The practice of innovation

Abstract

We know that institutions matter. They set the rules of the game. They provide the staging and context for interaction and communication. They shape our identities and sense of what is fair and appropriate. They provide the means to inquire into facts. They ground thought and action. For all these reasons we want this ground to be stable. There is increasing evidence, however, that it is shifting under our feet. Old sources of stability recede before we have the language to grasp new ones. Disagreements lose their vitality as old tradeoffs lose their grip on our imaginations. Take, for example, policy disputes over whether markets or administrative rules are the best way to advance technological development. These disputes embed an agreement that the choice between market and hierarchy is meaningful and provides stable ground for debate. If institutional arrangements began to crop up that did not fit this dichotomy and, moreover, looked attractive, then the tug of war between these poles would lose its interest and vitality. In this chapter I trace some prominent features of what I believe is a new institutional landscape and discuss their implications for efforts to promote innovation through direct action and policy design. I start with what amounts to stipulating two general features. The first is a breakdown of the distinction between markets and hierarchies hinted at above. We see signs of this breakdown when observers in fields like business begin to try out new vocabularies to describe the landscape they see. In a recent issue of the Sloan Management review, a group of authors commented, for instance, that "[m]odern societies are not market economies; they are organizational economies in which companies are the chief actors in creating value and advancing economic progress."61 Others have highlighted changes in the character of the relationships through which coordination is achieved as the feature that distinguishes the new institutional terrain. Sabel notes that efforts to capture these patterns of practice in the vocabulary of market and hierarchy overlook the possibility that the new firms operate by principles of decentralized coordination so different from those of the preceding epoch of large-scale organizations, and so disruptive of the institutional connections to the administrative state, the 'market economy' and 'representative democracy' of the coming decades will look as different from the timeless victors of today as the latter now seem from their mid-nineteenth century, small scale predecessors.62 The first feature is this shift away from a choice between market and hierarchy to patterns of coordination based on organizational relationships that operate by new "principles of decentralized coordination." The second is often described in terms of a blurring of the boundaries between public and private and a concomitant growth in the size, role, and resources of the civic sector. Again, it is the practical significance of new arrangements that has attracted attention.63 In a variety of policy arenas, observers regularly note the prevalence and success of arrangements that do not fit with established notions of government. The relationships and patterns of action in these settings: ...indicate ...a shift away from well-established notions of politics and bring ...in new sites, new actors and new themes. There is a move from the familiar topography of formal political institutions to the edges of organizational activity, negotiations between sovereign bodies, and inter-organizational networks that challenge the established distinction between public and private. The disparate actors who populate these networks find nascent points of solidarity in the joint realization that they need one another to craft effective political agreements. Their efforts to find solutions acceptable to all who are involved (and to expand the circle of involvement) nibbles and gnaws on the constitutional system of territorially based representative democracy. Notions of politics itself change as new themes occupy centre stage. It is probably no coincidence that these practices are more developed in 'new' spheres of politics such as the environment and the 'life politics' of food and technology.64 There is not space here to make good on these assertions empirically. The anecdotal evidence provided by direct experience probably provides the best support that this is not idle chatter and something is afoot, even if we cannot fully grasp it. Public-private partnerships and practices like "social entrepreneurship" draw our attention even as they resist understanding. Success in complex ventures increasingly hinges more on sustaining interactions among a diverse group of organizations than on accumulating authority and resources. Any particular case is likely to look like an ad hoc adjustment to particular circumstances. If we squint, however, and blur the details, we can begin to see the outlines of a new institutional landscape. © 2006 Springer.