Working Paper
Innovation Systems, Radical Transformation, Step-by-Step

The paper introduces a reform trajectory we call ‘revolutionary incrementalism’ in which partial and incremental measures add up to profound transformation. Recent advances in economic theory demonstrate that growth is not hard to start: it almost starts itself, somewhere, sometimes. But keeping it going is not easy: doing so requires attention to the context of growth binding constraints and situation-specific ways to resolve them. The same goes for institutions: it is almost always possible to find some that are working. The issue is using the ones that work to improve those that don’t. The thrust of the proposal is to rely on variation within existing institutions as the ‘Archimedean lever’ with which to leverage reform and change. India’s public sector record for implementing and coordinating innovation efforts can be notoriously fragmented and inefficient but there are some parts that perform better than others, and there are recognized pockets of excellence virtually within every ministry or public sector organization. The same internal diversity is even more visible in the private sector. Importantly from a policy perspective, better performing segments of public sector and better performing segments of productive sector are beginning to join forces in a variety of search networks—private-public partnerships and programmes to unblock binding constraints and to advance reforms. From this perspective, India’s unparalleled heterogeneity is its most beneficial aspect. But to leverage internal diversity, the already vibrant search networks have to develop a systematic procedure of assessing the constraints and of developing ‘next step’ measures to relax them. All too often, reform is conceived as a comprehensive blueprint consisting of many desirable changes. Neat in theory, but such blueprints tend to become mere ‘wish lists’ in practice because of a myriad of implementation constraints. The consensus is that while India needs a profound modification of its innovation and higher education system, reforms are blocked because of vested interests and significant political economy constraints. Revolutionary incrementalism perspective developed in the paper dispenses with blueprints and ‘wish lists’. Instead, it proposes a series of strategic pilots, each addressing binding constraints in its own way, and a procedure to evaluate these as a way to reform. The proposal draws on lessons from China, a recognized paragon of revolutionary incrementalism. The paper is addressed primarily to policymakers. It will also be of use to economists with an interest in institutional design of innovation policies.