DECISIONS ON INNOVATION AND DIFFUSION AND THE LIMITS OF DEREGULATION

Governments in Western Europe are currently assigning responsibilities for functions of high societal importance to private groups under the slogan 'Deregulation and privatization'. Identical principles are app lied in former communist countries in Eastern Europe, based on the the sis that only free-market mechanisms will guarantee most benefits for all groups of society. Against this thesis, governments in most indust rialized states have established so-called 'national innovation system s', formed by government-owned or -supported research institutions and measures supporting the innovation abilities of companies, since comp etition in innovation has become the most important kind of competitio n on company level and between national economies. The main aims of th e article are to reach an understanding of mechanisms and responsible actors for generation and diffusion of innovation within a society and (national) economy; to demonstrate problems and impacts of unreflecte d deregulation and privatization on society and national economy, to s how that unreflected deregulation and privatization is not in conformi ty with, but opposed to, economic theory as founded by Adam Smith; and to derive consequences and measures necessary for coordination within an economically developed society. The research methodology includes the use of an explanatory model, demonstration of examples, partly bas ed on our own research, exegesis, and logical final conclusion. Copyri ght (C) 1996 Elsevier Science Ltd