The market failure and the systemic failure rationales in technological innovation systems

Photovoltaic Development From New Order Regime to Reformation Regime in Indonesia: Perspective of Technological Innovation System

“…The functional TIS perspective, currently considered more appropriate for policy analysis than the structural view that characterizes the IS literature, allows a defining of systemic failures in the generation and of diffusion of a new technology in terms of problems or weaknesses in the key dynamic processes (functions) of an innovation system (Bleda & Rio, 2013). In the TIS approach, there are seven function elements that describe how a particular technology can develop well in a region or otherwise (see Table 1).…”

How innovation commons contribute to discovering and developing new technologies

“…But this extension is of significance, and perhaps contentiousness, because we claim to have discovered a new class of commons at the locus of what economic theory reliably informs us is the single most important factor determining the wealth and prosperity of nations: the growth of new technologies (Solow 1956;Romer 1990). Since Richard Nelson (1959) and Ken Arrow (1962) (see Stephan 1996;Martin and Scott 2000;Bleda and Del Rio 2013) economists have claimed the existence of market failure at the point of investment in developing new technologies. In consequence, large-scale and global suites of government policy -ranging from intellectual property, through R&D tax credits, to targeted procurement, through publically funded research, high technology industry policy, including especially military spending, and a raft of other programs amounting to typically around 3 or 4% of GDP in each nation, adding to several trillions of US dollars worldwide -address this market failure.…”

“…Because of the fixed costs and uncertainty associated with discovery, as well as the public goods characteristics of knowledge, individuals may worry about opportunism and exploitation in their private investment of resources to innovative activities (Arrow 1962). From a social welfare perspective, investment in producing new knowledge that has fixed costs and is appropriable suffers a market failure because the marginal cost will always be below the average cost, and whoever accrues those fixed costs will be outcompeted by new entrants (Jones and Williams 1998;Bleda and Del Rio 2013). A frictionless competitive market will dedicate too few resources to innovation than is socially desirable (Romano 1989).…”

“…The different ways of removing innovation from perfect competition constitute the modern systems of innovation policy (Nelson 1993;Freeman 1995;Soete et al 2010;Dodgson et al 2011). Governments impose innovation policy through two broad categories: market-based interventions or planning-based interventions (Bleda and Del Rio 2013). Intellectual property statutes create monopoly rights over innovations (Boldrin and Levine 2008).…”

Recent Economic Theorising on Innovation: Lessons for Analysing Social Innovation

“…Yet, it has been concluded that indirect R&D intensities would not influence the classification of sectors. (Hatzichronoglou, 1997: 5) 29 In an attempt to systematically compare the market and systemic failure policy rationales, Bleda and del Río (2013) to intellectual property rights (IPR) because that provides incentives for private actors to invest in R&D activities. 30 Clearly, while certain types of technological innovations can be important components ('ingredients') of social innovation processes, too, this type of policy support is unlikely to be the most pertinent one to promote social innovation.…”