The importance of designing good innovation institutions: a timely reminder from the 2015 Global Innovation Index

This week, the World Intellectual Property Organisation, Cornell University and INSEAD published the 2015 edition of the Global Innovation Index (GII). Now in its eighth year, this Index has become a useful barometer for tracking changes in the resources that governments are putting into innovation, and the bang they are getting for their buck.

The importance of policy and institutions to innovation performance is a major focus of the 2015 Index. It looks at both general policies that create a supportive environment for innovation (such as a strong IP regime, access to finance and good trade relationships) as well as more direct supply and demand side innovation policies (including public R&D funding, procurement, and the creation of public-private partnerships). However, one of the report’s key conclusions is that the policy mixes used by more developed countries are unlikely to be as successful in developing ones if they are simply transferred across without regard to specific national contexts.

We are currently thinking about this question at Nesta through a comparative study of national innovation agencies, which we define broadly as government-funded bodies designed to help companies do more research and development. While the purpose of these organisations is usually linked to generating economic growth, there is considerable diversity in their approach and in their methods. By looking at a range of case studies around the world, we are trying to get a better sense of whether, when, why and how these agencies should be established and run.

It is pretty self-evident that there is no one size fits all model for an innovation agency that will be suitable for countries at different stages of economic development. Nevertheless, our research has revealed some common patterns and challenges that we believe would be relevant to most innovation policymakers thinking about setting up a new support agency, or changing the way an existing one works.  A few are outlined below.

1. Creating a clear USP

Most current innovation agencies have responsibilities that sit on a spectrum between delivering government services and priorities, and experimenting with radical and untested forms of innovation support. While there are pros and cons associated with either approach, there needs to be clarity from the outset about what this body will do that is distinctive, how it will complement or help coordinate the actions of other public and private forms of innovation support, and the governance structures that will best support it to carry out its mission.

2. Designing an organisation fit for purpose

Rather than trying to copy agencies that are commonly viewed as ‘success stories’ (such as the massive Defense Advanced Research Projects Agency in the United States), governments need to think about what will be appropriate for their context and capabilities. This model should also be flexible, capable of changing to suit changing needs. Look for example at Innovate UK, which has transformed over the past decade from a small small government advisory panel into an arm’s length executive agency with considerable freedom to set its own programmes and budget.

3. Hiring the right people 

How effectively an organisation delivers on its goals depends on the skills and capabilities of its staff. For innovation agencies, this means deciding who their main target audience is (policymakers? industry? the research community?) and then recruiting accordingly. For example, while Innovate UK primarily employs individuals with experience of working for a business, the majority of employees at Sweden’s innovation agency - VINNOVA - have an academic research background. And at ITRI in Taiwan, most staff are engineers, with a deep understanding of the technical areas where their support is focused. A common denominator in success here appears to be expertise, highlighting the importance of staffing these organisations with specialists rather than policy generalists.

4. Getting the right programme mix

Direct grants and subsidies are currently the most common innovation agency support instruments. Some organisations use these almost exclusively. However, others are experimenting with a wider range of tools for the commercialisation of R&D, including low-interest loans (a particular feature of the Tekes model in Finland), equity-based financing (such as the SEEDS programme run by SPRING in Singapore), or the creation of major platforms for industry-research collaboration (such as the £1 billion programme of Catapult Centres set up by Innovate UK). An ambitious and experimental ethos is to be welcomed in innovation agencies, although this requires careful management so that the organisation does not spread itself too thinly.

5. Understanding what is and isn’t working, and acting on this evidence

Innovation performance and impact is notoriously hard to measure, especially over short time frames. Nevertheless, innovation agencies need to be able to justify how they are spending their money, and have a reasonable idea of whether they are doing so in the most impactful way possible. Ongoing monitoring and evaluation of processes is therefore as important as post hoc evaluations of projects, and should feed into real time decisions about which programmes should be prioritised and which ones should be cut or handed off.  

The list above is just a quick overview of some the issues we are digging into right now. As ever, we welcome comments and suggestions on these and other critical questions facing government innovators around the world. As the 2015 GII makes clear, getting the answers right makes all the difference between being an innovation leader or an innovation lagger.


Alex Glennie

Alex Glennie

Alex Glennie

Senior Policy Manager

Alex is a Senior Policy Manager in the Innovation Growth Lab (IGL).

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