4, February 2026

In 2026 THECIS celebrates its 25th anniversary. To celebrate this, we are starting a 25th Anniversary Blog series where we ask prominent individuals to write a blog to provide perspective on a topic related to innovation and entrepreneurship. This Blog is by Richard Hawkins, former Professor and Canada Research Chair in Science, Technology, and Innovation Policy at the University of Calgary. It is the second in a three-part series on the past, present and future of innovation policy.

Innovation policy today – Blog #100

Over the past few decades, “innovation” has evolved into a powerful social, economic, and cultural phenomenon that has been internalized within virtually every aspect human life. All of which his has had significant impacts on the form and content of public policy, not just for innovation, but reciprocally for practically everything else.

But if the early origins of innovation policy were opaque, the contemporary policy regime stems directly from the advent of the semi-conductor. Although certainly not the only factor in innovation, no other single factor contributed the seminal catalytic impetus for the evolution of innovation policy as recognized today.

As we saw in the first installment, innovation policy had its origins mostly as subsumed within conventional macro and meso policy domains aimed broadly at encouraging industrial development through technological change. Today innovation policy is out in the open, but almost entirely in the form of specialized strategies, measures and institutions aimed mainly at the production of new technology, especially anything digital.

But as innovation became a synonym for technology, the principal policy mission became to provide inputs to technological change, which is only one of an enormous range of inputs to the final goal of innovation, expressed ultimately as growth and prosperity. And as many critics are now noting, the result was a highly problematical disconnect between innovation policy and policy affecting all these other crucial factors.

The British economist Keith Pavitt was fond of referring to digitalization humorously as “chips with everything.” But his quip pointed out a serious need for vigorous policy attention to infrastructural, intermediate, enabling, or general-purpose technologies. For it was not just the semi-conductor technology that would evolve rapidly and impactfully. These devices were going to impact virtually the entire technological basis of modern industry, along with every social and economic factor that depended upon it.

Suddenly, innovation policy was serious business that no government could afford not to pursue. Interest and concern were driven even further by the highly asymmetrical rate of technology and enterprise development worldwide. Although several jurisdictions played significant roles in the development of these technologies, the US soon took an enormous lead, quickly getting a lot of products to market and dominating many key infrastructures, a position it has never lost. This position was solidified and magnified in the mid 1990s, with the rollout of public network internet services.

Thus, as in the reconstruction period, policy outside the US became a game of “catch-up”, certainly in terms of technology, but even more urgently in terms of trying to establish commercial players to counterbalance the global dominance of the Microsoft, Intel, Oracles, and Googles, and generally to emulate the commercial environment of Silicon Valley and other US high-tech clusters. Countries became obsessed with performance league tables for R&D, technology transfer, inward investment, capital deepening and a host of other factors associated with innovation, whether strongly or weakly, directly or indirectly.

The result of all this concern was that very soon the innovation policy domain became segmented into the roughly four inter-related domains that we recognize today: basic scientific research, knowledge mobilization and management, R&D, and finance. Around the world, on different scales at national, regional, sub-national, municipal, and even community levels, a more-or-less standardized suite of policy measures emerged to support these activities. And although emanating from the electronics segment, this model was soon applied across the board to virtually every sector.

The structure took form amidst several much broader changes in how the role of public policy in general was perceived by policy makers. Changes that were encouraged by notions that a “new economy” underpinned by computer and communication technologies would break the business cycle and deliver virtually limitless growth. Prosperity for free? A heady idea that policy makers have never ceased to embrace. And as technology startups proliferated and grew market cap at often astounding rates, who would gainsay their enthusiasm?

However, in the haste to pursue this supercharged notion, a lot of means, ends, inputs and outputs became confused, often hopelessly. The simple economic definition of innovation as a “real output” became mired in policies whose main objective was often solely to encourage the indiscriminate development of as much technology as possible. The result was a policy milieu almost entirely devoted to inputs and means rather than outputs and ends, typically with scant attention to connecting anything up.

In this frame of mind, the center of gravity for policy shifted inevitably from its origins at the macro and meso (industry) levels to the firm level. Innovation policy became as or more concerned with nurturing start-up enterprises than even with new technology as such. Indeed, in many cases technology became merely a pretext for creating firms whose value was primarily as investment vehicles; commodities to be bought and sold like any other.

This phenomenon was aided and abetted by aggressive changes in financial and securities regulation, trade rules, and competition policy along with the massive expansion of intellectual property rights. And crucially by portfolio-based venture capital models focused on short term profits in stock markets rather than on the stainability of new enterprises, which ultimately is where most genuine prosperity comes from.

In recent years, such observations have generated many questions as to the ultimate value of the innovation policy approaches described above and of their overall effect in terms of public welfare both in social and economic terms. Most stem from concerns that although policy appears to have played a significant role in flooding the world with technologies that could well play critical roles in addressing serious, even existential, emerging global challenges, it has failed chronically to provide the broader policy frameworks needed to deliver real solutions at appropriate scale.

Moreover, a newer generation of economic analysis is questioning the fundamental assumptions of the “new economy,” not least because, demonstrably with its constant stream of booms busts and bubbles, the business cycle has never been broken. A lot of wealth has been created but also concentrated to an unprecedented and almost certainly unhealthy degree. It has yielded higher productivity and employment in some sectors but destroyed it in others, while impacting it hardly at all in many. The jury is still out on the aggregate effect.

And, as the eminent Stanford economist Mordecai Kurz has documented comprehensively, far from encouraging more competitive markets, every trend in technology markets since the 1960s has been to monopolization, especially of the critical networked substrate upon which everything else depends. And with developments like AI, many are now advocating that innovation policy be re-positioned from how to encourage new technology to how to contain it.

Whatever one’s position on these arguments, it is very clear that innovation policy will require a rethink. Which will be the topic of my final installment.

 

Richard Hawkins, former Professor and Canada Research Chair in Science, Technology and Innovation Policy at the University of Calgary.