An Innovation Policy Framework: Bridging the Gap Between Industrial Dynamics and Growth

Innovation is increasingly considered the key to elevating prosperity and securing sustainable long-term growth. The last few decades have also witnessed a refi nement of previous growth models to include investments in education by individuals and R&D by fi rms. Better educated individuals and increased expenditure on R&D are shown to result in increased innovation and accelerated growth in endogenous growth models. This fi nding has spurred policy makers, most recently the OECD, the European commission, and other organizations, to design innovation strategies to meet future growth and welfare challenges. Such strategies have also trickled down to the country level.