Supply and demand side innovation policies : final report.
Date: 2016-04-28
Institutions: Directorate-General for Research and Innovation
Subjects: EU research policy, Framework Programme for Research and Development, business policy, energy technology, innovation, research and development, small and medium-sized enterprises, supply and demand

Supply and Demand 
Side Innovation 
Policies 

Final Report 

 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Directorate-General for Research and Innovation 
Directorate A— Policy Development and Coordination 
Unit A.4 — Analysis and monitoring of national research policies 

Contact: NIETO NUEZ Ana  

E-mail:  Ana.NIETO@ec.europa.eu 

RTD-PUBLICATIONS@ec.europa.eu 

European Commission 
B-1049 Brussels 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Supply and Demand Side 
Innovation Policies 

Final Report 

20 February  2015 

Prepared by: Inno AG, University of Manchester (MIOIR), INNOVA Europe, 
SQW Limited SQW 

2015 

Directorate-General for Research and Innovation 
7th Framework Programme (FP7) 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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and the Commission cannot be held responsible for any use which may be made of the information contained 
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Luxembourg: Publications Office of the European Union, 2015. 

PDF  

ISBN: 978-92-79-54079-0 

doi: 10.2777/441701 

KI-01-15-962-EN-N 

© European Union, 2015. 
Reproduction is authorised provided the source is acknowledged. 

Cover images: © Lonely, # 46246900, 2011. © ag visuell #16440826, 2011. © Sean Gladwell #6018533, 2011. © 
LwRedStorm, #3348265. 2011. © kras99, #43746830, 2012. Source: Fotolia.com 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The  report  was  prepared  by  the  project  team  composed  of  Marc  Pattinson  and  Sophie  Vallet  Chevillard  (Inno-
Group),  Dimitri  Gagliardi,  Chiara  Marzocchi  John  Rigby,  Yanchao  Li  and  Deborah  Cox  (MIOIR),    Robin  Brighton 
(SQW), and Gavriel Avigdor and Rebecca Lucas (Innova).The study was carried out on behalf of unit  A4  Analysis 
and monitoring of national research policies led by Román Arjona.  

Disclaimer 

This  document  is  a  report  produced  by  the  appointed  research  team  and  has  been  prepared  as  an  input  into  the 

policy  development  debate.    The  views  expressed  in  this  report,  as  well  as  the  information  included  in  it,  do  not 

necessarily reflect the official opinion or position of the European Commission and in no way commit the institution. 

The  Commission  does  not  guarantee  the  accuracy  of  the data  included  in  this  study.  Neither  the  Commission  nor 

any  person  acting  on  the  Commission’s  behalf  may  be  held  responsible  for  the  use  which  may  be  made  of  the 

information contained therein. 

5 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents 

1. 

INTRODUCTION AND METHODOLOGY OVERVIEW ........................................................................................ 7 

1.1. 

1.2. 

STUDY AIMS, REMIT OF THE RESEARCH TEAM ......................................................................................................... 7 

APPROACH, METHODOLOGY AND WORK UNDERTAKEN............................................................................................. 7 

2. 

POLICY ISSUES AND LESSONS ...................................................................................................................... 18 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

DIFFERENT WAYS OF COMBINING DEMAND SIDE INTERVENTIONS WITH THE SUPPLY SIDE ............................................... 19 

GOVERNANCE, POLICY DESIGN AND MANAGEMENT ............................................................................................... 21 

CONTEXTUAL CONDITIONS ............................................................................................................................... 22 

TRANSFERABILITY AND ADAPTATION OF POLICIES THROUGH DIFFERENT CONTEXTS ....................................................... 24 

EVALUATION AND METRICS .............................................................................................................................. 25 

3. 

4. 

5. 

CONCLUSIONS AND KEY MESSAGES ............................................................................................................ 26 

REFERENCES ................................................................................................................................................ 28 

EXTERNAL ANNEXES .................................................................................................................................... 28 

6 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.  INTRODUCTION AND METHODOLOGY OVERVIEW 

1.1.  Study aims, remit of the research team 

This document is the final report of the study undertaken under the framework contract “provision of 
services  in  the  field  of  research  evaluation  and  research  policy  analysis”  Lot  3  on  behalf  of  the  DG 
Research  and  Innovation.  The  scope  of  the  study  was  to  provide  an  overview  and  analysis  of 
innovation supply side and demand side policies and their interactions in the context of a broad policy 
reflection  about  how  to  develop  the  use  of  demand  side  instruments  as  part  of  a  more  integrated 
policy  approach  for  improving  the  effectiveness  and  efficiency  of  research  and  innovation  (R&I) 
systems at regional, national and EU level. This reflection and the study methodology selected sought 
to develop an analysis based of the experiences of countries which are the more advanced on the path 
of integrating supply- and demand-side policies in their overall innovation strategies.  

The study had four principal objectives: 

 

 

 

 

Identify,  classify  and  characterise  demand-side  innovation  policy  measures  and  how  they  are 
being combined with the supply side; 

Assess  the  specific  impact  of  demand-side  innovation  policy  measures  on  the  efficiency  and 
effectiveness of the innovation policy mix; 

Analyse in detail and present five detailed case studies to highlight specific policy features which 
can be considered as obstacles, limitations or best practices; 

Recommend how to strengthen the demand-side of innovation strategies at national, regional or 
sectoral level. 

The  work  undertaken  by  the  study  team  was  mainly  analytical  and  based  on  reviewing  existing 
materials  (secondary  sources  and  evaluation  reports  when  available)  that  have  been  complemented 
with telephone interviews of policy makers to collect evidence related to the nature of the interactions 
between demand and supply side innovation policies and a policy makers project workshop to review 
the  preliminary  study  findings.  It  is  worth  noting  that  this  exercise  was  not  an  evaluation  of  the 
policies studied and thus didn’t aim to produce conclusions related to the relevance or efficiency of the 
policies,  but  the  overall  goal  was  to  rather  emphasise  key  success  factors  and  key  lessons  from 
examples of good practices of interactions between demand and supply side policies.  

The principal aim of the final report is to summarise the main policy issues and lessons learnt from the 
20  case  studies,  the  5  detailed  policies  studied  and  the  discussions  held  at  a  project  workshop  in 
Brussels on the 14th of November 2014.  These policy lessons and key messages are provided to give 
insights  about  the  challenges  to  design  innovation  policies  that  combine  supply  and  demand  side 
interactions  and  suggest  possible  approaches    to  coordinate  and  manage  such  types  of  policy 
interventions. 

1.2.  Approach, methodology and work undertaken 

Reminder of the methodology 

The methodological approach adopted by the study team comprised the following steps:  

 

 

 

 

A detailed literature review of demand and supply-side innovation policies (a separate annexe). 

The  analysis  of  20  international  cases  of  innovation  policies,  instruments  and  tools  selected  as 
representative of good practices (and sector and geographical coverage) to address demand side 
and/or to combine or interact with supply side approaches. 

A detailed analysis of 5 international cases that focused on shedding further light upon both the 
Supply  and  Demand  side  mechanisms  available  to  policymakers  when  designing  and 
implementing the policy measures and how the interaction has played out during and after the 
deployment of the policy measures. 

An open discussion on these cases with a panel of over 30 international experts during a one day 
workshop held in Brussels.  

7 

 
 
 
 
 
Several documents have been produced in the course of the study including:  

 

 

A first policy brief that presented  the main  outcomes of the literature review and the 20  cases 
studies.  

A second policy brief that presented the five detailed cases studies 

The figure below summarises the overall methodological approach of the study.  

Figure 1: methodological approach of the study 
These two documents are annexed to the present report.  

The  two  policy  briefs  and  the  literature  review  documentation  gathered  during  the  study  are 
reproduced in the form of separately bound annexes.  

Summary of the Supply/Demand case studies  

Twenty  cases  were  selected  with  the  aim  of  addressing  some  of  the  more  interesting  supply  and 
demand innovation policies measures that cover a variety of situation and sectors. The selection of the 
20  international  cases  of  demand-side  innovation  policies  was  undertaken  to  include  a  focus  on  how 
supply-side  approaches  are  combined  into  demand-side  policies  and  to  ensure  a  broad  thematic, 
sectoral and geographical coverage. 

The table below presents a summary of the case studies selected for the analysis in terms of content, 
beneficiaries and promoting institutions. The case presentation is structured according to the typology 
set out at the beginning of chapter 2.0.  The cases  represent policies developed at different levels of 
governance: local, national, EU level as well as successful examples from Overseas (United States and 
Korea).  In  this  way  the  study  was  able  to  examine  and  address  how  demand  side  policies  are 
implemented  at  different  levels  and  what  type  of  differences  can  be  observed  regarding  their 
interactions with the supply side. Most of the policies taken into consideration were policies devoted to 
Small and Medium Enterprises and to economic sectors such as: health, energy and food industries or 
defence. This latter element provides per se a first hint to the underlying relationship between supply 
and  demand  side  interactions  in  the  design  of  demand  policies,  with  sectors  selected on  the  basis  of 
their  technology  (potential)  push  on  the  overall  economy  and  the  related  legislator  intention  to 
increase  the  demand pull  in  order  to  diffuse  innovation  along  both  production  (suppliers)  and  overall 
value chain (consumers and customers).   

The table presented overleaf also includes a “subjective” judgement undertaken by the team regarding 
the perceived “bottlenecks/limitations and/or enablers” of each of the cases. 

8 

 
 
 
 
Policy 

Promoting 
Institution 

Beneficiaries & 
Driving Factors 

Description 

Bottlenecks/Enablers 

Policy Type & 
Interaction1 

Category A  Public Demand 

Small  Business 
Innovation 
Research  

(SBIR)  

Governmental 
Federal Agencies 

SMEs and 
Universities 

(United States) 

Increase private-
sector 
commercialization 
of innovations 
derived from 
Federal research 
and development 
funding 

Award-based 
programme 
encouraging US 
Small businesses 
to engage in R&D 
with potential for 
commercialisation  

  Demand side: 
Public procurement 

  Supply Side: 
Subsidy for R&D 
commercialisation  

  Explicit interactions 

between demand and 
supply side 

Bottleneck-limitations:  
 

Lobbying  (serial  participation  of  under-
achieving 
firms  whose  probability  of 
winning an award is strongly increased by 
relationships with federal officials). 

  Risk of non-additionality 
  Some  government  agencies  may  regard 
SBIR as a “tax” on their programmes and 
will  not  invest  time  in  choosing  the 
award-winners 
on 
and 
programme outcomes. 
Long time between the application phase, 
and  phase  I  and  phase  II  awards  (this 
can be an issue for SMEs with constrained 
cash flow). 
Technology  developed  only  to  a  certain 
readiness 
(commercialisation 
requires substantial additional funding) 

follow-up 

level 

 

 

 Enablers: 
  Budgetary  encouragement  to  spend  with 
SMEs  (by  reserving  a  specific  percentage 
of 
small 
businesses). 

federal  R&D 

funds 

for 

  Award recipients retain the IPR developed 
using  the  SBIR  award,  with  no  royalties 
owed to the government. 

  SBIR  facilitates  links  with  angel  and 

venture capital investments. 

Procurement 
conditioned 
SME 

R&D 

Small and 
Medium 
Business 

SMEs  

Ensuring SMEs an 

Zero-interests 
R&D funding to 
develop new 

Bottleneck-limitations:  
  Initially,  purchasers  were  unwilling  to 
commit  target  shares  of  their  budgets  to 

  Demand side:  
Public demand and public 
procurement  

1  

Where supply and demand-side interventions are combined in the same programme so that beneficiaries are subject to both, we refer to this as “explicit interactions”.  If 
the supply and demand interventions are separate programmes we refer to “implicit interactions” 

 
 
 
 
                                                 
Policy 

Promoting 
Institution 

Beneficiaries & 
Driving Factors 

Description 

Bottlenecks/Enablers 

Policy Type & 
Interaction1 

Programme 

Administration 
(SMBA)  

access to capital 
funding for R&D  

(Korea) 

Defence-
related 
Procurement 
Schemes  

R&D 

Department of 
Defence 
(DARPA) 

(United States) 

Enterprises and 
Universities  

Enhancing the 
development of 
research with 
military 
applications  

Innovation 
Procurement 
Scheme  by  the 
Ministry 
of 
Defence  

Ministry of 
Defence (MoD)  

Enterprises  (with 
particular 
attention to SMEs) 

(United 
Kingdom) 

Enhancing the 
development of 
research with 
military 
applications 

products. 
Successful 
products will be 
marketed. There 
is a no-collateral 
policy on the 
received funding 

A vast 
programme 
covering high 
payoff research 
with the aim of 
bridging the gap 
between 
fundamental 
research and its 
military 
application 

The aim of this 
policy is to drive 
innovation by 
generating and 
exploiting new 
technologies and 
services 

Pre-commercial 
Procurement 
by NHS  

National Health 
Service (NHS)  

Enterprises  

(United 
Kingdom) 

Improving the 
service delivered 
by the National 

Bespoke 
procurement 
scheme applied 
to:  

(1) identify 

the  programme. 
mandatory for public agencies 

  Later 

this  became 

Enablers: 
  Embedded 

identifies 
in  system  which 
prioriy  areas  and  provides  non-financial 
support to SMEs 

  Operates 

in 

Technology 
Programmes (see below) 

conjunction  with  New 
Assurance 
Purchasing 

Enablers: 
  Small,  Flexible  and  flat  organisation  with 
bureaucratic 

freedom 

from 

relative 
impediments 

  World class technical staff involved in team 

and networks 

  Supply side:  
Measures to increase SME 
collaborations, SMEs 
support and R&D subsidies  

  Explicit Interaction 

between the supply and 
the demand side 

  Demand side: 
Public demand and  
Strategic procurement  
  Supply side:  
Funds and subsidies for 

R&D 

  Explicit interactions 

between the demand and 
the supply side 

Bottleneck-limitations:  
  The  policy  developed  to  streamline  the 

MoD procurement process 

  R&D planning with supply-side providers of 

  Demand side:  
Public demand and general 
procurement 

technology 

Enablers: 
  Avoid inefficiencies 

Bottleneck-limitations:  
  Development  of  innovative  solution  by 
to 
competitive 

suppliers 

challenging 
design. 
Enablers: 
 

 Prototype 

and 

demonstrate 

their 

  Supply side:  
R&D joint plans for the 
supply side 

  Explicit interaction 

between the supply and 
the demand side 

The policy intends to adopt 
a systemic approaches 

   Demand side:  
Pre-commercial 
procurement  

10 

 
 
 
 
 
 
 
Policy 

Promoting 
Institution 

Beneficiaries & 
Driving Factors 

Description 

Bottlenecks/Enablers 

Policy Type & 
Interaction1 

Health Service 

clinical needs;  

solution,  the  contract  will  be  awarded  to 
the best R&D solution. 

(2) 
understanding 
the market 
positioning of the 
clinical needs;  

(3) contract firms 
to design, 
prototype and 
demonstrate their 
solutions;  

(4) evaluate and 
adopt the 
solution  

Policy to 
stimulate 
technological 
development by 
SMEs. The 
products are 
certified and 
purchases 
indemnified 
against non-
performance thus 
reducing the risk 
associated with 
procurement of 
new products P 

Originally 
developed to 
address the lack 
of market for 

New 
Technology 
Purchasing 
Assurance 
Programme 

Small and 
Medium 
Business 
Administration 
(SMBA) 

(Korea) 

SMEs 

Bringing SMEs and 
purchases 
together. 
Stimulate SMEs 
involvement in 
technology 
creation  

Forward 
Commitment 
Procurement  

Department of 
Business 
Innovation and 

Enterprises (with 
particular 
attention to SMEs) 

Bottleneck-limitations:  
  Reluctance on the part of public agencies 
to  commit  target  shares  of  their  budgets 
programmes  was 
to 
inhibiting their effectiveness.   

procurement 

  Concerns 

that  product  quality  and 
below 

functionality 
requirements.  
These  issues  are  directly  addressed  by 
this programme. 

might 

be 

 

Enablers and Critical success factors: 
 

and 
Identification, 
commitment  to  meet  unsatisfied  public 
demands;  

articulation 

  Supply side:  
Part of series of policies 
designed to foster 
innovation  

  Explicit interaction 

between the supply and 
the demand side 

  Demand side:  
Public demand; Public 

procurement. 

 Private demand from large 
corporations which are 
also involved in the 
programmes 

Certification of products 
  Supply side:  
Parallel programme to fund 
R&D  

  Implicit interaction 

between the supply and 
the demand side 
  Demand side:  
Public demand and public 
procurement 

11 

 
 
 
 
 
 
 
Policy 

Promoting 
Institution 

Beneficiaries & 
Driving Factors 

Description 

Bottlenecks/Enablers 

Skills (BIS) 

(United 
Kingdom)  

Satisfy identified 
public needs and 
enterprise 
development  

Small  Business 
Innovation 
Research 
Programme  

(SBIR) 

Ministry of 
Economic Affairs  

Enterprises  

(Netherlands)  

Increase 
innovativeness in 
the business 
sector 

Small  Business 
Research 
Initiative  

Innovate UK 
(formerly: 
Technology 
Strategy Board) 

SMEs 

(SBRI) 

(United 
Kingdom) 

Connect public 
sector challenges 
with innovative 
ideas; SMEs 
development  

environmental 
innovations, 
today is more 
generally 
oriented in these 
sectors where 
there are 
demand-pull R&D 
efforts needed 

The programme 
outsource the 
development of 
innovative 
solutions for 
socially relevant 
research 
particularly in 
logistic, 
renewable 
energy, care, 
security sector 
and food 

It is a multilevel 
initiative 
(national and 
regional) 
involving various 
departments. It is 
a public 
procurement 
scheme 
developed in 
order to provide 
innovative 
solutions to 
challenges faced 

  Hands-on  project  management  and  the 
provision of intermediation and brokerage 
in  new/innovative  ways 
to  set  out 
procurement 

Bottleneck-limitations:  
 

The  initial  phase  of  the  programme  was 
rather slow due to the unfamiliarity of the 
business  with 
and 
the 
inexperience  of  the  agency  in  dealing 
with SMEs 

scheme 

Enablers:  
  Quick 

turnaround, 
participation,  and 
burdens 

for 
low  barriers 
low  administrative 

  Companies  receive  an  R&D  contract  – 
with  contractual  obligations)  rather  than 
a subsidy 

Policy Type & 
Interaction1 

  Supply side:  
Support to R&D  

  Explicit Interaction 

between the supply and 
the demand side 

  Demand side: 
Public demand and catalytic 
procurement  

  Supply side:  
Funding high-risk 
innovation projects 

  Explicit interaction 

between the demand and 
the supply side 

Enablers:  
  Core 

technology  demonstrates 

firms’ 

innovativeness 

  Demand side:  
Public demand and public 
procurement 

  Use  of 

intermediary  body 

to 

lead 

companies to apply for SBIR 
Innovate 
from 

  Support 

UK 

to 

  Supply side:  
R&D support  

participating companies 

  Clear  articulation  of  the  demand  and 

  Explicit interaction 

needs of the public user 

between the demand and 
the supply side 

12 

 
 
 
 
 
 
 
 
 
Policy 

Promoting 
Institution 

Beneficiaries & 
Driving Factors 

Description 

Bottlenecks/Enablers 

Policy Type & 
Interaction1 

Transformation 
of  the  Greater 
Manchester 
Waste System  

Greater 
Manchester 
Waste Disposal 
Authority  

(United 
Kingdom)  

Enterprises  

Foster the 
implementation of 
greener 
technologies 

European 
Innovation 
Partnerships  

Directorate 
General for 
Research and 
Innovation  

(European 
Commission) 

National, regional 
and local 
stakeholders along 
the whole research 
and innovation 
chain 

Foster 
international 
competitiveness   

by the public 
sector  

Strategy for the 
implementation 
of the EU 
Regulation 
including public 
procurement 
policy to 
substitute landfill 
waste practice 
with state of the 
art technology for 
waste separation, 
recycling and 
composting  

Policy working 
across supply and 
demand focusing 
on societal 
challenges and 
the 
modernisation of 
the associates 
sectors and 
markets 

Bottleneck-limitations:  
 

Time  to  mobilise  and  involve  key  and 
“right” stakeholders 

Enablers: 
 

Evolution to take on board societal needs 
and interests 

Bottleneck-limitations:  
 

Lack  of  dedicated  structure  at 
the 
European  Commission  has  hindered 
progress 

  Clearer  channels  for  bringing  in  new 

stakeholders requires 

Enablers: 
 

means 

Effective 
mobilising 
stakeholders and integrating and aligning 
new  and  existing 
interventions  with 
priorities 

of 

  Demand side: 
General procurement and 
public demand/behavioural 
change 

  Supply side:  
Funding for the acquisition 
of new technologies  

  Explicit interaction 

between the supply and 
the demand side 

The policy is intended as a 
systemic approach 

  Demand side:  
Integration of demand and 
supply side logics and 
measures 

  Supply side:  
Complex and integrated set 
of policies and actions to 
leverage on demand side 
elements to foster 
development across the 
whole value chain 

  Explicit interaction 

between the supply and 
demand side 

13 

 
 
 
 
 
 
 
 
 
Policy 

Promoting 
Institution 

Beneficiaries & 
Driving Factors 

Description 

Bottlenecks/Enablers 

SMEs 
Standardisation 
Initiative  

French Ministry 
of Economics 
and Finances, 
Directorate 
General of 
Competitiveness, 
Industry and 
Services 

SMEs  

Foster 
internationalisation 
and 
competitiveness  

Provide financial 
assistance to 
intermediary 
organisations 
representing 
SMEs in order to 
participate in 
standardisation 
committee at the 
EU level 

Limited budgets available 

Bottleneck-limitations:  
 
Enablers: 
 

Positive  use  of  intermediaries  to  access 
SMEs 

Category B Private Demand 

Green  Energy 
incentives 

Ministry of 
Economic 
Development 
and Ministry of 
the Environment 

(Italy) 

Enterprises 

Foster the 
implementation of 
greener 
technologies 

National policy 
for renewables 
developed to 
promote: energy 
production; 
heating and 
cooling; energy 
sources for the 
transport sector 

Bottleneck-limitations:  
 

The  incentive  system  has  not  been  able 
to  develop  a  national  industry  since  the 
growing  demand  has  been  satisfied  by 
foreign production.  

  Several factors and contradictions caused 
distortions in the implementation phases: 
green technologies were mainly imported 
rather  than  developed  nationally;  the 
green  jobs  created  were  in  sectors  such 
as installation and maintenance.  

  Other barriers were due to a lack of long 
caused 
energy 

term 
insufficient 
in 
infrastructure and technologies 

investments 

perspective 

which 

Enablers:  
 

The  effectiveness  of 
the  system  of 
incentives used has achieved good results 
in terms of green energy production, CO2 
reduction and creation of Green Jobs. 
The 
to 
led 
significant  costs  for  the  system,  with  an 
impact on consumers’ energy bills.  

system  has 

incentive 

 

Policy Type & 
Interaction1 

  Demand side:  
Private demand 
  Supply side:  
Financial support  

  Explicit interaction 

between the supply and 
the demand side 

Part of a complex set of 
environmental policies 

  Demand side:  
Private demand and direct 
financial support of private 
demand 

  Supply side: 
Complex set of extended 
incentives  

  Explicit interaction 

between the supply and 
the demand side 

14 

 
 
 
 
 
 
Policy 

Promoting 
Institution 

Beneficiaries & 
Driving Factors 

Description 

Bottlenecks/Enablers 

Policy Type & 
Interaction1 

German  (Solar) 
Panel Policy 

(Renewable 
Energy  Heating 
Act  and  Market 
Incentive 
Programme)  

Federal Ministry 
for Economic 
Affairs and 
Energy (BMWi) 
and Federal 
Office of 
Economics and 
Export Control 
(BAFA)  

(Germany)  

Private individuals; 
enterprises; 
NGOs; and 
municipalities 
investing in 
renewable energy. 

Foster the 
implementation of 
greener 
technologies  

Danish 
Program 
User-Driven 
Innovation  

Business 
Innovation Fund  

for 

(Denmark)  

Firms; Public 
Organisations; and 
Research 
Institutions 

Collaborating with 
users to identify 
and act on 
innovation needs 

The policy seeks 
to encourage the 
use of renewable 
energies in the 
heating process 
by obliging 
owners of new 
buildings to have 
a certain amount 
of renewable 
energy in their 
heating processes  

Provide financial 
support in 
studying users or 
improve 
collaboration with 
users in order to 
identify and act 
on innovation 
needs in strategic 
sectors such as: 
design, welfare, 
health and food 

Top Sectors 

Ministry of 

Enterprises  

Industrial policy 
focusing public 

 

The    National  Energy  Strategy  of  2013, 
which  could  be  a  first  step  towards  a 
better integrated and coordinated system 
of support policies. 
Bottleneck-limitations:  
 

Inability  of  national/EU  suppliers  to  meet 
demand.   

  Demand Side: 
Private demand, subsidies 
and financial incentives 

  High export impacts 
Enablers:  
  Mixed  policy  covering  new  installations 

and refurbishment guidelines 

  Supply side:  
Technology push for solar 
energy  

Bottleneck-limitations:  
 

Programme  was  focussed  on  developing 
capabilities  to  assess  user-needs.    There 
is  some  limited  evidence  that  it  was 
respect  but  no 
successful 
information  on  whether  methodolgies 
have been adopted by businesses. 

this 

in 

Bottleneck-limitations: 
  Difficulties 

in 

engaging 

smaller 

  Interactions between the 
supply and the demand 
side are implicit  

The intent of the policy is 
forward-looking and 
systemic 

  Demand side:  
Identify private demand, 
integrate demand and 
supply side logics and policy 
measures 

  Supply side: 
Grants for innovative 
projects  

Aim to develop research 
capabilities in Denmark 
  Explicit interaction 

between the supply and 
the demand side 
  Demand side:  
Stimulate private demand 

15 

 
 
 
 
 
 
 
 
 
Policy 

Promoting 
Institution 

Beneficiaries & 
Driving Factors 

Description 

Bottlenecks/Enablers 

Policy Type & 
Interaction1 

Initiative 

Economic Affairs  

(Netherlands) 

Foster 
international 
competitiveness  

Category C  Regulations 

Biometrics 
Standardisation  

Department of 
Business 
Innovation and 
Skills (BIS) 

(United 
Kingdom) 

Enterprises 

Interaction 
between standards 
and innovation in 
order to support 
crucial emerging 
technologies and 
stimulate 
industrial 
development. 

activities and 
resources in the 
nine top sectors 
in which the 
Netherland excel 
globally. Main 
objective are: to 
leverage private 
sector R&D; 
create a greater 
coherence in 
supporting 
businesses 
tailoring the 
policy to specific 
sectors 

Align biometrics 
sectors with 
advances in 
technology and 
facilitate 
exchange of 
information with 
other countries  

Smart Grid 
technology 
Standardisation  

National 
Institute of 
Standards and 
Technology  

Enterprises and 
Citizens   

The policy is part 
of a wider energy 
plan to foster the 
use of clean 
energy. It 

entrepreneurial  companies  in  developing 
strategy and implementation 

and direct financial support 

 

Enablers:  
  Diversion  of  innovation  resources  from 
other  sectors  which  may  have  socio-
economic importance 
(Large)  companies  actively  engaged  in 
developing  as  well  as 
implementing 
strategy  
The  process  of  developing  strategies  is 
thought  to  have  introduced  a  positive 
dynamic in some cases 

 

Bottleneck-limitations: 
 

Importance  of the  use  of  open standards 
to avoid monopolistic positions 

Enablers:  
  Use 

of 

government-sponsored 
standardisation  can  create  lead-market 
initiatives  by 
creating  or  enabling 
capacity for competing contractors 

  Supply side:  
Funding instruments such 
as knowledge vouchers, 
support hiring experts, R&D 
grants, networking activities 
and innovation brokers  

  Explicit interaction 

between the supply and 
the demand side 

  Demand side: 
Regulations: process and 
use of norms. Demand-pull 
action to identify solutions 
to emerging R&D 
technologies 

  Supply side: 
Link R&D in promising / 
emerging technologies 

   Implicit interaction 

between the supply and 
the demand side 
  Demand side:  
Regulations  
  Supply side: 
Investment grants and 
loans  

16 

 
 
 
 
 
 
 
 
 
 
Policy 

Promoting 
Institution 

Beneficiaries & 
Driving Factors 

Description 

Bottlenecks/Enablers 

Policy Type & 
Interaction1 

(United States)  

Foster the 
implementation of 
greener 
technologies 

  Category D Systematic Approaches 
Health 
Information 
Technology  for 
Economic  and 
Clinical  Health 
Act 

Department of 
Health and 
Human Services  

(United States) 

Healthcare 
ecosystem: health 
care industry; 
health care 
providers; health 
care consumers. 

(HITECH)   

Build the best 
conditions to 
promote the 
adoption of 
electronic medical 
records 

promotes 
interoperability 
standards which 
will enable the 
networked 
elements which 
make up the 
Smart Grid to 
communicate and 
work more 
efficiently  

The programme 
is designed to 
accelerate the 
adoption of 
health care 
technology and 
specifically of 
electronic medical 
records in order 
to enhance 
medical service 
delivery  

Bottleneck-limitations: 
  An  Act 

rather 
providing legislative power  

than  a  programme 

Enablers:  
  System  wide  approach 

including  users, 

involving  all 
from 

stakeholders, 
outset. 

  Strong central coordination 

  Explicit interaction 

between the supply and 
the demand side 

HIGHTECH is systemic; it 
includes supply and demand 
side as well as interactions. 
The objective is to create a 
national ecosystem.  

  Demand side:  
Combination of demand and 
supply side instruments  

  Supply side:  
Related programmes 
targeting supply side factors  

  Interactions between the 
supply and the demand 
side are implicit 

17 

 
 
 
 
 
 
 
 
 
2.  POLICY ISSUES AND LESSONS  

In  this  section  the  report  explores  the  issues  emerging  from  the  20  case  studies,  the  5  detailed 
policies studied and the discussions held at the policy workshop with the aim of highlighting some 
of the main policy lessons identified. 

One strong and overarching message is that demand side innovation policies cannot be confined in 
one  well  defined  and  rigid  typology:  the taxonomy  (see  below)  introduced by  Edler  (2013) offers 
practical guidance in the identification and classification of demand side policies but leaves out the 
nuances of the effects of these on the system of innovation. In particular, demand side innovation 
policies, more often than not, span the boundaries of the `box’ into which they have been classified 
and, as we have seen in the two policy briefs, tend to encompass strong elements of the supply-
side.  In  other  words,  there  is  a  great  level  of  interaction  within  the  various  typologies  of  the 
demand-side and between demand and supply-side policies. 

Table 2: Demand Side Measures Typology 

Public demand (Group A) 

Private demand (Group B) 

• 

• 

• 

General procurement (innovation as an 
essential  criterion  in  the  tendering  and 
assessment processes) 

Strategic procurement (the demand for 
certain technologies, products or services 
is encouraged) 

Cooperative and catalytic 
procurement (public agencies purchase 
in connection with private demand) 

•  Direct/financial support (demand 

subsidies and tax incentives) 

•  Indirect/soft steering support 
(awareness building; labelling and 
information campaigns; training and 
further education; articulation and 
foresight; user-producer interactions) 

Regulations (Group C) 

Systemic approaches (Group D) 

•  Regulation  of  demand  (to  create  a 

market; process and “usage” norms) 

•  Regulation of the demander – 

producer interface (regulating product 
performance and manufacturing; 
regulating product information; supporting 
innovation-friendly private regulation 
activities) 

•  Integration of demand-side measures 
(strategically co-ordinated measures which 
combine various demand-side 
instruments) 

•  Integration of demand- and supply-

side logic and measures (combination of 
supply-side instruments and demand-side 
impulses for selected technologies or 
services; conditional supporting of user-
producer interaction; pre-commercial 
procurement) 

Source: Authors adapted from Edler (2013) 

Issues such as combining  demand side policies with the supply side, have raised important policy 
questions  such  as:  coordination  of  measures;  the  appropriate  level of  institutional involvement in 
terms of skills necessary to design,  launch, implement and evaluate policy  effects; the  choices of 
financial  instruments  to  avoid  crowding-out  and  other  negative  effects;  and  finally  the  role  of 
evaluation  at  different  stages  of  the  policy  deployment  taking  into  consideration  issues  such  as 
additionality reach and effectiveness of the intervention, time consistency etc. 

When  unpacking  these  issues,  it  emerges  that  further  scrutiny  is  necessary,  especially 
with regard to the exploration of the value generated by combining demand side policies 
with the supply side, the modes and models of governance reflected in the design of policies and 
their overall management and finally on the contextual conditions surrounding the policy effort.  

The  following  sections  emphasise  some  key  messages  that  could  be  highlighted  from  the  study 
results.  

18 

 
 
2.1.  Different ways of combining demand side interventions with the supply 

side 

It  is  clear  that  demand-side  policies  are  not  designed  and  implemented  in  a  vacuum  and  that 
connections with the supply-side are either implicitly or explicitly linked in the policies. A demand 
side policy may affect a company’s performance by providing a kick-start to the economic activity 
(through  demand  pull) that  is  then  consolidated  through  further  public  and  private  efforts on  the 
supply side. From the examples studied it is clear that demand-side policy interactions  are linked 
to  the  supply-side  in  a  number  of  ways  and  their  outcomes  rely  often  on  contextual  conditions 
which  in  many  cases  are  an  integral  part  of  the  policy  process  together  with  policy  design  and 
implementation. 

Regarding  the  objectives  of  the  policies,  several  cases  of  combinations  appear:  demand  side 
policies could be combined with supply side by design, but demand side policies may also implicitly 
include elements of the supply side that are  not explicit in the policy design. Finally, demand side 
policies can be designed independently from the supply side but having supply side effects.  

On  another  hand,  the  interaction  between  demand  and  supply  side  innovation  policy  can  be 
organised through the policy framework in which the policies are embedded. Demand side policies 
are “nested” with supply side policies into a policy mix and the results of the interaction between 
supply and demand and the systemic outcomes are often difficult to disentangle.  

Key  policy  message:  Demand-side  and  supply  side  policies  are  frequently  combined 
together. The level and nature of interaction take several paths:  

1) 

Supply-side policy (respectively demand-side) are  explicitly designed into demand 
side policies (respectively supply-side)  ; 

2)  Demand-side policies are linked to supply side policies already in place ; 

3)  Demand  side  policies  see  to  pursue    policy  objectives  typical  of  the  supply-side 

innovation policy ; 

4) 

Policy mixes are designed and combined into a more general policy framework. 

The  box  below  illustrates  examples  for  each  of  the  categories  based  on  the  case  study  materials 
(reminder the full case studies can be found in the Annexes to this report). 

Supply-side policy explicitly designed into Demand side policies 

Evidence box 1  

The  three  cases  of  SBRI-SBIR  programmes  studied  (US,  UK  and  NL)  show  the  intent  of  a 
systemic  approach  by  design  whereby  demand  side  actions  such  as  buying  in  R&D  from  SMEs 
through the means of public or catalytic procurement are  integrated with the supply-side through 
support of R&D in high-risk innovation areas. 

The  HIGHTECH  act  (2009)  was  designed  in  order  to  improve  efficiency  and  effectiveness  of 
healthcare in the US by enhancing availability and use of Electronic Health Records (EHR). The Act 
integrates  demand-side  measures  such  as  IT/Data  standardisation  to  promote  systems’ 
interoperability  and  certification  procedures  with  the  supply  side.  The  supply  side  included  the 
creation of infrastructure (physical and intangible) involving healthcare providers, universities and 
patients in the design and implementation of EHR.  

Demand side policies linked to the supply side implicitly 

An example of demand-side policies linked implicitly to  the  supply-side (i.e. not by  design) is the 
case  of  the  Green  Energy  Incentives  in  Italy.  Launched  in  2000  to  support  the  Renewable 
Energy Sector, it consisted mainly of three instruments: Green Certificates, All-inclusive tariffs and 
the  Energy  Account.  Whilst  the  incentive  system  has  been  reviewed  since,  the  main  instruments, 
the Green Certificates and the Tariff system (all inclusive and feed-in tariff) are both demand side 
instruments.    The  first  is  a  regulatory  measure  and  the  second  concerns  financial  measures  to 
stimulate private demand. On the supply side there are several instruments in place to support the 
Renewable Energy Sector (RES) including tax incentives, R&D grants, skill-upgrades and technical 
services amongst others. In other words, demand-side policies co-exist with supply side measures 
even though these are not the result of a coordinated action in support of the RES. 

Demand side policies pursuing typical supply side effects 

19 

 
 
 
 
 
 
SME Standardisation in France. Standardisation instruments are typical demand-side measures. 
The  objectives  of  SME  Standardisation  are  to  push  expected  benefits  from  innovation  directly  by 
developing  networks  of  SMEs  and  indirectly  by  improving  and  maintaining  SMEs’  competitiveness 
at  a  national  and  international  level.  In  particular,  this  measure  was  inspired  and  influenced  by 
focusing  on  the  various  supply  (by  being  directly  funded)  and  demand  benefits  that  SMEs  can 
expect to secure by participating in standardisation design and processes. Key points include: 

1)  Maintain or increase competitive advantage due to:  

o 

o 

o 

o 

Better information than their competitors on the content of standards 

Better  understanding  of  the  technical  content  which  facilitates  its  application  and 
improves SME’s ability to ensure its product respects  standards 

Anticipation of the evolution of the regulations  

Better  control  of  interoperability  and  compatibility  of  SME’s  products  with  others 
products/systems that fit with customers’ expectations.  

2)  Access new markets at national, European and International level due to:  

o 

o 

o 

o 

Collaboration and networking fostered during standardisation processes 

Better information about market trends and strategic evolutions 

Benchmarking of good practices and experiences of other companies 

Ease with which to enter new markets thanks to market harmonisation. 

3)  Disseminate and exploit innovation outputs due to  

o 

Influence on technological content of standards which depend of size of SME, but also 
of its engagement and strategic role into the standardisation committees.  

4)  Increase credibility and visibility  

o 

Standards  are  considered  as  a  guarantee  of  quality  by  clients  and  customers.  Better 
use of standards thus provides opportunities to increase sales and market shares and 
hence influence supply factors. 

Demand side policies “nested” in a policy framework including supply side (policy mix) 
The  Smart  Grid  Technology  Standardisation  in  the  US  was  instituted  in  2007  by  the  Energy 
Independence  and  Security  Act  (2007)  through  which  the  Obama  Administration  aimed  at 
developing a framework to foster interoperability between the Smart Grids operating in the States. 
The  National  Institute  of  Standards  and  Technology  -  NIST  oversees  the  process.  The 
standardisation  effort,  a  typical  demand-side  innovation  policy,  interacts  with  the  supply  side  by 
the complementary plan set out by the Department of Energy aiming at developing and capitalising 
on the Smart Grids. In practice the policy objective is to unify the national energy networks into a 
federal  Smart  Grid  which  would  create  the  condition  for  a  more  secure  and  efficient  energy 
distribution network. This effort is also complemented by Smart Grid Investment Grants and other 
loan guarantees for renewables and  spans complementary areas  such as sensor technologies and 
smart meters. 
The Procurement Conditioned SME R&D Programme was launched by the South Korean Small 
and Medium Business Administration (SMBA) and is an example of a demand side policy that has 
been employed to generate external economies and therefore have supply sides effects. This policy 
involves  Government  Agencies,  public  institutions  and  private  businesses  to  commission  the 
development  of  new  technologies  to  SMEs.  The  organisation  commissioning  the  technology  will 
purchase the products directly for a longer period (ideally three years). The projects selected are in 
areas  where  South  Korea  has  an  innovation  deficit  and  are  targeting  SMEs  in  the  national 
technology clusters and for technologies that  have a potential for substituting exports. The SMBA 
has also instituted a Large conglomerate – SME Technology Co-operation Centre in order to provide 
technical support to SMEs and monitor the import substitution effect of the programme. 

The  study  of  the  policy  objectives  have  shown  that  demand-side  policies  are,  to  some  extent, 
linked directly or indirectly with supply side policy within a wider innovation policy framework. The 
value of combining demand side policies with the supply either explicitly or implicitly derives from 
the policy makers’ needs/aims to outreach the scope of the policy intervention and eventually even 
extend  its  beneficial  effects  to  a  domain  larger  that  the  targeted  areas  of  intervention.  In  other 
words,  the  policy  makers  tend  to  create  additionality  either  within  the  policy  remits  and,  when 
they see the opportunity, outside its domains.  

20 

 
 
Key  policy  message:  Demand-side  policies  may  be  linked  to  the  supply  side  in  order  to 
reach  more  efficiently  and  more  effectively  their  original  aim.  Certain  types  of 
interactions may be more conducive to additional effects than others in specific contexts 

The box below illustrates this policy message through the Greater Manchester Waste system case.  

Linking demand side policy with the supply to reach more efficiently/effectively a policy 
objective and/or promote particular types of interactions 

Evidence box 2 

The Transformation of the Greater Manchester Waste System is an example of negotiated 
public procurement, a demand-side type of measure, undertaken within a strategic plan of 
requalification of the waste management disposal in the area of Greater Manchester (UK). The local 
waste authorities had to prioritise: reduction, re-use, recycling and composting, energy recovery 
and disposal of waste. Given the amount of funds involved, the instrument employed was 
negotiated public procurement which favoured the interaction between supply and demand. 
Although further R&D was not expected, some demonstrations were performed in order to assess a 
better delivery of the final process. Other notable supply side outcomes and interactions included 
the development and support of a strong Environment Business Cluster in the North West and 
various RDI collaborative projects with local businesses. For the deployment of the project the 
procedures also include both customer and suppliers engaged in training activities. New business-
to-business relationships were established in the form of consortia between the suppliers, which 
had to create partnerships in order to fulfil their contractual obligations and between firms 
providing the technology, modifying it, distributing and managing the (technological) process as 
well as acquiring the recyclables generated.  

2.2.  Governance, policy design and management 

Given  the  nature  of  demand  side  policies,  especially  concerning  the  links,  interactions  and 
overlapping  with  the  supply  side,  there  are  a  series  of  issues  related  to  the  governance  systems 
which  reflect  a  range  of  factors  regarding  the  coordination  between  the  various  public  agencies 
involved in the policy action and coordination between public agencies and other actors involved. 

There  are  many  possible  governance  arrangements  through  which  the  issue  of  coordination  may 
affect  the  deployment  of  the  policies.  These  usually  may  play  out  amongst  policy’s  governing 
bodies  and  between  the  policy’s  governing  bodies  and  target  organisations  (and  eventually 
citizens). Sometimes governance arrangements include intermediaries. 

As  well  financial  issues  the  governance  needs  to  encompass  the  required  skills  sets,  for  example 
procurement experience or technical competence, and good links with the actors the intervention is 
targeted at in order to encourage their effective participation.  The governance actors also need to 
carefully  consider  the  interactions  with  intermediaries  and  similar  actors  who  are  often  present, 
notably in interactions with SMEs. 

Furthermore,  strategic  demand  side  policies  can  often  seek  to  encompass  multiple  objectives 
including  wider  behavioural  or  societal  changes  within  the  population  or  within  a  sector.  In  these 
cases, successful examples of policies or strategies show that including all stakeholders within the 
governance arrangements might be an important success factor. 

Key policy message: there is a large  diversity of options that can  be  chosen in terms of 
governance.  Multi-level  and  multi-stakeholders  governance  arrangements  should  be 
considered  and  the  involvement  of  the  target  organisations  and  citizens  appears 
important  in  those  areas  where  the  policy  objectives  aspire  to  a  wider  and  more  all-
encompassing effect. Finally, the use of intermediaries could also play an important role 
to spread effects and facilitate interconnection between stakeholders. 

21 

 
 
 
 
 
The boxes below illustrate examples of this key message.  

Evidence box 3 
Importance of involving all stakeholders 

The  Transformation  of  the  Greater  Manchester  Waste  System.  In  order  to  fulfil  the  EU 
directive,  in  the  early  2000s  GMWDA  first  proposed  to  build  new  generation  energy-from-waste 
incinerators. This first solution however was strongly rejected both by Manchester City Council and 
other  stakeholders  such  as  citizens  and  environmental  groups,  which  demanded  broader  answers 
and  a  longer term  strategy  for  waste disposal  and encouraged the  opening of  new  routes  for  the 
implementation  of  the  EU  Landfill  Directive.  The  stakeholders’  response  triggered  a  process  of 
internal  adjustment  in  the  structure  of  GMWDA:  the  Authority  needed  to  acquire  the  internal 
capabilities necessary to respond to the challenges and, after his retirement, also had to find a new 
director. In our opinion, GMWDA’s transformation itself marks an example of demand side policies 
incorporating  system-wide  changes  and  societal  transformations:  a  local-level  demand  side 
initiative was developed calling for a technological push in the adoption of innovative technologies 
for waste disposal. Such development was modulated by the intervention of local stakeholders and 
provides an example of demand policy design and technological adoption selected following social 
impulses and hence reaching out from public procurement to a wider systemic action. 

On a much larger scale, the US HIGHTECH Act also has such an ambition. It involves many public 
and  private  healthcare  providers  and  patients  and  is  overseen  by  the  Office  of  the  National 
Coordinator  for  Health  Information  Technology  (ONC).  Whilst  the  programme  does  not  have  a 
specific economic focus – it aims at improving efficiency and effectiveness in healthcare – it differs 
from  other  programmes  in  that  there  is  a  substantial  overlap  between  the  user  (demanders)  and 
supply  communities  in  that  healthcare  providers  are  the  main  users  of  Electronic  Health  Records 
and  also  suppliers  of  the  required  information.  The  participants  to  the  programmes  include  labs, 
pharmacies,  public  health  agencies  as  well  as  hospitals,  general  practice  and  patients.  One 
strategic  goal  of  the  ONC  is  to  empower  individuals  to  improve  their  health  and  the  health  care 
system through health IT.  It is, therefore, distinctive from the other case studies in that there is 
explicit ‘consumer’ involvement. 

Evidence box 4 
The use of intermediaries 

Since 2007, in the French SME Standardisation programme, intermediaries have the designated 
role  of  acting  on  behalf  of  the  network  (or  group)  of  SMEs  in  standardisation  committees, 
representing the SMEs’ interests and reporting back. The logic behind intermediaries involvement is 
that  standardisation  is  a  complex  process  that  impacts  upon  companies  in  a  variety  of  ways 
(requirement to follow standards, especially in sectors with a high degree of control such as health, 
children’s  products,  construction,  etc.)  therefore,  experts  are  called  in  to  act  on  behalf  of  the 
companies  which  do  not  possess  the  necessary  competences.  The  employment  of  intermediaries 
can  also  be  considered  as  an  opportunity  to  disseminate  the  knowledge  acquired  during  the 
standardisation  process  back  to  the  group  of  companies  with  a  multiplicative  effect  as  one 
participant to the process reports back to a group of SMEs, a consortium or a federation.  Between 
2010 and 2012,  42 agreements have  been signed, mainly with professional federations or unions 
(86%) and with SME groupings (14%).  

It  came  to the  attention  of  the  research  group that  intermediaries  have  been serially  used  in the 
application  phase  of  the  US  SBIR.  It  is  understood  that  intermediaries  in  this  phase  have 
facilitated  the  matching  of  university  and  industry  partners  in  many  cases  where  collaboration 
would  have  not  emerged  spontaneously.  Moreover,  intermediaries,  involved  in  the  application 
phase  have  reportedly  managed  to  compile  proposals  more  efficiently,  increasing  the  odds  of 
receiving the funding for the project. In this case however, a risk has been identified in the higher 
success rate of intermediaries due more to their capabilities and knowledge of the system than to 
the impact of the project on the technological  advance. In other words, the use  of intermediaries 
might have favoured the  approval  of  projects focusing  on commercially-ready technologies rather 
than projects aiming at developing new technological solutions. 

2.3.  Contextual conditions 

From  the  analysis  of  the  interactions  of  the  demand-side  with  the  supply-side  a  further  host  of 
factors  emerge  for  our  consideration.  At  a  general  level,  policies  play  out  in  a  complex  social, 
technological and economic system whereby characteristics of the systems can be described by the 

22 

 
 
 
 
 
 
 
 
elements  forming  them  and  the  relations  between  the  various  elements.  In  this  setting,  policy 
intervention,  whilst  focusing  on  a  particular  objective,  or  set  of  objectives,  has  an  effect  on  all 
components  of  the  innovation  system  and  their  relationships.  For  example,  employing  public 
money,  through  procurement,  to  support  a  particular  technology  may  divert  attention  from  other 
technologies which are at a more embryonic stage of development but might have greater impact 
on the social, technological and economic system.  

Key  Policy  Message:  Demand  side  innovation  policies  might  have  both  unexpected  or 
unintended  consequences  on  the  elements  of  the  innovation  system.    If  the  aim  is  to 
stimulate local production of innovative services and products (as well as their adoption) 
policy makers need to  be confident that local suppliers are able to respond to increased 
demand. 

Evidence box 5 

Unintended consequences of innovation policy 

The  Green  Energy  Incentives  in  Italy,  in  particular  the  feed-in  tariffs  for  photovoltaic.  The 
incentives  were  employed  to  increase  the  diffusion  of  photovoltaic  energy  generation  panels,  a 
sector just emerging in Italy and based on a technology which, albeit in a development stage, had 
already  achieved  some  level  of  standardisation.  As  the  feed-in  tariffs  increased  demand  for 
photovoltaic installations, the  sourcing  of  the  products shifted from  Italy to other countries which 
had  a  competitive  advantage  in  terms  of  labour  cost  for  the  provision  of  a  standardised  good, 
mainly  China.    The  end  result  is  that  the  Italian  economy  benefitted  only  from  the  increase  in 
services related to the sector: installation and maintenance. It should be noted however that this 
policy intervention resulted in a massive increase in the percentage share of energy produced from 
RES  in  Italy  as  opposed  to  non-renewable  sources.    Furthermore,  similar  RES  type  policy 
interventions have been developed in other EU states such as France, with very similar outcomes. 

Public effort on standardisation might produce soft infrastructure for interoperability and introduce 
quality  assurance  between  technologies,  components  and  technological  platform  which  may 
certainly  benefit  further  development  and  innovation;  however,  this  effort  might  be  focussing  on 
technological  domains  then  may  not  prevail  on  the  market  place.  The  risk  is  that  standards  can 
slow  or  even  inhibit  the  launch  of  new  innovative  products  and  standards.  Nonetheless,  the 
interactions  in  place  and  relationships  developed  during  the  policy  implementation  stage  might 
themselves create new avenues for innovation.  

Demand side innovation policy might have unexpected consequences 

Evidence Box 9 
Unexpected consequences of `SME Standardisation’ 

Leaving aside the individual performance of the French SMEs in terms of their participation on the 
standards  initiative,  the  effects  of  the  SME  Standardisation  in  France,  has  been  in  fact  more 
important  in  introducing  SMEs  to  international  standards  and  create,  through  networking, 
competences and capabilities that have enhanced  the internationalisation and export awareness of 
the French SMEs. 

Contextual  factors  clearly  impact  upon  all  types  of  policy  interventions.    However  for  the  specific 
characteristics of demand and supply side interventions it is important taht the policy maker, when 
designing and implementing a particular policy, acquires a detailed knowledge of the system within 
which  said  policy  is  due  to  be  deployed,  and  the  clarity  of  the  objectives  it  wishes  to  tackle.  We 
have seen that the choice  of the policy  governance  model and a clear articulation of the demand 
(or  the  policy  objectives)  are  essential  during  the  phases  of  design  and  implementation  of  the 
policy, these usually work in tandem and are strong contributors of policy success.  

The effects of the selection of the financial instruments employed, the procedures for selecting the 
participants and the mode of delivery of the policy objectives might have an influence on the final 
outcome  of  the  policy  intervention.  Particular  emphasis  has  to  be  placed  on  the  risk  of  causing 
crowding out or reward underperformers. 

Summarising,  supply  and  demand-side  innovation  policy  design  and  implementation  faces 
`hurdles’ that are dependent on the characteristics of the innovation system they intend to affect. 

23 

 
 
 
 
 
 
These contextual conditions are multilevel and present a high degree of complexity. At the higher 
level of aggregation we might look at the innovation capabilities already present within the system, 
the  various  innovation  ecologies  and  their  interdependencies,  the  level  and  structure  of  skills 
available  within  said  sub-systems  and  the  structure  of  economic  activities.  The  design  and 
implementation of policies is heavily dependent on whether the intention is diffusion of innovation, 
development of new innovation or a mix of both. In the latter case a problem of finding the right 
balance between diffusion of existing innovation and developing of new ones needs to be solved.  

2.4.  Transferability and adaptation of policies through different contexts 

Since  the  1990s  the  debate  in  policy  circles  has  focussed    on  issues  such  as  transferability  of 
policies, lessons learnt from policy analysis and adaptation of policy (see Rose, 1991; Dolowitz and 
March,  1996  and  2000;  James  and  Lodge,  2003  for  an  overview  of  the  debate).  Although  this 
rendition  of  the  debate  might  exceed  in  simplification,  it  was  clear  enough  that  transferring 
successful policy to other contexts would lead to a sub-par outcome and this was beginning to cast 
doubts  on  the  practice  of  implementing  successful  policies  across  different  settings  with  marginal 
policy  adaptation.  The  consequent  policy  failures  made  scholars  and  policy  makers  to  review  the 
reasons  of  such  failures  in  relation  to  the  transfers  that  took  place.  Uninformed  transfer, 
incomplete transfer  and inappropriate transfers were seen as  causes  for the policy failure (James 
and  Lodge,  2003).  Yet,  these  accounts  do  not  take into  consideration the  specific  features or  the 
process of transfer that might originate from the systemic aspects of  - and differences between – 
the systems of relations across which policies were originally designed and then transferred. These 
systemic issues include differences in the institutional settings, differences due to “lock-in” effects 
and path dependency, differences  in the  structure of  social, technological and economic relations, 
and the links between the policy makers and the stakeholders in the policy process (legitimacy). All 
these  issues  indicate  that  policy  transfer  practices  tout-court  are  poor  practices  in  policy  making 
which do not take into account policy learning and appropriate adaptation.  

Whilst this is not the appropriate place to discuss the theoretical aspects of policy transfer, learning 
and  adaptation,  there  is  certainly  scope  to  draw  some  valuable  insights  from  the  case  studies. 
Furthermore,  through  this  study  we  have  also  deepened  our  knowledge  on  the  policy  making 
process  from  the  perspective  of  the  stakeholders  involved.  In  particular  we  have  seen  that 
legitimacy  and  shared  objectives  tend  to  be  determinant  during  the  phases  of  policy  design, 
implementation  and  deployment  and  need  to  be  taken  into  account  when  considering  issues  of 
transferability.  In  some  cases,  the  stakeholders  triggered  a  series  of  actions  including  the  re-
adjustment of the organisational structure as in the case of the Greater Manchester Waste Disposal 
Agency, acquisition of new knowledge and technological competences to be applied for the case at 
hand  and  prompted  a  cooperative  approach  to  procurement  –  in  line  with  the  regulation  on 
negotiated  public  procurement.  Legitimacy  and  shared  intents  carry  important  weight  during  the 
phase of policy design and are particularly important for understanding transferability issues.  

Key  policy  message:  Adaptation,  contextualisation  and  policy  learning  are  an  essential 
part  of  policy  transfer.  Involving  the  appropriate  stakeholders  is  also  an  importance 
factor  to  support  the  legitimacy  of  the  policy  and  understanding  the  conditions  for 
enhanced transferability. 

The boxes below illustrate how similar policies have been designed and implemented (transferred) 
differently across systems and contexts and the importance of involving the ‘right’ stakeholders 

Evidence Box 10 
Policy transfer 

In  the  Small  Business  Research  and  Innovation  cases  (US  –  UK  -  NL)  we  can  see  how  1) 
within each context policies have evolved in order to take into account the social, technological and 
economic  dynamics  within  the  specific  systems  they  were  meant  to  affect  and  2)  similar  policies 
have been designed and implemented differently across the systems. SBIR-type policies are in fact 
a  `popular’  instrument  in  the  policy  toolbox  and  have  been  implemented  in  over  50  national 
context to some extent during the last 3 decades. Yet the cases we have studied demonstrate how, 
though the main objective was common to the three cases – increase R&D by SMEs -, 1) In the US, 
UK  and  the  Netherland  the  policies  were  tailored  and  evolved  in  order  to  accommodate  national 
features  and  facilitate  the  implementation  process and  2)  the  policy  levers  activated, the  general 
(systemic)  aim  of  the  policies  have  been  rather  different  and  targeted  to  specific  the  social, 
technological and economic systems.  

24 

 
 
 
 
Evidence Box 11 
Involving the ‘right’ stakeholders 

The case of the Transformation of the Greater Manchester Waste System has demonstrated 
that  important  policy  objectives  might  be  reached  by  only  involving  all  stakeholders  from  the 
inception  of  the  decision  making  process.  The  first  attempt  to  implement  locally  the  European 
Landfill Directive (1999) in fact failed due to fragmentation of the governance: The organisation of 
the  waste  collection  and  disposal  was  operated  separately  within  the  area  with  nine  Councils 
devising  and  implementing  their  own  strategies independently.  Although  all the  Councils  involved 
were part of the Greater Manchester area, their strategies were disjoint and no common structure 
was  in  place  in  order  to manage  waste  disposal  homogeneously.  The  picture  was  complicated  by 
the separation between the Authority responsible for municipal waste management (GMWDA) and 
the Authority responsible for waste collection and lack of involvement of all parties to the decision 
table: 

2.5.  Evaluation and Metrics 

Few  of  the  20  interventions  selected  as  cases  studies  have  been  subject  to  detailed  impact 
assessments. In some cases this reflects their relatively recent introduction and the intention is to 
evaluate  them  in  the  future,  but  it  also  reflects  the  inherent  complexity  of  these  interventions. 
They are complex for the same reasons which apply to any policies or instrument/tool designed to 
stimulate innovation; including the often long timescales to economic impact and the difficulties of 
separating policy outcomes from the activities of others in the innovation process.  

Instead  of  impact  evaluations,  assessments  of  the  interventions  have  focused  on  process 
evaluations  and  monitoring  data.  Several,  especially  in  their  early  stages,  have  through  expert 
panels  and  surveys  of  participants  and  non-participants  considered  whether  programmes  are 
developing  as  intended  and  have  recommended  adjustments  as  appropriate.  Some  interventions 
seem  to  have  evolved  over  many  years  in  this  respect  with  fluctuating  budgets  depending  on 
political or economic priorities.  

Monitoring data is, of course, collected by all, but tends to focus on activities rather than outputs 
and  outcomes;  for  example,  expenditure,  number  of  firms  involved  and  more  specific  measures 
related to the programme, such as share of procurement budgets. 

Some  programmes  have  also  collected  data  on  intermediate  outcomes  which  could  be  used  to 
inform an assessment of economic and other impacts. The most common, which obviously reflect 
programme aims, are: 

1.  Employment (and growth) of participating firms; 
2.  Sales and growth; 
3.  R&D and growth; 
4.  Profitability and growth; 
5.  Various measures of innovation related outputs, notably patents. 

As  noted  above,  it  is  very  much  the  exception  for  these  metrics  to  be  developed  into  economic 
impact measures, or for assessments of what would have happened without the intervention.  One 
of  the  results  is  that  it  is  very  difficult  to  assess  the  transferability  of  interventions  from  one 
geographic area or  market to  another.   There are  some exceptions to this,  but, as box 10  shows 
the results are not always easy to interpret or indeed consistent 

Key  policy  message:  Interventions  need  to  be  regularly  monitored  and  process 
evaluations  can  be  an  important  input  to  development  in  response  to  changing  needs 
and contexts. Moreover, rigorous evaluations can give valuable insights.  

25 

 
 
 
 
 
The box below illustrates this message 

Evidence box 10 
Using monitoring to develop programmes 

The  Korean  Procurement-conditioned  SME  R&D  programme  has,  in  various  forms,  been  in 
operation for many years.  It is regularly reviewed by research teams and expert groups and has 
evolved in response to perceived deficiencies and changes in national needs.  Key changes include: 
increases  in  the  share  of  public  procurement  budgets  mandated  for  the  programmes;  the 
introduction of product certification for suppliers (and indemnities for purchases); and establishing 
technological support centres. 

Quantitative evaluations 

The  US  Small  Business  Innovation  Research  (SBIR)  programme  has  probably  been  more 
extensively evaluated  than  any  other measure  and  it is one of the very few in our sample where 
econometric  methods  have  been  used  to  assess  counterfactuals.  Interestingly,  these  studies  are 
not unanimous in their conclusions. Some studies which compared SBIR participants with a control 
group  of  non-participants  found  a  positive  and  significant  impact  on  sales  and  employment. 
Another, which adopted an  instrumental  variable  approach to correct for omitted variables, found 
no effect on employment and that the SBIR grant crowded out privately-funded R&D. 

A wide ranging review of Korean Innovation policies, including  our case study (see above) , found 
that  tax  incentives  have  greater  effect  on  the  firm's  innovation  activities,  relative  to  other 
instruments  such  as  government  financial  measures,  procurement,  legal  and  institutional 
infrastructure, and other indirect incentives. 

3.  CONCLUSIONS AND KEY MESSAGES  

The  study  has  reviewed  a  diverse  range  of  interventions  which,  to  varying  degrees,  combine 
demand and supply-side measures.  The diversity arises from their specific aims and activities, but 
also  the  innovation  systems  in  which  they  are  operating,  timing  (and  length  of  operation)  and 
scale.    There  is  limited  evaluation  evidence  with  which  to  judge  their  effectiveness,  but  in  this 
section we present the high-level messages which we have drawn from the policy and case study 
reviews. 

The key characteristic of most of the interventions is their complexity. Innovation is complex, and 
all  policies  will  reflect  this  to  some  degree,  but  the  interaction  between  supply  and  demand  side 
measures  adds  to  this.    In  addition,  several  of  the  policies  reviewed  combine  more  than  one 
demand-side measure and, in a few cases, more than one supply side intervention.  A number of 
conclusions follow from this. 

First,  it  is  especially  important  that  there  is  clarity  on  what  is  trying  to  be  achieved  and  how.  In 
particular,  policy design  needs to carefully consider the  rationale  for  public intervention and the 
extent to which either demand or supply-side measure might introduce unwarranted distortions in 
the  market  (and  the  potential  consequences).    In  policy  brief  2  we  discussed  the  use  of  ‘logic 
models’ in the context of evaluation,  but  they  also clearly have a role in relation  to policy  design 
also.   

Two  key  issues  for  policy  design  encompass  the  scope  for  combining  supply  and  demand-side 
measures and  whether such  measures should be  integrated in a single programme. Demand-side 
measures always draw on supply-side interventions, if only because they require skills provided by 
the  education  system.  But  almost  all  the  programmes  reviewed  integrate  supply  and  demand 
measures  within  the  programme,  for  example  the  various  procurement  schemes  also  fund 
development work.  Such integration obviously enables supply-side support to be targeted, and is 
administratively  efficient  for  participating  firms,  but  also  adds  to  the  complexity  of  programme 
management.  There may also be questions surrounding the efficiency of R&D funded in this  way, 
as  well  as  possible  tensions  between  public  funding  of  R&D  and  the  wider  diffusion  of  resulting 
technologies. 

We would also note a fundamental question which needs to be addressed and that is whether  the 
aim of the intervention is to diffuse existing innovative processes or products within the 
economy or to pull through research outputs into innovative products and processes, or 
(perhaps  more  likely)  a  combination  of  the  two.    This  is  not  always  made  explicit,  but 
obviously  has  implications  for  policy  design.    For  example,  many  of  the  renewable  energy 
programmes have been criticised because they stimulated imports rather than domestic production 
and  it  has  been  suggested  that  stronger  supply-side  polices  were  also  necessary.    We  have  no 
evidence to suggest that supply-side intervention would have been successful in this way, and we 

26 

 
 
 
understand  that  some  European  manufacturing  equipment  makers  may  have  benefited  from  the 
increased demand for renewable energy equipment.  However, it does illustrate the importance of 
considering the context in which the policy is being introduced (in this case the competitive position 
of renewable energy equipment suppliers) and their potential supply-side needs. 

The  second  general  message  concerns  the  governance  and  management  of  supply  and 
demand-side interventions.  The diversity of measures means that a single agency is unlikely to 
possess  the  authority  or  experience  to  effectively  manage  all  components.    Procurement  policies 
are a good illustration.  Agencies responsible for procurement are unlikely to be familiar with R&D 
funding  programmes,  especially  where  these  involve  competition.    In  addition,  many  of  those 
consulted  and  attending  the  workshop,  pointed  out  that  procurement  officials  may  lack  the 
technical skills to specify innovative products and can struggle to identify new functionalities.  We 
would also note that many sub-national authorities have large procurement budgets and some are 
showing  increased  interest  in  demand-side  interventions,  but  may  be  financially  (and  sometimes 
legally) unable to support the supply-side.   

Some of the successful interventions we reviewed have effectively coordinated inputs and activities 
of  a  diverse  range  of  organisations  and  agencies.    The  HITECH  scheme  in  the  US,  for  example, 
brings together users, equipment producers  and  various State and Federal bodies with regulatory 
responsibilities  under  the  Office  of  the  National  Coordinator  for  Health  Information  Technology.  
Innovate UK2 leads the Small Business Research Initiative (SBRI) in the UK which involves a large 
number  of  Ministries  and  has  successfully  increased  uptake  of  the  scheme.   What  is  required  will 
depend on aims and objectives, but successful programmes have combined: 

 

 

Obviously, the required political and financial authority and responsibilities 

Knowledge  of the  sector  and  participating  businesses.    This  has  enabled  the programme to 
reach relevant participants as well as helping to ensure effective programme design. 

We would also note that some of the older programmes have changed and evolved over time.  In 
part, this was a response to changing circumstances, but many undertake regular process reviews 
(as  opposed  to  impact  assessments)  and  this  has  sometimes  led  to  significant  changes  in 
operation.    The  SBRI  and  SBIR  and  the  Korean  procurement  schemes  are  good  examples  of 
evolution. 

The  third  point  concerns  evaluation.    As  was  discussed  in  policy  brief  1,  there  is  only  limited 
evaluation evidence for the interventions we reviewed. The result is that it is very difficult to assess 
the  effectiveness  of  supply  and  demand  interactions,  their  relative  importance  and  the  extent  to 
which experience might be transferable between sectors and between regions and/or countries.   

The fundamental evaluation challenge is establishing the counterfactual and we recognise that this 
will not always be feasible as a result of the underlying complexity and/or the resources which are 
likely to be available for evaluation.  Nevertheless, the lack of evaluation evidence is a major gap in 
current  knowledge  which  could  be  at  least  partially  rectified  by  all  interventions  preparing 
evaluation plans reflecting: 

 

 

 

 

Developing logic models at the policy design stage 

Such  models  should  specify  what  short-term  and  longer  term  outputs  and  outcomes  are 
expected and how the intervention is expected to generate these; i.e. the underlying theory 
of change.  The models will suggest evaluation questions and should be used to identify ways 
in which relevant data can be collected 

At  this  stage  the  scope  for  techniques,  such  as  randomised  control  trials,  regression 
discontinuity design and difference  in difference  estimates should be considered in order to 
derive  a  robust  assessment  of  the  counterfactual  and  what  the  intervention  has  actually 
caused.  Such  approaches  are  to  be  strongly  encouraged,  but  they  will  be  expensive 
compared to “softer” evaluation approaches.  There is likely to be a threshold for programme 
expenditure  and  one  workshop  participant  suggested  any  programme  above  €0.5m  should 
be  evaluated  in  this  way.    In  some  cases,  it  is  simply  not  feasible  to  introduce  such 
approaches:  standards,  for  example,  potentially  affect  all  and  it  is  difficult  to  see  how  a 
control or comparison group could be established in a meaningful way 

Softer approaches such as self-reported benefits (and problems) by participants will also be 
required.  These  do not represent  a rigorous evaluation, but can provide valuable feedback 
to programme managers and lead to improvement in the intervention.  They also need to be 

2  

Formerly the Technology Strategy Board (TSB) 

27 

 
 
                                                 
undertaken  in  as  rigorous  a  way  as  possible,  with  careful  selection  of  survey  samples  to 
avoid bias in responses. 

4.  REFERENCES 

Dolowitz,  D.,  &  Marsh,  D.  (1996).  Who  learns  what  from  whom:  a  review  of  the  policy 
transfer literature. Political studies, 44(2), 343-357. 

Edler,  J.  (2013)  “Review  of  Policy  Measures  to  Stimulate  Private  Demand  for  Innovation. 
Concepts and Effects”, MIoIR, the University of Manchester and NESTA, London. Available at: 
http://innovation-policy.org.uk 

James,  O.,  &  Lodge,  M.  (2003).  The  limitations  of  ‘policy  transfer’and  ‘lesson  drawing’for 
public policy research. Political studies review, 1(2), 179-193. 

Rose, R. (1991) What is lesson-drawing? Journal of Public Policy, 11 (1), 3-30 

5.  EXTERNAL ANNEXES 

Several documents produced all along the study are annexed to this final report:  

First policy Brief and its annex which contain:  
o  the comprehensive literature review 
o  a selected bibliography 
o  the comprehensive 20 short cases.  

The first policy brief summarize the key lessons from all this collected material.  
Reference list to be prepared. 

The second policy brief which contains:  
o  The  detailed  analyses  for  five  cases:  SBIR  programmes  in  USA,  UK  and  Netherlands, 
Green  incentives  in  Italy,  Hitech  programme  in  USA,  Great  Manchester  case  on  waste 
management  and  The  French  programme  supporting  SMEs’  participation 
in 
standardisation committees.  

 

 

. 

28 

 
 
 
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This document is the final report of the study undertaken under the framework contract “provision 
of services in the field of research  evaluation and  research policy analysis” Lot 3 on behalf of the 
DG  Research and Innovation.  The  scope of the study was to  provide an overview and analysis of 
innovation  supply  side  and  demand  side  policies  and  their  interactions  in  the  context  of  a  broad 
policy  reflection  about  how  to  develop  the  use  of  demand  side  instruments  as  part  of  a  more 
integrated  policy  approach  for  improving  the  effectiveness  and  efficiency  of  research  and 
innovation  (R&I)  systems  at  regional,  national  and  EU  level.  This  reflection  and  the  study 
methodology  selected  sought  to  develop  an  analysis  based  of  the  experiences  of  countries  which 
are the more advanced on the path of integrating supply- and demand-side policies in their overall 
innovation strategies.  

Studies and reports 

doi: 10.2777/441701