How should governments design public innovation agencies to accommodate the challenges of rapid technological and economic change? In this article, we argue that innovation agencies can approach innovation in very different ways. We develop a typology of innovation agencies, using eight agencies from around the world to identify distinctive patterns of learning, adjustment, and experimentation. In doing so, we demonstrate that the effective design of innovation agencies depends heavily on their mission and the specific ends they seek to pursue.

This article challenges the long-standing emphasis in the developmental state literature on the powerful pilot agency as an essential component of industrialization. Although a pilot agency may be able to facilitate growth in mature industries, we argue that policy makers seeking to promote rapid innovationbased competition must instead rely on continuous, radical policy innovation. We argue that this kind of experimentation is more likely to occur at the periphery of the public sector, in agencies with few hard resources and limited political prestige. In addition to providing a novel interpretation of how states enter new, high-technology markets, we explain why some successful countries become less innovative over time. As agencies successfully introduce radical policy innovations, their higher profile exposes them to greater political interference and reduces their entrepreneurial capacity. The argument is supported by within-case analysis of two historically low-technology economies that successfully promoted rapid innovation-based growth, Finland and Israel.

Globalization has generated increasing interest in technology‐intensive industries as a way to sustain national economic competitiveness. High‐technology growth is often conceptualized as a “high road” to prosperity, more amenable to private–public, industry–labor, and interfirm cooperation than tax, regulatory, or cost competitive strategies. While specialization in technology‐intensive industries does deliver several benefits, this article uses Finland's successful transformation into a high‐technology economy to highlight the significant economic and political risks associated with this strategy. Economically, movement into electronics exposed Finland to cost competition and disruptive technological innovations. Politically, high‐technology competition weakened the solidaristic ties that characterized postwar capitalism and the coordinating capacities that underpinned economic growth. In short, high‐technology growth exacerbated the problems it was supposed to solve. The article concludes by generalizing the argument to several non‐Nordic states.

No abstract