The Paradigm of Knowledge-Oriented Industrial Policy

The paper attempts to synthesize some of the outcomes of the evolution of thinking on industrial policy in the knowledge-based economy and the related advances in policy practice. The term "knowledge-oriented industrial policy" is used in the paper to denote a new brand of public sector interventions targeting various structural aspects of the economy through transmission channels and mechanisms that hinge on the driving forces of knowledge flows and stocks and incorporating a systemic understanding of the policy rationale. The paper outlines the theoretical background, the rationale and the operational framework as well as the design of knowledge-oriented industrial policy whose nature is highlighted by drawing attention to the distinctions between "traditional" and "knowledgeoriented" approaches and instruments. A simplified taxonomy of different categories of knowledge-oriented policy instruments is also presented in the paper. The specific features and effectiveness of these policy instruments are discussed by highlighting their knowledge functions, the policy transmission channels as well as other important characteristics.