Scarce funds, infinite ideas: choosing the right innovation policies

Luxembourg faces an innovation puzzle. Despite high income and productivity levels, international firms, strong public research institutions and access to European markets, productivity growth has slowed, while business R&D and firm-level innovation remain modest by international standards. Several explanations are possible, including sectoral specialisation in services, measurement limits, a small domestic market and delayed returns from new technologies. Yet these remain hypotheses, not established facts. This brief reviews key policy instruments to strengthen innovation, including R&D support, public procurement, collaboration schemes and science funding, and argues that they should be designed as a coherent policy portfolio rather than a patchwork of programmes.
The priority is not necessarily to spend more on innovation support, but to target the right actors and account for interactions among instruments.
Understanding their impact requires linked firm-level and policy data.