“At Layer 2 we position the formal institutions, including public institutions of the state and the networks between the state, bureaucracy and private business. Innovation is largely influenced by the role of the state in the economic system. A well-known distinction between the role of the ‘regulatory’ state and that of the ‘developmental’ state is that the former plays a minor role while market forces are dominant, in contrast to the latter that takes the initiative and guides the structural development of the economy in specific directions. Japan and most Asian economies are examples of the latter, while the Anglo-Saxon countries are examples of the former. The role of the state has large implications for a country’s laws and regulations, including its instruments to facilitate innovation at Layer 3. The networks that exist between politics, bureaucracy and business also depend largely upon the role of the state.”
Page 178 Steen, Groenewegen, Jonker, Kunneke and Mast, in Foxon, T, Kohler, J. and Oughton, C. (2008) Innovation For A Low Carbon Economy Economic, Institutional and Management Approaches Cheltenham: Edward Elgar
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