This paper looks at how digitalisation is transforming innovation, and the consequent need for innovation policies to adapt. The paper shows that the digital transformation affects the economics of information and knowledge, in particular pricing and allocation. The reduced costs of producing and handling information and knowledge and the increased fluidity change innovation dynamics. Data have become a core input for innovation. Other changes include more opportunities for versioning; an acceleration in innovation, more experimentation and collaboration; servitisation; and higher risk associated with these general purpose technologies. The digital transformation also has economy-wide effects in terms of business dynamics, market structures and distribution. In view of this transformation, changes to innovation policy are required in the digital age. Innovation policies need to address data access issues; become more agile; promote open science, data sharing and co-operation among innovators; and review competition for innovation and intellectual property policy frameworks.
