Erkki Karo

Economic development and evolving state capacities in Central and Eastern Europe: can "smart specialization" make a difference?

We position “smart specialization” (SS) as the third external and conditionality-based reform of economic policy rationales – after Washington Consensus and Europeanization – in Central and Eastern Europe (CEE). We discuss what kind of state, policy, and administrative capacities, or routines, SS presumes. We show that over the years CEE economies have built very different routines, especially for policy coordination and public–private interactions. Design and implementation of functional SS strategies requires critical attention and development of these routines through contextual policy experimentation in all CEE regions. We provide some general guidelines for this.

Public management, policy capacity, innovation and development

In this paper we discuss the question of what factors in development policy create specific forms of policy capacity and under what circumstances developmentoriented complementarities or mismatches between the public and private sectors emerge. We argue that specific forms of policy capacity emerge from three interlinked policy choices, each fundamentally evolutionary in nature: policy choices on understanding the nature and sources of technical change and innovation; on the ways of financing economic growth, in particular technical change; and on the nature of public management to deliver and implement both previous sets of policy choices. Thus, policy capacity is not so much a continuum of abilities (from less to more), but rather a variety of modes of making policy that originate from co-evolutionary processes in capitalist development. To illustrate, we briefly reflect upon how the East Asian developmental states of the 1960s-1980s and Eastern European transition policies since the 1990s led to almost opposite institutional systems for financing, designing and managing development strategies, and how this led, through co-evolutionary processes, to different forms of policy capacity.

STATE OWNED ENTERPRISES AS INSTRUMENTS OF INNOVATION POLICY

This article expands the literature on the rationales and governance of state owned enterprises (SOEs). We show that SOEs could be seen as instruments of innovation policies and change agents within broader innovation systems that can overcome many of the conventional challenges of innovation policy and its implementation, from coordination and implementation of policies and innovation system actor networks to financing innovation. We review the existing literature on the rationales of SOEs and extend it to include innovation as a central rationale. Thereafter we provide a taxonomy that reveals the necessary policy and managerial conditions and constraints for using SOEs as instruments of innovation policy. We place some of the better-known innovation-oriented SOE successes and failures into this taxonomy and show that this approach will allow in future research to explore different SOE practices and potential for using SOEs as innovation policy instruments across countries.

Should “open innovation” change innovation policy thinking in catching-up economies? Considerations for policy analyses

This paper provides a review of the current state of academic and policy-level debates on “open innovation” by elaborating on the relevance of the concept of open innovation for innovation policy-making in catching-up economies. The paper shows that paradoxes and contradictions exist between the “mainstream” innovation discourse and the development challenges of the catching-up countries that have lead to “de-contextualization” of the innovation policy discourse. The paper argues that applying the concept of open innovation in its ideal-type form to the catching-up context is likely to reinforce these de-contextualization tendencies. This problem can be remedied by more conscious attention to the basic contradictions and paradoxes, which requires a more comprehensive and systemic analytical focus on innovation and technological development at the levels of firm, industry and policy.

Modernizing governance of innovation policy through ‘decentralization’: A new fashion or a threat to state capacities?

Abstract This paper contributes to the current debates on the relevance of economics research for innovation policy in two ways. First, the paper argues that innovation policy debates in economics are converging on a ‘decentralization thesis’, which posits that globalization and decentralization of production and innovation systems should be paralleled by decentralization of innovation policy systems. By analyzing the ‘systems of innovation’ literature the paper highlights the weaknesses of this thesis from the perspective of public policy-making. Second, the paper argues that by integrating economics-based discussions of innovation policy with the ‘public management’ perspective of policy systems, innovation research has better potential to open-up the ‘black-box’ of policy-making than by using the ‘policy studies’ perspective, which has been already introduced to innovation policy literature.

Innovation and the State: Towards an Evolutionary Theory of Policy Capacity

In this chapter we propose an evolutionary analytical approach to policy capacity with a specific focus on policy domains where uncertainty and need for policy innovations, or novelty creation, is a central concern for effective policies. From an evolutionary perspective, the core elements of policy capacity are: (a) organizational routines and their varieties, (b) search and selection and the endogenous and exogenous sources of novelty creation, (c) selection and feedback environments. We operationalize these elements and illustrate the value of the evolutionary analytical perspective through discussing the evolution of science, technology and innovation (STI) policy capacities of three Asian Tigers.

Searching for Exits from the Great Recession: Coordination of Fiscal Consolidation and Growth Enhancing Innovation Policies in Central and Eastern Europe

Abstract To overcome the Great Recession that started in 2008, the European Union (EU) has opted for a strategy that combines austerity-driven fiscal and experimental ‘growth-enhancing’ research, development, and innovation (RDI) policies supported by different coordination mechanisms. We analyse the experiences of four Central and Eastern European economies—the Czech Republic, Estonia, Poland, Slovenia—in implementing this strategy. Given the weak policy capacities both in the EU institutions and CEE economies to draft and coordinate such novel RDI policies, we find that the implementation of this strategy is more challenging under the current EU fiscal and economic policy coordination system than assumed by the EU.

Can Smart Specialization and Entrepreneurial Discovery be Organized by the Government? Lessons from Central and Eastern Europe

Abstract In this chapter, we treat smart specialization and entrepreneurial discovery as elements of broader phenomenon of “experimental governance” in the European Union. We analyze, how have different Central and Eastern European economies tried to operationalize and organize the drafting of smart specialization strategies and entrepreneurial discovery as part of this strategy-making process. We show that the analyzed countries have faced great difficulties in operationalizing these concepts and implementing them in a way visioned by the EU policy makers. While the countries have tried to consciously select broad specializations with rather limited changes in policy-making practices, we argue that emphasis should not be on defining and agreeing upon “smarter” specializations per se, but on developing systems and capabilities for continuous entrepreneurial discovery based on close interactions and agile coordination between and within states, academia, and businesses. This requires more flexible approach to bureaucratic rules and regulations by both the European Union, as well as the national and regional policy makers.

Emergence of societal challenges-based innovation policies in market-based innovation systems: lessons from Estonia

The societal challenges-based approach to science, technology and innovation (STI) policy is currently one of the key ways by which the EU seeks to break away from the linear and science-push driven policy thinking. This seems to raise complex challenges of policy legitimisation, rationalisation and institutionalisation especially in the countries that have tried to build market-based innovation systems. Based on the case study of Estonia, we show that in addition to the development of new policy mixes and coordination instruments, such policy shift may also require the re-thinking of core STI policy rationales and legitimisation practices, and these may have to be further supported by experimental policy approaches and institutional innovations for changing the habits and routines of key STI system actors.

Public Administration, Technology and Innovation: Government as Technology Maker?

In this chapter, we summarize the historical roots and development of public sector innovation research and discuss its main current weakness—lack of an explicit evolutionary perspective. To remedy this weakness, we develop further the co-evolutionary perspective on public administration (PA), technological development and innovation. Relying on Christopher Pollitt’s framework of government as “placemaker”, we propose a complementary framework of government as “technology maker”. In the concluding section, we discuss the implications of the proposed framework for PA research.