Demand-led Innovation

The role of demand in innovation has been extensively debated. The ministudy reviews the schism between Schumpeter’s emphasis on technology breakthroughs and Schmookler’s stress on innovators responding to the pull of market demand. Of course, both technology-push and demand-pull may coexist. What may be important is understanding how they relate and which dominates at specific times and in particular types of industry. The schism continues to be reflected, however, in much economic argument and indeed in policy thinking. We consider two types of DLI policy - policy aimed at promoting DLI processes in industry (e.g. better utilisation of tools for market research or user innovation strategies to enhance competitiveness); and policy efforts to promote innovation or innovation trajectories of a particular types (e.g. toward meeting Grand Challenges).

The ministudy reviews a great deal of survey research indicating the European firms do in fact pay considerable attention to demand in planning and sourcing information for innovation. The studies also demonstrate that demand-side innovation policy measures tend to be seen as more influential than supply-side ones. But these studies do not tell us a great deal about how demand might be specifically used as a way of stimulating more innovation and influencing its direction. There is less systematic evidence about such approaches, and what is apparent is that there are many complicated factors influencing both the evolution of demand and the linkages between demand and innovation.

This complexity is reflected in the numerous policy instruments that have been identified as relevant to DLI. The ministudy briefly reviews frameworks for thinking about such instruments. The main message to emerge is the need for coordination of policy efforts, and systematic evaluation of their effectiveness, if DLI is to play a role in enhancing competitiveness and meeting Grand Challenges.

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