Design of Innovation Policy through Diagnostic Analysis: Identification of Systemic Problems (or Failures)

Activities’ in innovation systems are the determinants of the development and diffusion of innovations. Examples are R&D, provision of organizations and institutions, financing of innovations, incubation, etc. These activities are partly performed by private organizations and partly by public organizations, the latter performing tasks that constitute innovation policy. As a basis for innovation policy, the problems (failures) in the systems must be identified. These ‘systemic problems’ or ‘policy problems’ can be identified only by means of comparing existing innovation systems with each other – over time and space. It is on this basis that the division of labor between public and private organizations must be analyzed, a division of labor that varies from country to country and over time. Determining this division of labor is a matter of strategic choices in innovation policy-making. This paper focuses upon the design of innovation policy through diagnostic analysis; it provides a framework for identification of systemic problems (or failures) in innovation systems.