Sustainability Transformations and the Transformative Capacity of Nation States: Implications for Innovation Policy

The need for radical transformations to respond to the environmental polycrises of climate change, biodiversity loss, and pollution has come to the forefront of political and academic debates. Nation states must have transformative capacity, meaning the ability to ignite, enable, and steer large-scale sustainability transformations. However, despite its importance, there remains a significant gap in understanding how innovation policy influences and shapes this transformative capacity. In this conceptual paper based on a systematic literature review, we explore which capacities are needed to navigate the current transformations and how different innovation policies influence transformative capacity. We argue that the current Grand Challenges put a double demand on nation-states regarding transformation breadth and depth and highlight that the literature on transformative innovation policies is biased toward some dimensions of the transformation. We propose a more holistic approach to innovation policy, which takes a dynamic system perspective and evolutionarily conceptualizes transformative capacity. We discuss the implications of this more holistic approach to innovation policy. This approach reflects on how different capacities should be mobilized through innovation policies throughout the transformation process.