A Practitioner’s Guide to Innovation Policy - Instruments to Build Firm Capabilities and Accelerate Technological Catch-Up in Developing Countries

Jul 19, 2026

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A Practitioner’s Guide to Innovation Policy provides practical guidance for designing and implementing innovation policy in developing countries. It links innovation policy to firm capabilities and managerial and organizational practices, then explains how governments can build institutional and administrative capacity. The guide clarifies how to prioritize policies across the capabilities escalator, dispels common myths, and outlines elements of effective policy making, including rationale, implementation effectiveness, system coherence, and predictable governance over time.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages348

Reading Time14 h 37 min

Preface

Acknowledgments

Abbreviations

Overview

The Innovation Policy Challenge and Introduction to This Guide

The Innovation Policy Challenge in Developing Countries

From Upgrading to Invention—A Broader Definition of Innovation

Innovation Policy in Developing Countries

The Innovation Imperative in Developing Countries

Firm Capabilities for Innovation: The Importance of Managerial and Organizational Practices

The Need to Prioritize Policies Across the Capabilities Escalator

Dispelling Some Myths About Innovation in Developing Countries

Building Government Capabilities for Innovation Policy

Elements of Good Innovation Policy Making

Innovation Policy Agencies and Institutions

Other Important Elements for Innovation Policy Choices

Some Guidelines When Searching for Policy Solutions to Innovation Problems

A Practitioner’s Guide to Innovation Policy Instruments to Build Firm Capabilities and Accelerate Technological Catch-Up in Developing Countries Xavier Cirera, Jaime Frías, Justin Hill, and Yanchao Li A Practitioner’s Guide to Innovation Policy A Practitioner’s Guide to Innovation Policy Instruments to Build Firm Capabilities and Accelerate Technological Catch-Up in Developing Countries Xavier Cirera, Jaime Frías, Justin Hill, and Yanchao Li © 2020 The World Bank 1818 H Street NW Washington, DC 20433 USA Telephone: 202-473-1000 [Internet: www.worldbank.org](Internet: www.worldbank.org) [Some rights reserved.](Some rights reserved.) This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution—Please cite the work as follows: Cirera, Xavier, Jaime Frías, Justin Hill, and Yanchao Li. 2020. A Practitioner’s Guide to Innovation Policy. Instruments to Build Firm Capabilities and Accelerate Technological Catch-Up in Developing Countries. Washington, DC: World Bank. Cover art: La Creación de las Aves,(The Creation of Birds) by Remedios Varo. Used with the permission of INBA; further permission required for reuse. Reproducción autorizada por el Instituto Nacional de Bellas Artes y Literatura, 2020 (Reproduction authorized by INBA, 2020) . Cover design: Aichin Lim Jones. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [pubrights@worldbank.org](pubrights@worldbank.org). DOI: 10. 1596/33269 Table of Contents Preface ........................................................................................................................... xi Acknowledgments ...................................................................................................... xv Abbreviations............................................................................................................. xvii Overview................................................................................................................... xxiii PART I .................................................................................................................................... 1 1. The Innovation Policy Challenge and Introduction to This Guide.................3 1.1 The Innovation Policy Challenge in Developing Countries ..................3 1.2 From Upgrading to Invention—A Broader Definition of Innovation ...........................................................................................5 2. Innovation Policy in Developing Countries .......................................................9 2.1 The Innovation Imperative in Developing Countries............................9 2.2 Firm Capabilities for Innovation: The Importance of Managerial and Organizational Practices ........................................14 2.3 The Need to Prioritize Policies Across the Capabilities Escalator............................................................................. 18 2.4 Dispelling Some Myths About Innovation in Developing Countries ...........................................

FAQs

What is the main innovation policy focus in developing countries addressed by this guide?

The guide frames innovation as more than upgrading by including a broader definition that covers moving toward invention. It also emphasizes tailoring innovation policy to the capabilities needed in developing-country firms and systems.

How does the guide connect firm capabilities to innovation policy effectiveness?

It highlights managerial and organizational practices as key components of firm capabilities and explains why policy should prioritize actions that build these capabilities over time.

Which government-side capacity elements are emphasized for making innovation policy?

The guide outlines elements of good policy making, including clear rationale and justification, implementation effectiveness, coherence across the national innovation system, and consistency and predictability over time. It also discusses institutional arrangements and the need for coordination.

Jul 19, 2026

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