Innovation enhances productivity and drives long-run prosperity.
It can create new and improved products and processes, and generate cost savings for companies and the taxpayer, as well as numerous other benefits. However, a range of market failures mean that if left entirely to the market, the amount of R&D which takes place would be considerably less than optimal. These failures provide a strong case for government intervention to support R&D across the economy.
Therefore, policy makers are paying more attention to changing patterns of business R&D and the effectiveness of policy instruments for creating a supportive climate to encourage business innovation.
Empirical evidence indicate that business strategies for research and development (R&D) have changed significantly in recent years, is increasingly entering the innovation policy debate.
If firms are forced to develop new strategic responses to challenges of their business environment, the question arises, which government policies should be employed in order to stimulate industrial innovation and to improve the capabilities of national innovation systems.