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Innovation Policy in the Globalising Learning Economy –Summary


Bengt-Åke Lundvall, Aalborg University & Susana Borras, Roskilde University


The new context for European Innovation Policy

Policy perspectives

A European agenda for innovation policy

Elements of a research agenda for socio-economic research



Late spring 1997 the unit in charge of the TSER-programme (Director Mitsos, Mr Bures and Mrs Vittorino) in DG XII asked professor Bengt-Åke Lundvall, Aalborg University to take the lead in a pilot action aiming at transferring insights gained in 7 on-going TSER-projects to policy makers. The action included two meetings with project participants and other experts, more than 30 written contributions from project members and it has resulted in a 180 page report authored by Bengt-Åke Lundvall and Susana Barras (Lundvall&Barras, 1997). The interaction with the projects was used to develop a common vision of the new context for European innovation policy as well as new principles for policy making in specific areas. Special attention was given to the co-ordination of innovation policy with other policy areas and to the co-ordination between action at the Community level with national and regional action. What follows is a summary of the main policy conclusions. The emphasis is on new principles for policy rather than on specific policy measures and implementation of policy. The report is based on preliminary findings of the TSER-projects: "Innovation Systems and European Integration" (co-ordinator Charles Edquist), "Technology, Economic Integration and Social Cohesion" (co-ordinator Bart Verspagen), "Regional Innovation Systems: Designing for the Future" (co-ordinator Phillip Cooke), "Services in Innovation, Innovation in Services" (co-ordinator Johan Hauknes), "The Strategic Role of Knowledge" (co-ordinator Peter Wood), "Networks, Collective Learning and RTD in Regionally-Clustered High-Technology SMEs" (co-ordinator David Keeble), and the project "Universities, Technology Transfer and Spin-off activities" (co-ordinator Dylan Jones-Evans).

The new context for European Innovation Policy

The learning economy 1

One fundamental trend in the last decade is a speeding up of the rate of innovation and change. This reflects changes in technology, international trade and political deregulation initiatives. It is registered as an intensification of competition both in sectors already involved in international trade and in formerly protected sectors becoming less sheltered than before. 2

Change and learning are two sides of the same coin. The speed-up of change confronts agents and organisations with new problems and to tackle the new problems requires new skills. The process is characterised by cumulative circular causation. The selection by employers of more learning-oriented employees and the market selection of change-oriented firms accelerate further innovation and change etc. There is nothing to indicate that the process will be slowed down in the near future. Rather, deregulation of markets for services and entrance of new competitors in world markets will give new momentum to the process. 3

In this new context, there is a need for policy co-ordination both between different sector policies and across different territorial governments. The speed up of change reflects a more intense 'transformation pressure', calling for a stronger 'capability to innovate' and for 'compensation mechanisms' that compensate the losers in the process of change. Innovation policy primarily affects the capability to innovate and it needs to be co-ordinated with policies affecting the transformation pressure and with policies affecting income distribution. The current territorial division of policy responsibility where European authorities are in charge of policies imposing a pressure for change while national and regional authorities are left with the responsibility to promote and cope with change is not sustainable in the long run.

European innovation systems have not been successful in exploiting the new techno-economic paradigm rooted in information technology. This is reflected in the European paradox (strong science base but weak innovation performance) and in a trade specialisation in low-growth products. A major policy objective of innovation policy must be to contribute to the learning capability of firms, knowledge institutions and people and to promote innovation and adaptation. In the background report we have pointed to human resource development, new forms of firm organisation, network formation, new role for knowledge intensive business services and for universities as the key elements in speeding up the catching-up within this paradigm. 4

But it is difficult and costly to catch up when you once are left behind (for instance TSER-projects demonstrate that trade specialisation patterns are sticky). We therefore propose that there should also be a strong focus in European innovation policy on the formation of the next techno-economic paradigm. This might be done through building new technological systems aiming at attacking problems inherent in the globalising learning economy. Environmental problems and social and regional polarisation are potential negative outcomes of the speed up of innovation and the globalisation of competition. Policies that speed up further the movement along given technological trajectories need to be supplemented with a new and wider role for governments in promoting radical technological change (promoting exploration rather than exploitation) to tackle these very problems (a need- and problem-oriented innovation policy). The social and environmental challenges may be the keys to the next techno-economic paradigm in the same way as the cold war played a key role in triggering the present one around information technology.

The negative side of the learning economy - social and regional polarisation

The globalising learning economy is characterised by intensified competition in product markets. Intensified competition stimulates effectiveness in production as well as incremental innovation. But it also gives rise to polarisation between sectors, regions and people. Through its impact on the selection of firms and people it affects the demand for labour favouring the skilled workers and disfavouring the unskilled. This is the most important mechanism behind the polarisation in labour markets observed in all OECD-countries. 5

One important response to intensified competition is increased co-operation between firms aiming at sharing tacit knowledge. It takes the form of technological alliances, formation of business networks and closer linkages between suppliers and customers. But the inclusion of some in networks has, as the other side of the coin, the exclusion of those with weak capabilities and competencies. This mechanism explains why the narrowing of regional income gaps has slowed down in Europe in the last decade. TSER-projects demonstrate that a major factor behind the fact that the regional disparities are reproduced is the differentiated access to knowledge and learning. 6

Policy perspectives

Creating a balance between transformation pressure, innovative capability and distributional objectives

In the learning economy policy makers are left with a complex task. They have to co-ordinate and calibrate three different policy areas:

There are packages of policies that affect each of the three levels and this can be illustrated as in Diagram 1.

Diagram 1: Policy packages affecting the pressure for, the capability of and the consequences of change

Transformation pressure

Macro economic policies

Competition policies

Trade policies


Capability to innovate and to adapt to change

Human resource development policies

Labour market policies

Innovation policies


Redistribution of Costs and benefits of change

Tax and other income transfer policies

Social policy

Regional policy

It is obvious that the costs and benefits from an increasing pressure for change will reflect the capability to innovate and to adapt. In the background report we have argued that there is a risk that the transformation pressure becomes too strong, the costs of change too high and the result may be social polarisation and environmental crises. Policy initiatives in terms of human resource development and innovation policy may reduce the problem if properly designed. Re-distribution policies may compensate losers and innovation policy may be directed toward solving the environmental challenge. But, under all circumstances, the policy package aimed at affecting the pressure for change should take into account the capability to innovate as well as the actual room for re-distribution policies.

Four policy strategies to cope with the learning economy

As a crude simplification and for pedagogical reasons four alternative strategies may be outlined:

  • Promote rapid change and neglect the negative impact on environmental, social and regional balances (the neo-liberal solution).
  • Slow down change in order to reduce the negative impact (the neo-protectionist solution).
  • Promote rapid change while compensating the victims through social and regional policy and through income transfers ex post (the old new deal).
  • Increase the capability to absorb change by focusing on the learning capability of the weak learners - people and regions – and by focusing innovation policy on social and environmental needs (the new new deal).

The horizontal co-ordination problem is especially serious since the three policy packages are distributed unevenly between the regional, national and European levels. One of the major impacts of the EMU-construction is that it cements, and makes definite, the movement of the first policy package from the national to the European level. It is also worth noting that the implementation of this policy package is increasingly left to semi-autonomous institutions outside direct democratic control (the European courts for competition policy and the European bank for monetary policy). The other two packages remain the responsibility principally of the national and regional government levels. There are European initiatives in the field of innovation policy and human resource development, and the regional funds aim at tackling social and regional distributional issues, but the resources involved are marginal as compared to the national resources. (The exception, the Community Agricultural Policy, goes to another extreme, in protecting the socio-economic interests of a specific social group with little reference to any socio-economic rationales.)

A major issue is if this division of labour is sustainable, even in the medium term. As the pressure for transformation increases, the social costs will grow and popular resentment to the European project might become so strong that the EU must either reduce the pressure or go much more actively into the other two policy areas. This scenario becomes even more probable when we take into account the impact of globalisation on national strategies. Intensified global competition, and growing difficulties in raising taxes in the new Internet trading regime, tempt national governments, and regional authorities, to compete for foreign direct investments through reducing social and environmental protection and through global tournaments of subsidising. There is a need to consider how innovation policy can be integrated in such a wider policy strategy and how far the current policy responsibilities between territorial levels need to be re-shuffled as a response to the new context.

Increasing the capability to innovate – moving more rapidly along the technological trajectory

In chapters 5-10 in the background report we outline new principles for a policy that aims at keeping abreast in the innovation race and to catch up with Japan and the US in terms of innovative capabilities. The basic principle is to create a learning economy that can cope with rapid change and be successful in developing new products and services. This gives priority to policies aiming at human resource development, creating new forms of organisation, building innovative networks, reorienting innovation policy toward service sectors and integrating universities in the innovation process.

Human resource development

There is growing consensus that there is a need for radical change in policies aiming at human resource development. The distance between the rhetoric and what is actually taking place in the area is substantial, however. The movement in the education system toward promoting the capability to learn and the formation of combinations of theoretical knowledge and social skills is slow. Financial pressures on governments trying to qualify for the EMU result in resource scarcity that makes experimentation and radical reform difficult. The response to the generally accepted need for life-long learning and new pedagogical forms better suited to slow learners is weak and unevenly distributed among European countries. Here, EU should try to establish a kind of discipline that corresponds to the one established around financial issues. It is a worrying paradox that it is so much easier to reach agreement at the European level on subsidising agriculture than it is to agree on a forward-looking community-wide human resource development plan. 7

New forms of organisation

Currently, an organisational revolution is taking place and there is an enormous potential in European firms in this respect. The full positive impact of information technology on productivity can only be harvested if the organisational forms develop. New forms of organisation that increase connectivity and interaction between departments are key elements in accelerating innovation. Forms of organisation will always reflect national specificities and the broader social and institutional context, including industrial relations, education systems and industrial structures. Still, new broadly defined better-practise organisational trajectories can now be discerned and policy makers should help management and workers to move ahead along these. It will involve a movement towards more horizontal communication, more intense communication inside and outside the firm and the delegation of responsibility to workers. In the background report we refer to an ambitious Danish policy initiative creating better framework conditions for organisational change (the LOK-project). The EU-level should stimulate research in this area and establish a forum for the exchange of policy experiences in the field. The Made in Europe-project established in connection with the TSER-programme should be given high priority. 8

Building innovative networks

One of the most dramatic changes in the learning economy is the growing importance of networking and inter-firm co-operation in connection with innovation. It reflects the speeding up of change, but also the growing complexity of the innovation process, where each single innovation has to build upon several disparate technologies and where each technology has to combine several separate scientific disciplines. Public policy has different roles in this context. Competition policy needs further changes in order to respond to the full implications of the new regime. The formation of networks of firms and of firms and knowledge institutions should be stimulated at different levels. At the regional level the formation of knowledge-intensive networks is a key to promote regional development. At the European level the formation of networks and consortia may help to create a more interdependent and coherent innovation system and promote the competitiveness of European industry. In the background report we point to two caveats. 9

First, the design of effective public policies are especially difficult in this area. What is needed is to get the right parties together in minor co-operative activities so that they can start to build trust. Public policy may try to support the formation of organisational routines that reduce the risks involved and support initiatives from below to form new network relationships. Also in this field there is a need for further research, including analyses of the basic roles of and reasons for network formation. 10

Second, it should be noted that given the high rate of change, networks that are geographically closed may, in the long run, hamper rather than stimulate innovation. Both at the regional and the national level outward networking may be crucial in order to remain at the front of the innovation race. The experiences from ESPRIT and the general weak state of the European electronics industry point to the need for extra-European networking. Industrial districts may need stronger interaction with external parties in order to avoid lock in into stagnating product areas. This implies a role for public policy in promoting the internationalisation of firms and the positioning of big European firms in global networks.

A new role for the service sector

The on-going TSER-research indicates that the service sector is the one where change is currently most dramatic and that this will remain so also for the near future. A better analytical understanding of the service sector is of key importance for policy-making. The preliminary results indicate that parts of the service sector - business services, communication services and other knowledge intensive services – increasingly tend to become key sectors in relation to the over all industrial dynamics. They become central nodes in the innovation system gathering and codifying knowledge, connecting users and producers of knowledge and distributing knowledge, world-wide, between different localities. The traditional focus of industrial policy on the competitiveness of manufacturing firms is becoming correspondingly less relevant. Services become increasingly important in their own right as providers of wealth and jobs and as strategic elements in innovation systems. Rethinking regulatory systems, including quality control systems, so that they promote rather than block for innovation in these sectors is one policy task. Another one is to promote access to knowledge-intensive business services for SMEs and marginal regions. 11

Integrating research institutions in the innovation system

In this report we have accepted elements of the hypothesis proposed by Gibbons et al. (1994) that we have entered a new mode of knowledge-creation where there is a much stronger connection between science and technology and where innovation typically will be the outcome of an interaction among a multitude of actors distributed between many different institutions and locations. These developments point to the need to integrate the knowledge production taking place at universities more closely with the innovation process. There is great diversity of different attempts in Europe to get universities more effectively engaged in innovation. It is obvious that local conditions are important but certain principles may be followed. Matrix-forms of organisations (combining discipline organised departments with temporary inter-disciplinary centres), buffer organisations connecting universities with SMEs and circulation of scholars between basic, applied and development research tasks are obvious policy initiatives in the new context. 12

In the background report we have warned against solutions that completely break down the protection of academic autonomy. The major function of universities is to train students and scholars in skills that are crucial for the development, absorption and use of technology and this calls for a certain degree of autonomy. Also, autonomous basic research is becoming increasingly important as competition and new governance forms tend to promote applied and short term development work in the private sector. 13

Innovation policy in a wider perspective

So far the focus has been on a set of policies that will increase the capability to innovate and adapt in a rapidly changing environment. As indicated earlier in this chapter, the costs of rapid change and the negative effects of the learning economy may be substantial. There are a number of factors that makes it more and more difficult to leave these changes to 'repair' policies. Big scale income transfer is becoming more and more difficult in the context of globalised monetary regimes and Internet transactions. Environmental damage is difficult to repair. This is one reason for proposing a wider perspective on innovation policy. 14

The other reason has to do with the fact that the market-led speed-up of innovation may be effective in the short run but in the longer view the crucial issues have to do with creating a new techno-economic paradigm and here non-market intervention in the form of a need-oriented technology policy may be a key element. There are many indications that the present acceleration along a well established technological trajectory (where Europe trails behind) based on information technology discriminate against long term efforts to create new ones. The kind of innovation policy referred to in this section responds to the first problem and it may also help to solve the second one.

Designing an innovation policy aiming at social and environmental sustainability

The policies presented above, emphasise the importance of human resource development and the integration of the different parts of the innovation system in networking and interaction. They will prove more helpful when it comes to catch up along the information technology trajectory than traditional Science and Technology programmes. But they should be supplemented by a need-oriented innovation policy that explicitly aims at tackling issues raised by the speed-up of innovation and transformation. It would be possible to list numerous such needs but here we will focus on two issues: Only the second of those will be used to illustrate the basic principles involved.

Social and regional polarisation is not a new phenomenon in the history of capitalism. In the present era polarisation between people and regions has become rooted in differences in skill, competence, access to and participation in interactive learning to an extreme degree. Education systems and learning organisations should therefore be designed so that they strengthen the learning capability of the weak learners (the new new deal). New ways of using the potential of advanced user-friendly information technologies such as multi-media is one element in a policy tackling these issues. Regulating the equal and effective access to information technology and communication systems in marginal regions is another. 15

The environmental threats call for immense trans-disciplinary and multi-technological efforts and they need to be realistically anchored in an understanding of the role of social movements and interest groups. Measuring what is going on at the global level, developing pure technologies in manufacturing and transports, changing the incentive structures in agriculture and forestry so that more environmental friendly techniques become in demand and changing the mode of everyday life are all elements in a strategy aiming at sustainable growth. 16

The parallel with the post-war US military procurement of information technology and soft ware

In this context it is interesting to consider the historical role of government in connection with the formation of the current techno-economic paradigm around information and soft-ware technologies. The major player in this field was, of course, the US military. The impact from military demands were dramatic especially in the early history of the formation of a new technological system. While the impact of direct procurement was important in this phase the most important influence came through the construction of knowledge institutions, academic training and subsidised access to computers. The fact that universities were used as the base for developing new knowledge in the field was critically important for the wide and rapid diffusion of the knew technologies in the economy as a whole. 17

The US soft ware example illustrates a case where massive intervention, had long term effects on the over all dynamics of economic growth through fostering a new techno-economic paradigm. It is important that the idea was not to designate the technological winners of the future – nobody in charge of building the first elements of the soft-ware knowledge infrastructure, or the embryo to the Internet, had any idea that this specific technology would revolutionise the world economy and give the US a head lead in the field. But the massive concentration of knowledge power, which could not have happened through a market led incremental approach, to solve a set of collective needs related to the cold war had the indirect effect to open up radically new technological avenues.

The environmental field is different from the military field in being closer to private markets. As new regulations are introduced, for instance through making the polluter pay, new markets for 'green products' are created. Also, the preferences of private and collective consumers are affected by 'environmental learning' as the non-sustainability and the private and collective risks of following present strategies are realised. If Europe moves ahead in directions that others have to follow later on it creates markets for its future products and technologies. National and European procurement policies may be crucial for the success of such a strategy. Among the policy instruments analysed in the TSER-projects they seem to be especially effective when it comes to create products with new green qualities. 18

Building new technological systems

In this context it is useful to think in terms of 'technological systems' as a special version of innovation systems. A technological system is a combination of interrelated sectors and firms, a set of institutions and regulations characterising the rules of behaviour and the knowledge infrastructure connected to it. Most innovation policies referred to above are well-suited when it comes to support existing technological systems but much less so when it comes to stimulate the creation of new ones. 19

In the case of environmental innovation the following elements may be crucial for success:

Such a model where the core elements are market creation, building new knowledge infrastructure and policy co-ordination might be used in other areas where the globalising learning economy tends to undermine its own logic. 20

A European agenda for innovation policy

Taking into account all the different aspects of innovation policy discussed in this summary we recommend that innovation policy at the European level should include the following elements:

Many of these elements are already on the European agenda as specified in the Green Paper on innovation and in the outline of the 5th Framework Programme 22 . Actually, it might be argued that while the Green Paper takes on the first task of promoting innovation along the trajectory, the framework programme corresponds to the wider perspective on innovation policy, including its need orientation. On the background of the TSER-projects covered by this policy action we find that the Green Paper tends to underestimate the soft aspects of innovation such as the role of human resources, competent users, demand factors, network building and organisational change. A major criticism of the actions proposed in the Framework programme is that they are too partial in their focus on science and technology, remaining in a linear understanding of innovation and not achoring the formation of technological systems in their socio-economic context.

Elements of a research agenda for socio-economic research

The coverage of this exercise – seven projects mainly focused on technology policy related issues – does not give enough background for coming up with an extensive research agenda. Here we will just mention four topics that seem to need further research given the general vision presented in the report.

The learning economy/society is a complex phenomenon where the social dimension is important. There is a need for research that gives a better understanding of the role of learning and knowledge in an economic perspective, but also to promote inter-disciplinary research bringing together economists with sociologists, experts in cognitive science and communication. There is a need to analyse the role of social cohesion and trust as a prerequisite for learning. Finally, it is important to understand how learning takes place in time and space. What are the implications of information technology for the codification of knowledge and for the accessibility of different kinds of knowledge and learning across regional and national borders in the future? This will involve basic and applied research as well as disciplinary and trans-disciplinary research.

In the field of economics, there is a special need to pursue the analysis of the interaction between competition, co-operation and innovation as well as the role of intra- and interorganisational change in connection with radical innovation. New developments in evolutionary, structuralist and institutionalist economic analysis, referred to in the background report, are fundamental when it comes to understand the new features of the globalising learning economy. These analytical developments are not yet properly anchored in the academic institutions. It should therefore be considered to establish one or two European centres on evolutionary/structuralist economics.

Among specific problems, we would emphasise the need to understand the role of the service sectors in the over all dynamics of innovation and economic growth. The change in degrees of internationalisation and in competition intensity for services are important to capture. Labour market research and analysis of education and training also need to be more explicit in focusing on service sectors. In this field there is a need for building data sets, research institutions and taxonomies to sort out the heterogeneous character of the service sectors.

Finally, our policy conclusions point to the need for a systematic and historical overview and assessment of policy learning and especially for understanding better the impact of government efforts to stimulate innovation in the context of need oriented policies. The aim of the research would be to give policy makers at the regional, national and European level inspiration for engaging in bold action in areas crucial for the sustainability of the learning economy and for the long term innovative capability of Europe.

1. The title refers to a 'globalising learning economy'. The reason for preferring this clumsy connotation to the more elegant 'the global knowledge-based economy' is simply that we want to emphasise that we are still far away from a truly global economy and that what characterises the present era is not so much the use of knowledge but rather the rapid rate of forgetting and knowledge-creation.

2. On different aspect of globalisation see TSER-contributions: Chesnais&Serfati (1997), Ietto-Gillies (1997), Molero (1996), Narula&Wakelin (1997) and Archebugi&Michie (1997).

3. For a specification and analysis of the learning economy see Lundvall (1996). TSER contributions Johnson&Gregersen (1997) and Johnson (1997) discuss the learning economy in the context of innovation systems.

4. For data illustrating the European paradox see CEC (1994). For the analysis of the weak European specialisation and its sticky character see TSER-contributions Dalum, Laursen&Villumsen (1997), Laursen (1997) and Verspagen (1997). Important TSER-contributions on European innovation policy in an evolutionary and systemic context are Smith (1997a) and Malerba (1997). See also Foray (1997) for an attempt to define the proper realm of a European innovation policy.

5. Several of the TSER-project analyse the interaction between technology and employment (Edquist, Hommen&McKelvey, 1997, Petit&Soete, 1997 and Verspagen, 1997). There is no clear evidence that a more intensive use of new technologies affect the volume of employment negatively but there is strong evidence that the use of information technology has a skill biased effect (see also OECD, 1994, OECD, 1996 and OECD, 1997). In the background report we emphasise how new technology, trade and deregulation combine in giving rise to a strong and growing skill bias in recruitment in the labour market.

6. Several of the TSER-contributions focus on different aspects of regional development. Fagerberg&Verspagen (1996) and Fagerberg, Verspagen&Marjolein (1996) demonstrate that the knowledge-base is fundamental for the income gaps between European regions and that the catching-up went very slowly in the eighties. Cooke (1997) and Molero (1996) analyse regional developments in the light of globalisation. Cooke, Etxebarria&Uranga (1998) and Tödtling&Sedlacek (1997) develop the concept regional innovation systems and use it in empirical analysis. Sternberg (1996a), Sternberg (1996b), Landabaso (1997) and Landabaso&Reid (1997) analyse policy alternatives at the national and the European level.

7. For an up to date discussion on the need to invest in education, training and learning in the information society and for the potential of using information technology for updating learning see CEC (1997, p.21 et passim).

8. One important contribution to this policy area is Andreasen et al (1995). Recent contributions relating directly to the Made in Europe-project are Coriat (1997), Dosi (1997) and Weinstein (1997).

9. Different forms of regional networking in Europe have been analysed in the Phil Cook TSER-project (see for instance Cook, 1997 and Tödtling&Sedlacek, 1997). See also the other references under footnote 5. The new book from Michael Storper (1997) gives a major contribution to the analysis of the territorial dimension of networking.

10. Much of the interesting work on the formation of trust in networks takes place in France. See for instance Lazaric&Lorenz (1997).

11. In the Hauknes-project (see for instance Hauknes, 1996, Hauknes, 1997 and Miles, 1996) a broad mapping of innovation in services has been pursued while the the thematic network co-ordinated by Peter Wood has focused on the role of knowledge intensive services. Wood&Strachbach (1997), Antonelli (1997), Tomlinson (1997) and Tsounis (1997) demonstrate how certain business and communication services become key sectors in relation to the over all industrial dynamics.

12. The TSER-thematic network co-ordinated by Keeble on High Technology SMEs illustrates different regional and national models in this respect and show how university research increasingly give rise to technology based spin-offs (Keeble&Lawson, 1997 and Keeble et al, 1997). In the case of Chalmer University in Sweden the building of new technology oriented trans-disciplinary centres seem to have been a major element of a successful strategy (Holmén&Jacobsson, 1997). The TSER-project co-ordinated by Jones-Evans has shown the diversity of different attempts in Europe to get universities more effectively engaged in innovation and also some of the difficulties met in these respects.

13. For excellent overviews of the complexity of the contribution of academic research to economic development see Pavitt (1995), Pavitt (1996) and Martin&Salter (1996). Chesnais&Serfati (1997) point to the growing dominance of finance capital in governance on a global scale as a major factor behind the recent stagnation of R&D-efforts in the private sector.

14. One of the few economists who have tried to theorise about and even to measure the costs of economic change is Anne P. Carter (Carter, 1994a and Carter, 1994b).

15. The social dimension of the learning economy is discussed in Lundvall (1996). The policy dimension is developed by the high level expert group on information society in CEC (1997).

16. For a TSER-analysis of public participation and sustainable development in European countries see Jamison&Østby (1997).

17. According to Mowery&Langlois (1996), the direct procurement of soft-ware became less and less effective in terms of spill-overs as it became increasingly oriented toward very specialised military needs. The authors also argue that attempts to design separate organisations outside universities and pursuing applied research aiming at specific private needs, actually, undermine the wide distribution of knowledge.

18. TSER-projects show that new forms of procurement policies where public agencies organise private users in procurement aiming at energy savings have been highly effective in affecting the direction of technical change (Edquist, 1996, Edquist&Hommen, 1997 and Westling, 1996).

19. See Carlson (1995) for the development of the concept of technological systems and several of working papers from the Edquist-project on innovation systems, such as for instance Smith (1997a), Johnson&Gregersen (1997) and Malerba (1997).

20. It might also be regarded as way of shaping the institutions and structure of production so that the innovation system becomes more adequate to future market developments. One of the major results in the Verspagen-project (see for instance Laursen, 1997, Verspagen, 1997 and Dalum, Laursen& Villumsen, 1997) is that the structure of production matters for economic growth and that the weak specialisation position of Europe in electronics has slowed down growth and job creation. It has proven almost impossible to correct this weakness ex post through Science and Technology Policies (the experiences from the ESPRIT-programme illustrate this). The alternative sketched here takes into account that the European market is one of the biggest in the world – a process of setting new standards and creating new markets while at the same time building new technological systems is a way of shaping the future rather than try to adjust to it when it has already become a fact.

21. This theme is developed by Foray (1997).

22. For an interesting critical analysis of the 5th Framework programme see the TSER-contribution by Smith (1997b).

The complete version of this report is available both in a paperback version and at the Internet. The paperback version can be ordered at the European Commission, TSER central Office.

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Last updated 12/10/1998.

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