Demand, challenges, and innovation. Making sense of new trends in innovation policy

In recent years, the traditional rationale for innovation policy has been expanded to tackling societal challenges. There is also an increasing agreement that demand should be at the core of this challenge-oriented innovation policy, as for innovations to make a difference, they must be used. Still, demand and demand conditions are poorly understood and not yet in the focus of challenge-oriented innovation policy. This article re-conceptualises demand-oriented innovation policy and its link to societal challenges. We differentiate demand and need, and highlight different forms of demand articulation. We then characterise three ideal-typical policies that relate to demand: traditional innovation policy, sector-specific policy and challenge-oriented policy. These three ideal-types are then characterised against three major dimensions of any policy: output legitimacy, input legitimacy, and operational requirements. This discussion highlights the specific challenges and opportunities of demand-oriented innovation policies. It allows to derive a set of suggestions to increase the effectiveness of such policies as regards their ability to truly support tackling challenges that are relevant for society.