovation, focusing mainly on (radical) technological product and process innovations, i.e., “high-tech” innovation,  which he prefers to measure through patents (adjusted for quality differences as reflected in citations). Armed with this methodology he then goes on to explore the innovation (or science and technology) capability of various countries, which he finds to vary a lot, and much more than their levels of income (or productivity) would indicate.  However, it is common knowledge that patents are awarded for invention (new ideas for how to do things) and not for innovation (implementation of new ideas in practice), are much more common in some technological and industrial fields than in others, and tend to concentrate in a limited number of rich countries.  Thus, it is possible that the very skew distribution that he observes may have less to do with innovation as such than with the specific measure he chooses to employ.

The remainder of the book is devoted to the explanation of the observed cross-country differences in patenting (and to some extent related measures) for a sample of (mostly) developed countries. The starting point for the discussion of this topic in the second part of the book is the classical market-failure theory of the 1960s, on the basis of which five so-called “pillars of innovation” – property rights; R&D subsidies; education; research universities; and trade policy – are identified. The method employed is to collect statistics for these pillars and explore the correlation with patenting through scatter-plots. Many will probably find this method a bit simplistic (and deficient when it comes to discussing causality etc.). Nevertheless, it is shown that with the exception of trade policy the correlation is high in all cases, and it is claimed (but not documented) that the pillars collectively explain some 90% of the variation in innovation as measured by patenting.  However, despite the high correlation, there is also some variation in how countries perform on the various pillars, leading the author to conclude that there is no unique combination of science and technology investments that guarantee success in innovation.

The author then goes on to explore in the same manner as before the possible impact of other factors that have been central in recent research on economic growth and development, such as degree of democracy, political decentralization etc., and concludes that there is little evidence suggesting that these other factors matter much. He also expands the discussion of possible explanatory factors by extending the “market failure” perspective to also include possible “network failures”, which he argues may be important, and he illustrates the relevance of the argument using historical evidence from a limited number of countries (mainly Israel, Taiwan, Ireland and Mexico).

The third part of the book is perhaps the most original. Here the author presents, aided by a blend of statistical research and historical case studies, his so-called “creative insecurity” theory of innovation. The argument is that the distribution of resources in a country depends on the economic interests of powerful domestic actors, and that in such a setting public investments in science and technology are not likely to get high priority, unless powered by substantial external threats of a military or economic nature.  This is an interesting idea. It is easy, from US history for example, to find examples of investments in cutting edge science and technology financed by the military. On the other hand it hardly explains, as the author concedes, why peaceful Switzerland is a top performer in “science and technology”, so there probably is more to it than that. However, the author is undoubtedly right in pointing out that the political economy of science, technology and innovation policies requires more scholarly attention, not only from economists, but also from political scientists, historians etc.

The title of this book is a bit deceiving, and readers interested in the evolution of innovation policy as a new field of politics may have to look elsewhere. However, it is a highly readable, well documented and well-argued contribution to the literature on comparative economic development, which many readers may find interesting and thought provoking.

Mark Zachary Taylor: The Politics of Innovation – Why Some Countries Are Better Than Other at Science and Technology, Oxford University Press, 2016