Public Innovation Policies and Developing Countries In a Phase of Economic Liberalisation

It is now fairly well established both in theory and practice that if industrial R&D is left entirely in the hands of private sector enterprises there will be under investments. The desire to under invest is proportional to the size of the spill-over gap. In order to correct for these, public innovation policies are conceived. The paper undertakes a rather detailed survey of the public innovation policies across the developed countries. It is noted that all over the developed world there is a renewed emphasis on public innovation policies to offset the recent slow down in business enterprise R&D. Particular focus is given to those instruments of innovation policy that leads to more investments in R&D by the private sector without at the same time imposing the discretionary role of the state. The paper concludes by exploring the relevance of such instruments to developing countries most of which are engaged in reducing the discretionary role of the state with respect to economic matters