Module 1 – Basic Concepts of Innovation and Innovation Policy


Innovation has been at the heart of economic and social development. The rise of modern industrial powers in North America and Europe, as well as the economic success of many recent developing countries were all based on rapid increases in the speed of technological, process, and managerial innovations. As such, it is imperative for developing countries to focus on and understand effective innovation policies as a mean to promote public welfare and growth. Today, a multitude of global challenges make policy goals centered on technological innovation even more important. With global growth slowing as a result of the recession and commodity prices increasing due to geopolitical uncertainties, effective innovation can act as the vanguard against poverty resulting from these challenges. In addition, with the threat of climate change increasing, innovation and technology can act as a buffer in protecting the most vulnerable countries. 

While many governments recognize the importance of technological innovations, they often have a difficult time in clearly defining the concept of innovation and innovation policies. In addition, many misconceptions exist regarding the key constituents of these policies and how government can play a role in fostering innovation. Hence, the theme of the first module involves defining innovation, and demonstrating its importance. The module will then explain what innovation policies are and the roles of the government in building effective innovation systems. 

By the end of this module you will:

  • Have gained a broad understanding of what innovation and innovation policy means (also in the context of a broader economic strategy), particularly for developing countries
  • Understand why innovation policy matters, and what evidence exists for its importance
  • Be familiar with the concept of innovation systems and innovation policy, and how innovation policy differs from other policies such as technology or education
  • Have a broad understanding of the major instruments and institutions of innovation policy, and issues of political economy, including a ‘whole-of-government’ approach
  • Be introduced to the concept of inclusive innovation, and its potential impact on the poor


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