overnments across the world have now hopped on the innovation policy wagon, but are they on the right track? Over the last two decades or so, a new breed of public policy emerged to be known as innovation policy. This has evolved from being a science and technology focused area into a broad public policy agenda that encompasses a wide range of activities aiming at supporting new ways for creating economic or social value. A main objective for innovation policy is to help businesses innovate in order to achieve higher levels of productivity and competitiveness. In that pursuit, innovation policy grew to cut across a wide range of policy areas from schooling, to red tape, taxation and immigration policies. But all over the OECD and much of the industrialising economies, innovation policy has remained largely dominated by an "assembly line" Fordist style thinking.

Innovation policy has traditionally reflected the existing division of labour in the innovation process

Most innovation policies are grounded in the belief that innovation is a process with strict labour division between a number of players. For example, universities train and supply the needed workforce, firms allocate and organize the resources for it, and governments create the right support and regulatory infrastructure for innovation. These actors are all connected to each other through so-called "national innovation systems", whose components interplay to make innovation happen. The division of labour within a national innovation system also demarcates the boundaries between sectors (academic, public and private sectors), industries (manufacturing and services industries), as well as territories (regional, national and global spaces).

The division of labour in innovation is changing as industrial, sector and territorial boundaries are becoming more blurred

However, these boundaries are becoming increasingly blurred and making innovation policy according to traditional sectoral and industrial lines might soon become irrelevant. Innovation is increasingly taking different routes, emerging through nontraditional partnerships, and growing out in the least expected spaces. For example, farms are no longer places for food production only, but are becoming important producers of renewable energy (such as biofuel), industrial materials (such as fibre crops), and places of recreational experiences (e.g. rural tourism), manufacturing firms (e.g. automotive industry) are also services companies, and some services firms (e.g. fashion industry) are involved also in manufacturing.

Likewise, the labor division between private and public sectors is becoming less important, especially with the diffusion of new platforms for innovation, such as "users-centric" and "users-led" innovation, and the rise of commercial and not-for-profit innovation brokering platforms, as well as multi-stakeholder innovation platforms involving new forms of public-private ownership.

Last but not least, the territorial definition of innovation systems is becoming more blurred too. The geographic sources of ideas, inventions, designs, and new business models can emanate from anywhere and spread to everywhere, benefiting from an increasingly footloose labor, finance, and corporations. The users, who are increasingly being propped up as critical actors in the innovation process, more often than not reside outside one¡¯s town, region, and country.

From competitiveness and ICT to sustainability and EST

Until now innovation policy has been driven by the quest for achieving higher levels of productivity and economic competitiveness, with a notable emphasis on the role of information and communication technologies (ICT) in achieving these goals. But these priorities might be giving way to new ones, particularly priorities stemming from sustainability and quality of life issues.

A recent Eurobarometer survey showed that half of EU citizens are very much concerned about the effects of climate change and global warming, while a further 37% say that they are to some degree concerned about the issue. The survey also showed that EU citizens are fairly certain that energy prices will increase significantly over the next decade due to ongoing climate change. More than seven out of 10 Europeans feel that they will need to change their energy consumption habits in the next decade (76%), and that they will need to install energy-saving heating, lighting, cooling and other such equipment (72%).

The sustainability portfolio with its three broad priorities, climate change, renewable energy, and conservation, has a strong link to wider quality of life issues. These general public issues are mirrored in the political agenda and their importance lies in that they change not only policy priorities, but also the demand for innovations and technologies through which these challenges can be addressed. In particular, improving the quality of life is now connoted with improved sustainability rather than competitiveness, and hence with "environmental and sustainability technologies" (EST) rather "competitiveness technologies" such as ICT. This raises a number of questions related to the organization and management of the innovation portfolio in government, particularly with regards to which departments will lead the innovation agenda and at what level of government will policies have to be made?

From "urban-centric" to a more balanced spatial innovation

The ongoing shift towards a sustainability driven innovation policy agenda will leave their mark on the spatial distribution of innovative activities. In particular, there will be a greater shift of resources from cities to rural areas, be it financial, organizational, or human resources. Rural landscapes will once again acquire a strategic role as a source for survival and raw materials, albeit under the token of sustainable living and renewable resources. The rural-urban links inevitably will grow stronger and become more balanced in terms of the concentration of activities. This is expected as rural areas (countryside and the seaside) are increasingly new sources of disrupting innovations that seek to extract economic value from rural resources (e.g. wind farms, biofuel, solar energy, fibre crops, etc.). More people, businesses, and institutions (training, caring, services, etc.) will have to move closer to the new sites of innovation.

From National to Global

For an innovation policy agenda driven by environmental and sustainability goals the most appropriate level of analysis and action is the global. The interdependency between countries in these issues is simply set by the laws of nature. However, in addition to the energy and environment agenda, the quality of life agenda too is heavily influenced by globalization, especially the international flows of people, which can bring both negative (e.g. diseases and terrorism) and positive influences (e.g. skills, ideas, and entrepreneurs). Government will continue to play a crucial role in representing national interests and setting the global agenda for innovation policy. These can range from deciding on global technological standards for biometric passports, to setting the level of CO2 emissions from cars allowed on European roads.

From "Crossing lines" to "Changing Lanes"?

Governments have an important role to play in assisting the transition from an old innovation paradigm based largely on ICT and competitiveness to an emerging one that is geared towards environmental sustainability and quality of life. To do so, governments will have firstly to recognise that we are in a "transition" phase, and secondly to allocate more of their funding and activities into building their capacity to manage and embrace the transition. This includes investing in the capacity to make significant contributions to sustainability and quality of life innovations, as well as building up the absorptive capacity to benefit from global developments in these fields. This calls for an innovation policy geared towards transition and change, one that supports the generation and diffusion of new knowledge across disciplinary and organizational boundaries, and certainly across political geographies. To do that, governments will have to view the innovation process through the lens of "functions" rather than "institutions", and this is what the old innovation policy books don¡¯t tell you.

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