State governance of innovation: From market-shaping theory to international experiences and policy implications for Vietnam

Abstract

In the context where innovation has increasingly become a key driver of economic growth and sustainable development, the design of the state governance system for innovation plays a crucial role in enhancing national competitiveness. This study develops a theoretical framework from the transition of the state’s role in addressing “market shaping” and applies the concept of the national innovation system (NIS) to analyse and compare the organisational models of innovation governance in several representative cases: South Korea, China, Malaysia, and the European Union. The comparative analysis reveals that although these countries/regions differ in their levels of centralisation, coordination mechanisms, and policy instruments, they all emphasise the proactive role of the state in shaping technological trajectories, promoting mission-oriented innovation, and creating new markets. Based on international experiences, the paper draws policy implications for Vietnam, including: (i) establishing a highlevel national innovation council; (ii) combining centralised strategic direction with decentralised implementation; (iii) adopting a market-shaping approach with national priority missions; (iv) diversifying policy tools on both the supply and demand sides; and (v) developing monitoring and evaluation mechanisms based on output and outcomes. These implications provide a foundation for Vietnam to design a stronger innovation governance system, thereby enhancing competitiveness and moving towards sustainable development in the knowledge economy era.