Innovations do not occur in isolation. There is a system or framework in which different actors are connected to and affect each other. This chapter discusses three interrelated concepts: market failure, government failure, and the National Innovation System (NIS) and the government’s role in innovation. After defining and providing examples of market and government failure, this chapter explores how market and government failures impact innovation as well as the NIS and the government’s role in innovation. Understanding government operations, interpreting the relationship between public and private organizations, and evaluating government innovations are complex tasks. Each policy is subject to limitations and unexpected consequences. In many cases, the market fails. To correct these market failures, the government intervenes, changes, or implements a new policy or uses a tool (e.g., subsidy or tax). However, the government’s involvement in the market may lead to government failure. Therefore, fixing market and government failures is not easy, although innovations can help to fix both failures. In addition, this chapter discusses how innovative activity affects economic growth, employment, and entrepreneurship, as well as how technological innovations can enhance social welfare and living standards.

This chapter reviews the literature on the political economy of S&T and innovation, including the evolution from the national innovation system to a political economic approach, and proposes a conceptual framework to open the “black box” of the states role in S&T and innovation activities.

This chapter analyzes the public research system and policies implemented in South Africa to promote innovation and economic development. In addition to public research organizations and state-owned enterprises, the government research and innovation infrastructure is supplemented with private sector research, regulatory bodies, industry associations, and the South African Patent Office in South Africa. The chapter describes South African policies that have been introduced to support the supply of public research, consisting of the outputs of public research organizations, policies to support the innovative capabilities of firms, and policies to support linkages and knowledge transfer between public research and firms. Four case studies based on desk research and interviews show that the main channels for knowledge transfer in South Africa are informal methods and research agreements. The chapter concludes that a number of factors have limited the flow of knowledge from public research to businesses in South Africa and action is required to improve the demand for university research and increase the domestic capability to absorb and learn how to use technologies associated with new investment and modernization.

The main aim of this research is to explore the progress of the knowledge transfer system in the Republic of Korea and assess how much of this generated knowledge had been successfully commercialized. The chapter reviews policy changes since 2000 that were implemented to improve knowledge transfer from public research institutes. It identifies the important knowledge transfer channels in the Republic of Korea and reviews the challenges that government policy and public research institutes face in achieving successful knowledge transfer. The chapter concludes that for the national innovation system in the Republic of Korea to change from the old catch-up mode characterized by the twin dominance of big businesses and the government, the Korean system would need to support demand-oriented research, provide monetary incentives for researchers in terms of license income, place more weight on knowledge transfer performance in performance evaluation of researchers, and recruit high-quality personnel for knowledge transfer offices.