Developing innovation policies for the knowledge economy in Europe

Summary The principles on which contemporary innovation policies can be designed depend (a) on our understanding of what innovation has been in the past and how we have studied it as a process and a system, and (b) what it might become in the future. Science, technology, industry, organisational designs and the economy at large are evolving; this is itself an innovation process. As innovation is becoming more subtle, intangible and pervasive, so we need to become increasingly sophisticated in order to make further progress. Europe is progressing rapidly towards a knowledge-driven economy and this has important implications for innovation. In order to stimulate more widespread debate around this theme, this paper introduces the concept of ‘third generation innovation policy’ and explains the development of this concept with reference to one particular policy area — taxation.