How Do Innovation Agencies Reproduce? Evidence from Israel and Finland

• In Event: Politics of Science and Technology Here and Elsewhere

Abstract

Industrial policy has recently returned to the center stage of policy debates. Such policies are often designed, implemented, and overseen by a developmental or innovation agency. The classic literature on the developmental state stressed the crucial role of autonomous and highly powerful developmental agencies with a centralized bureaucracy such as Japan’s MITI or Korea’s EPB. More recent accounts focus primarily on low-profile agencies that operate at the periphery of the public sector making them less vulnerable to political interference and more likely to adopt experimental policies that are more suited for the promotion of Rapid-Innovation-Based growth, for example, the US’s DARPA or Finland’s Sitra. Most of the literature on the topic has focused on identifying factors that determine the effectiveness of developmental or innovation agencies. Few attempts, however, have been made to assess and explain how these key agencies go about reproducing their institutional capacities, and the effectiveness (or ineffectiveness) of innovation agencies is most often studied as a constant, rather than a variable that can strengthen or weaken over time. This paper addresses this theoretical lacuna by utilizing a comparative research design and leveraging a variety of sources, including in-depth interviews, policy debates, and official state documents. With these materials we evaluate the institutional reorganization of Israel’s most crucial innovation agency, the Office of the Chief Scientist (OCS) and its Finnish equivalent, The Finnish Funding Agency for Technology and Innovation (TEKES). In Israel, growing concerns regarding the OCS’s diminishing effectiveness led to the amendment of Israel’s R&D Law. This reform transformed the OCS into the Israel Innovation Authority (IIA) and bestowed the newly established agency with an expanded mission statement, a new institutional structure, and an array of new or updated policy instruments. Through this transformation, the state was able to redeploy its leading innovation agency in a new configuration more suited for the contemporary challenges of innovation-led development. By contrast, in Finland, TEKES struggled to adapt to changing economic circumstances. Like the OCS, TEKES entered the new millennium as the largest and most important actor in the Finnish innovation system, supporting a variety of programs, most notably the subsidization of corporate R&D. Despite early warning signs that this narrow approach to innovation was insufficient, TEKES failed to adapt and, in several respects, doubled down on its original strategy. Efforts to broaden its focus to younger firms in new industries and non-technological forms of innovation, including social innovation, only occurred after Finland entered an economic crisis and these defensive moves were only partially successful. The agency’s failure to develop new allies rendered it vulnerable to political interference, including a significant budget cut in 2015 and a merger with Finland’s export promotion agency to form Business Finland in 2018. Innovation has continued within a more pluralistic landscape, but the Finnish state’s capacity to direct this activity has decreased with the weakening of its primary instrument.

Authors

• Dan Breznitz, University of Toronto

• Erez Maggor

• Darius Ornston, University of Toronto