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There has been a shift in innovation policy in recent years toward more focus on systemic transformation and changed directionality. In this chapter, we describe a collection of challenges that such policies need to address. Based on a review of dominant frameworks regarding socio-technical transitions, we compare these theories with examples of innovation policy in different countries. Systemic transformation across an economy usually requires a process of creative destruction in which new competencies may be required, actors need to be connected in novel ways, and institutions may need to be changed. Our empirical illustrations show that support programs and initiatives across Europe do not always seem to result in such a process, as they include mechanisms favoring large, established firms and universities. These actors have often fine-tuned their activities and capabilities to the existing order, and therefore have few incentives to engage in renewal. As the incumbent actors also control superior financial and relational resources, there is a risk that they captivate innovation policies and thus reinforce established structures rather than contributing to systemic transformation.

Third-Generation Innovation Policy: System Transformation or Reinforcing Business as Usual?