We can summarise the evolution of innovation policy as follows. Until the 1980s, government focused heavily on stimulating R&D investment by offering subsidies and tax breaks and by protecting intellectual property. ‘Market failure’ gave government policy legitimacy: companies are less inclined to invest in R&D than society would like because their competitors will also benefit from the results. From the 1990s onwards, it became popular to think in terms of innovation systems, with government’s main role being to repair ‘system failures’.
During this period, innovation policy was firmly geared towards connecting the actors in the innovation system and encouraging publicprivate partnerships (PPPs). Recently, we have seen the dawning of a third generation of ‘transformative’ innovation policy, the aim of which is to promote innovations that are beneficial to society. Government is now more closely involved in the content of innovation, in that it helps to find innovative solutions and transition paths addressing pressing societal challenges, such as the transition to a low-carbon or circular economy. In short, innovation policy has gained legitimacy not only from market and system failure, but now also from transition failure.