Association for Public Policy Analysis & Management

Charles Weiss[1] and William B. Bonvillian[2]

We propose a new, integrative framework for analyzing technological innovation in “legacy sectors” of the economies of the US, France, Germany, Russia, India and China. Building on and synthesizing the work of many earlier scholars, it identifies barriers to innovation that are common to disparate legacy sectors, encompasses the many steps in the innovative process, treats in detail the active role of government in innovation, and explores the effect of context on the demand for innovation. We apply this framework to show how contextual factors can stimulate innovation in specific sectors or across an entire economy, or can counteract or undermine policies explicitly intended to stimulate and facilitate technological innovation. This analysis is set forth in detail in our book, Technological Innovation in Legacy Sectors (Oxford University Press, 2015). 

In the U.S., legacy sectors like fossil fuels, manufacturing, buildings, transport, agriculture, the inter-state electric grid, health services delivery and higher education offer opportunities for high-impact technological innovation, now “hidden in plain sight,” to address broad public challenges like inequality, unemployment, competitiveness, cybersecurity and climate change. In other countries we have studied, contextual factors favor innovation in infrastructure and manufacturing, but discourage cutting-edge innovation, for example in information industries.

Legacy sectors resist disruptive innovation through multidimensional paradigms: combinations of policies, incentives, regulations, public understanding, social systems and political support. These paradigms are important elements of the national innovation context. They create obstacles to innovation that are defended by powerful vested interests, typically in the private sector but sometimes in government. These obstacles are well known to specialists but are not always addressed by makers of science, technology and innovation policy.

In general, the national innovation context exerts at least as powerful an effect on the speed and direction of innovation in a given country as do the universities, research laboratories, firms, technical services and intellectual property regimes that make up the more obvious and better-studied national innovation system. Key elements of this context include culture (especially attitude toward competition, cooperation, risk, novelty, entrepreneurship, and the importance of family, social class and national origin), religion, social structure (including the relation between universities and businesspeople), macroeconomic policy (including possible controls on the prices of energy and other basic commodities), the system of banking and finance, industrial structure, business climate, trade and exchange rate policy, labor and environmental policies, immigration, bankruptcy and real estate law, the functioning or non-functioning of the legal system, the level and structure of corruption, and the state of physical infrastructure and connectivity.