The purpose of this paper is to discuss the link between economic thinking and public policy, two ways of promoting innovation are reviewed – competition and interaction. The competition perspective is illustrated by Schumpeterian-inspired growth economics, while the role of inter-organisational interaction is shown by the industrial network theory.
The construction sector is used as an example of a politically critiqued industry regarding low innovativeness and productivity, through which the two different views are outlined and compared. The main differences of these two perspectives are outlined as: the organisational unit of analysis (the firm vs the relationship and network), how knowledge is created and spread (exogenous vs endogenous to economic exchange), and the value-creation processes (internal vs external focus).
The two views are essential different and therefore should cancel each other out if implemented simultaneously. Consequently, a conscious choice as to which view should be used within a public policy for promoting innovation must be made. It is concluded that, while both types of economic thinking can be used to promote innovation in this industry, a fundamental difference could arise if construction firms continue to pursue mainly competitive strategies at the expense of addressing its interactional problems.
Finally, a set of questions that policymakers need to consider in relation to the three fundamental issues addressed above is discussed.
The paper adds to the discussion of how to increase the innovativeness in the construction industry in a novel way by comparing two distinctly different theoretical perspectives on how this is best handled.
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