By João Carlos Ferraz, Associate Professor, Institute of Economics, Federal University of Rio de Janeiro
New economic activities may be required for the sustainable, competitive and inclusive development trajectory of a nation. But in their early stages, the economic attractiveness of many of these new activities is unknown. Uncertainty prevails as investment projects have no track record of costs and returns, demand is not guaranteed, and the institutional framework may not be consolidated. In short, infant industry challenges may apply, which is when new policy and public institution practices should come into play. And increasingly, emerging societal development challenges like climate change, are creating a pressing need for innovative policy solutions.
But what is innovation in public institutions? Policy innovations may come in diverse shapes and forms; they can be new solutions to address a pre-existing challenge or alternative approaches to tackling an emerging one. Some may result in short-lived experiences (pilot projects that are never scaled up); others can be both immediately relevant and long lasting. Drawing from Schumpeterian literature, policy innovation can be defined as changes in processes – including organisational procedures – and products that a public agency offers to society. For policy beneficiaries, these are product innovations, but, when taken up, they imply process changes in the recipient organisation. Moreover, policy innovations can be of radical or incremental nature depending on the extent of the changes they imply for policy benefactors and beneficiaries. Nonetheless, a necessary pre-condition for the emergence and application of any type of innovation is the mobilisation of dynamic policy capabilities.Continue reading