– 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.
