Regional Inovation Policy and Multilevel Governance in Developing Countries

Abstract

Innovation policy is increasingly conceived as the shared responsibility of national and subnational governments, yet most countries are struggling with multilevel governance. This paper provides an overview of how different countries are dealing with regional innovation policy and of the institutions and tools used for national-regional coordination. The focus is on discussing the policy implications for developing countries, which have decentralized their innovation policies more recently than developed countries, but face more acute challenges with respect to critical mass and institutional capacity. These challenges call for a sequential and cautious approach to decentralizing innovation policy, seeking economies of scale and avoiding wasteful duplication across regions, while introducing methods to ensure that devolution of power is accompanied by capacity building in regional governments. Governments of developing countries are also advised to be cautious when using a regional innovation policy approach as a tool to reduce cross-regional income gaps. This is because policy efforts to counterbalance the natural trend toward agglomeration of innovative activities in core regions might lead to inefficient allocation of public funds.