Lecture 6

Taxonomies of Institutions

•         Formal           •         E.g. laws, patent law, govt regulation for bank conduct, formal instructions for officials of a technological service system •         More visible •         Codified

•         Informal •         E.g. Common law, customs, traditions, work norms, norms of cooperation, conventions, practices •         Indirectly observed through the behavior of people

Levels in the Institutional Set-up

•         Basic Institutions •         Like constitutional rules or ground rules •         They define basic rules in economic processes, property rights, conflict solving in labor market

•         Supporting Institutions •         Supporting rules define and specify the certain aspects of basic rules •         E.g. restriction on the use of private property, rules for regulating overtime work in specific industries

The Functions of Institutions in relation to innovation

1.     To reduce uncertainty by providing information

2.     To manage conflict and cooperation

3.     To Provide Incentives

Provide Information and Reduce Uncertainty

•         Institutions act as signposts

•         Technological service systems reduce uncertainty about technical solutions

•         Patent laws and other intellectual property rights reduce uncertainty

•         Norma that concern the operation of banks and other financial organizations

•         Uncertainty is an unavoidable component of innovative activity

•         Rules, practices, stable relationships between parties are needed to provide information

Manage Conflict and cooperation

•      Institutions control and regulate conflicts and cooperation between individuals and groups

•         Conflict has the potential to be very serious problem in connection to innovation activities

•        R&D personnel are long term oriented- Marketing department oriented towards consumer wants –work place democracy

•         Conflict provoked by innovation process

–        Old ones have to give away

–        Fast restructuring of firms

–        Reshuffling of power, prestige and income

–        New firms born and old ones go bankrupt

•         Social security arrangements, education, retaining rights, labor market arrangements

Institutions provide incentives

•         Different incentives to engage in learning and to participate in innovation processes

•         Salary and wage scheme, income taxes, tax allowance, and inheritance rules affect innovative efforts

•         Property rights to knowledge and ideas

•         Need to adapt incentive structure and reduce the importance of individual incentives

•         Negative incentives

•         Aspects of the institutional set-up affect the system of incentives for learning and innovation

Organizations and Innovations

•         Organizations, including firms, are the main vehicle for technological change in that they carry through innovation

•         Private organizations include industry associations and scientific and professional societies

–        Primary objective of capitalists firms in not innovation

–        Innovation is an important precondition for making a profit

•         In addition to production, firms must have a good overall innovation performance

•         Public organizations – formulate and implement technology policy, regulatory agencies, organizations for higher education and research, technology support entities, standard-setting organizations and patent office

Innovating Firms must have……

·        Carry out a routine search for new knowledge

·        Change the search routines when necessary

·        Utilize the search result

·        Absorb new knowledge created elsewhere

·        Stimulate the emergence of ‘unexpected’ new knowledge

·        Utilize unexpected new knowledge

Organizations and Innovations

•         Activities of innovation oriented organizations

–        Organizations for knowledge production (Universities)

–        Knowledge distribution (Science Parks)

–        Knowledge regulation (Standard setting committee, patent office)

•         Differ between systems of innovation

–        Universities are very important for research in USA and Western Europe

–        Private firms (Japan)

·         The Relation Between Institutes and Organizations

·         Organizations are strongly influenced, colored, and shaped by institutions

·         Organizations are ‘embedded’ in an institutional environment or set of rules

·         Institutes are also ’embedded’ in organizations

·         Established practices or relations in the operation of firms

·         Two-way relationship of mutual embeddedness between institutions and firms

·         Influences both performance and change of system of innovation

ROLE OF S&T IN POLICY & LAW MAKING

Definition of Public Policy:

“Whatever governments choose to do or not to do” Thomas Dye (1987)

“Purposive course of action or inaction undertaken by an actor or a set of actors in dealing with a problem or matter of concern” Anderson (1994)

It is a formal documented statement of intentions and sets of actions of an organization/authority to either remove certain deficiencies or improve the conditions in any particular area of concern/interest such as housing shortage, food crises, water contamination, growing poverty etc.

Role of S&T 

It is now universally recognized that the development of a country depends on its S&T capacity. This linkage is witnessed across the nations and through the course of history of hundreds of years. Especially after the World War II, the established recipe for nation building and reconstruction has been the use of rapidly expanding S&T resources. S&T related benefits are as follows;

1.       Increase in Agricultural productivity.

2.       Disease control.

3.       Technical education producing skilled HR.

4.       Making communication fast and easy.

5.       Better governance and decision making etc.

Following are the stages:

·        Problem Definition/ Recognition/identification

·        Agenda Setting

·        Policy Formulation

·        Policy Legitimation

·        Implementation

·        Analysis and Evaluation

Law & Policy Making		Various Interest groups of society
Problem Definition/ Recognition/identification		Think tanks, President and executive offices, Scientific community, Courts, Technical committee etc
Agenda Setting	Role of S&T
Policy Formulation	Resolving social issues (Environmental, Health, Food, Housing, Transportation etc)
Policy Legitimation/ Enactment of Law
Implementation
Analysis and Evaluation

Readings:

1.        Theodoulou, S. Z. (1995), ‘ Public Policy: the essentials readings’, New Jersey : Prentice-Hall. Part-Three

2.        Dye, Thomas R (2005), ‘Understanding public policy’ ; New Jersey : Prentice Hall.Pp 11-29