Comments for How entrepreneurial should the state be? Willot Camille 1 October 2014 In my opinion, encouraging knowledge of innovation could never be a lost cause. Even in cases of market failures, the dedicated efforts could be reused in the future, especially in today’s society: with every sector doing innovation and a system that allows keeping information in a performing way. A solution must therefore be found to make information and knowledge be…Read moreIn my opinion, encouraging knowledge of innovation could never be a lost cause. Even in cases of market failures, the dedicated efforts could be reused in the future, especially in today’s society: with every sector doing innovation and a system that allows keeping information in a performing way. A solution must therefore be found to make information and knowledge be shared between sectors and within a sector under certain conditions. However, it is important to well-chose the projects that the government should invest in. It is true that businesses which are receiving money from the state will act differently than if it was their money. Companies will be less careful with the state’s money, and even if they see that they are going nowhere, they could keep trying in a business that seems dead-end. The point of Ms Mazzucato that the governments should “reap a reward” from their investments seem very interesting to me. I think it would indeed reinforce that innovation system and spread the profits of growth more fairly. Firstly, it is true that if governments earn a share of the return, they could reinvest this money into other projects, other innovations. It would be a great incentive to them to invest in different projects of innovation. Furthermore, it will give incentive to companies to better use the money. They are receiving money from the state with a clear objective from results in a dead-line: they have to provide results. They will thus be obligated to create a worth-creating innovation. Secondly, if governments invest into innovation-creative companies, and earn a part of the profits afterwards, it is true that the profits of growth would be spread more fairly: between governments’ project and companies. As it was written in the text, I support the idea that the state should “stick to the basics” and promote innovative behaviours in schools. The money that will receive could be reinvested in health, education and transport for instance, and that would therefore reinforce the whole innovation system. Show less Reply Charlotte Irgens 1 October 2014 In this blog post, we are introduced to two opposing stands of how much the state should be involved in innovation. As with most things, taking it to either of the extremes seems non-feasible, and I would argue that finding a middle way is what would be most fruitful for the state. Whether the state should itself act as an…Read moreIn this blog post, we are introduced to two opposing stands of how much the state should be involved in innovation. As with most things, taking it to either of the extremes seems non-feasible, and I would argue that finding a middle way is what would be most fruitful for the state. Whether the state should itself act as an entrepreneur or rather provide a favourable framework for firms and individuals is one important question. I believe that, in most cases, the state itself should not take on the role as being the entrepreneur because it might not be best suited to come up with new and pioneering ideas. This should rather be left to creative individuals and firms with industry-specific knowledge. The state’s role should mostly be that of a creator and provider of an innovation-friendly environment, encouraging an entrepreneurial and innovative spirit across its sectors. It has been shown that knowledge creation is an important engine for economic growth (Uppenberg 2009). Hence, creating an environment where firms and individuals are given incentives to innovate seems beneficial for the state from a macroeconomic perspective. However, for the creation of some public goods where there might be little incentive to innovate because e.g. the potential profit margins are not very large in that specific industry, the state should intervene by for instance providing R&D subsidies. Like this the state can try to hinder that all R&D is spent in industries where the margins are highest and the risks are seen to be most manageable. The state can thus make sure that it is not completely up to the market to decide where the R&D is being performed, but that there is sufficient incentives created for actors to be willing to innovate in the sectors that are most crucial for the larger part of the population, e.g. public health care, education and transportation. It is noteworthy, as is mentioned in this blog post, that the countries that have been badly hit by the recent crisis, also are countries that have spent the least on research and development. This points to the fact that countries should not be too afraid of investing in R&D in order to boost certain industries. To sum up, in my view, the state itself should not try to be a successful entrepreneur as of such, but it should attempt to create an environment where entrepreneurs and people with innovative ideas can be successful. Still, it must also recognise the need for creating incentives for innovations in certain industries that might not be as lucrative as other, but that are important industries when it comes to the provision of public goods for its population. Source quoted in the text: Uppenberg (2009). Innovation and Economic Growth, EIB Papers, vol. 14, no. 1. Show less Reply Charlotte Moreau 1 October 2014 From a general point of view, it is clear that the state must be an actor in the innovation sector, but how implicated must it be? I think that the state has a mission to promote and help entrepreneurs in the country. Legislation should be in favor of start-ups. The development of new ideas is useful for the economic growth…Read moreFrom a general point of view, it is clear that the state must be an actor in the innovation sector, but how implicated must it be? I think that the state has a mission to promote and help entrepreneurs in the country. Legislation should be in favor of start-ups. The development of new ideas is useful for the economic growth of the country. Firstly, innovations can come from any kind of sectors as long as it can help expand markets or create new ones. Brilliant innovations may have private goals that would not necesseraly serve the development of the country. Apple is typically an exemple of it. So I think that the state should have a priority ranking so that the most important innovations can receive grants that could help them develop the idea on the best way. Priority sectors are namely education, security, employement or medical care. Secondly, the state may not be as objective as other decision makers. The state shouldn’t be the only one to make the decision to sponsor an idea or not. Specialists from the particular sector and from innovation should be allowed in the decision. Moreover, like the Economist explained it, the state has a short-term vision and makes decisions with an eye on political strategies. This way, specialists could bring another point of view which is more long-term thinking. They would make the decisions considering the markets growth and possibilities of expansion. Without the state support, innovation development wouldn’t be as efficient as it could be. A state must be entrepreneurial as long as it serves good objectives that may help in the development of the country. Show less Reply Zhang Xiaomeng 1 October 2014 Then debate about the relationship between state and the innovation was given the different views by economists. The general point is the entrepreneurial states which could give the basic founds and support would help to stimulate developing of national economics and innovation of technology in order to competition in the global market. The research from Mariana Mazzucato illustrates a point…Read moreThen debate about the relationship between state and the innovation was given the different views by economists. The general point is the entrepreneurial states which could give the basic founds and support would help to stimulate developing of national economics and innovation of technology in order to competition in the global market. The research from Mariana Mazzucato illustrates a point of view that the nations which achieved innovation not only create the condition of innovation but also actively provide direct support to innovators. The countries like America which invest more innovation funds in education areas developing faster. One example is the IT industry in America which get funds from US public agencies. Meanwhile, private sector should also share the social risk with public departments. My viewpoint is that the government should share the risk with private enterprise in innovation area not only from the fiscal support but also from the state policies improvement. Chinese government plays a main role in innovation process. The cooperation between ministries of China and other countries’ innovation works providing the large step in the fast economy growing. One example is the Chinese ministry of Science & Technology invest 7 million pounds working with UK in technology collaboration innovation in 2013. However, there are still several problems barriers in Chinese technology innovation. The biggest problem in Chinese innovation area is a weak protection of intellectual property from government policies and actives even government stimulating local innovation, most of the intellectual property rights were flowed to other developed countries. The relationships between government and private sectors could also be the obstacles of cooperate innovation. The mistrust between china and other countries is also standing out in business area. For example, some Chinese telecommunication companies like Huawei, ZET were limited to step into R&D areas into America as their relationship to Chinese government. However, under the national state intervention situation, these companies have to work with government in some area in local government. It is needs to improve the Chinese political model in state intervention on international market from protest aspect. Although the government make the “indigenous innovation” five- year plan, economists find out that most of funds and fiscal support were put in development but not innovation. As local industries and local government pays a lot attention on performance evaluation on GDP increasing while pays less attention on long-term research. In conclusion, innovation is not only the responsibility for scientists or researchers, business or entrepreneurs, but also the responsibility of government and social organizations. Government should invest more directly funds, tax-based fiscal incentives improve the government structure, and strengthen IPR protection to promote the national innovation. Reference: 1, http://www.ft.com/cms/s/0/738da524-08f2-11e3-8b32-00144feabdc0.html#axzz3EtuzHP54 2,http://siteresources.worldbank.org/ICLP/Resources/Innovation_for_Development_Introduction_and_Summary.pdf 3, http://www.economist.com/node/21549938#sthash.7w2utCok.dpbs 4, http://www.eastasiaforum.org/2011/07/22/can-china-become-an-innovation-hub/ Show less Reply Laurence Balis 1 October 2014 There are extreme thinkers in this text. First of all, the one that think that the governments should stick to the basics. It is very radical. Despite they are right on certain points of view such as better schools, clear rules, etc, they can't only stick to that. If you leave everything to the revolutionaries, for me, it would be…Read moreThere are extreme thinkers in this text. First of all, the one that think that the governments should stick to the basics. It is very radical. Despite they are right on certain points of view such as better schools, clear rules, etc, they can’t only stick to that. If you leave everything to the revolutionaries, for me, it would be worse because you don’t know what to expect. On the other hand, there are people that only see the good sides of State investments. Of course, there are many examples that proved the need of the governments. They help and give cash to some inventions that are sometimes risky. But without this money maybe wouldn’t these huge inventions and progress have been that far in the market.. So the State helps innovation and growth. But of course is the intervention of the State not every time right. they try to invest in what they believe that deserves it but sometimes they are wrong and just waste their money, as we could see in Senegal. The Senegalese government loses around 20 million euro’s by investing in Education. They bet on the success of some students but they failed. That is an example that shows that State investments are not always wise. Even if it is very important that the government invests in R&D projects, the State doesn’t have to go too far and invest in every new technology because it has to be healthy to make innovation a success. I think the State has to find a tradeoff between all the projects it has to fund like the health care, education, new technologies, etc and its own health. Of course they have to invest but they have to inflict themselves some boundaries. A successful entrepreneur has to think about the good sides and the bad sides of a project, investment etc before investing in it. So I don’t think a strong competition between scientists is needed but of course there are a lot of good inventions and technologies and the State can only fund some of them. So of course, there will always be some competition and it is a good point because it pushes scientists to go further and give their best and it is the same for start-up’s funds. I think politicians can have the last word but they must consult experts to know what they think because they will better know if it is worth it or not. So for me both sides of the spectrum have their good reasons but I think that extremes are not the answer at all. The answer would rather be a compromise of both sides. Show less Reply Aurore de Halleux 1 October 2014 As many comments bellow, I think that the answer (or a part of it) lies in a compromise between the two extremes. To sustain the “limited intervention of the state concerning innovation view”, governments, which are supposed to intervene to “provide the right incentives to create and innovate” when market failures happen, are not foolproof. They can also sometimes fail to…Read moreAs many comments bellow, I think that the answer (or a part of it) lies in a compromise between the two extremes. To sustain the “limited intervention of the state concerning innovation view”, governments, which are supposed to intervene to “provide the right incentives to create and innovate” when market failures happen, are not foolproof. They can also sometimes fail to allocate the resources efficiently. As the first article of the Economist says, I think that the State first has to provide good infrastructures to its population before investing in innovation. However, even if they are not capable to solve every problem, I think that the government should take some risks to try new solutions to existing problems. And if the State is too hesitant about innovating themselves, they should at least encourage their entrepreneurs with some policies The example of Social Impact Bonds (SIBs) (http://www.socialfinanceus.org/social-impact-financing/social-impact-bonds/what-social-impact-bond) illustrates well, according to me, the “between the extreme of the spectrum” idea. The public sector is trying new solution to tackle deep-rooted social problems with the help of experts and investments from the private sector. The fact that the SIBs are based on a Pay-for-Success scheme encourages the government to be more innovative as they have nothing to lose in case of failure. Finally, to answer the question of what makes a state a successful entrepreneur, I think that if there were an answer, a lot of problems would not be problems anymore. There is no magic recipe, only qualities that could help, like passion, open mind, expertize, ideas, proactive thinking (http://www.entrepreneur.com/article/227776). Show less Reply Hélène Linsmeau 1 October 2014 In my point of view, we need a good balance between a full control of innovation by the State and nothing from it. I think that the role of the state is more general, its purpose is to give favourable conditions to improve and develop innovation. In the following part of the text, I will try to summarize, thanks to my…Read moreIn my point of view, we need a good balance between a full control of innovation by the State and nothing from it. I think that the role of the state is more general, its purpose is to give favourable conditions to improve and develop innovation. In the following part of the text, I will try to summarize, thanks to my readings, this overall role by a small number of missions. First of all, the State needs to invest directly money in researches that are really promising but in the same time with a high level of risks. Nevertheless, in my opinion, this direct task is a small part of the State intervention. As applied in Switzerland, the state has a number of other tasks that, at first glance, have an unclear connection to innovation. Indeed, one mission is to continue and to enforce its investment in the educational system at every stage because the knowledge is the origin of a good innovation. Secondly, ministers have to manage a political stability, to secure the rules of justice, to ensure the proper functioning of the macro-economy, … in the purpose of maintaining opportune conditions for innovation. Also, they needs to promote the relation between the public and the private sectors by removing obstacles to cooperation or network constitution or by allowing scientists to patent some researches, … Moreover, as Rahel Zurfluh explains in her article, society changes constantly; which brings to relativize the current policy and not to think that it will stay as it is nowadays. She wrote: « The political decision making is never closed and it has the ability to take account of the changing environment, of new ways of thinking or of a disruption in the State’s priorities. » In conclusion, I think that, with the current society’s ideas, the role of the State needs to be limited and its main objective is not directly related to innovation but it is to create a good environment for innovation development. Contrary to Mariana Mazzucato’s thinking, I believe that innovation is mainly in the private companies hand. References used:  http://www.dievolkswirtschaft.ch/fr/editions/201310/pdf/Zurfluh_4_5.pdf  http://www.pwc.com/gx/en/technology/pdf/How-governments-foster-innovation.pdf  http://www.klubprepa.fr/Site/Document/ChargementDocument.aspx?IdDocument=5052 Show less Reply Mario Medina 1 October 2014 To make a big improvement in the economy it is necessary to invest in the technology field and in the innovation of it, but it is necessary that experts in the market and in the engineering field, scientist too, manage those business more than the government’s employees (politicians and bureaucrats) that don’t know too much about the products. To make…Read moreTo make a big improvement in the economy it is necessary to invest in the technology field and in the innovation of it, but it is necessary that experts in the market and in the engineering field, scientist too, manage those business more than the government’s employees (politicians and bureaucrats) that don’t know too much about the products. To make the investments in innovation something that really worth it and with no risks it is necessary to introduce new people more prepare to make the task of valuate if one enterprise really deserves to received money from the government. The big and the small companies all need resources from the government but the state also needs them to have a larger profit and make the economy flows better, so it is logic that invest in a well valuated product, well valuated company or science advance is a benefit for both parts the one who create the product and the one who believed in it. But if after the decision of professionals in the technology fields of invest in some product there is still a market failure (that could happen because sometimes we just can´t prevent certain events) there will be the base of a new product, I mean with that failure we will be able to improve that product or know what shouldn’t do for the next time, it is not a complete waste of resources. So in conclusion I think it is good to invest and facilitate resources to the starting companies but first they must be evaluate by experts in the field and economist well prepare to decrease the risks, that way the state will be able to make more profits as improve the economy of the country and also make more advances in technology and innovate more products. Show less Reply Anthony Dernicourt 1 October 2014 The whole problem in this situation is to know what the ideal place of the state is in encouraging innovation. It seems obvious that each state has to encourage innovations in firms. But I don't think that financing too much R&D in firms is the best way to reach this objective. First of all, Innovation is not only about R&D, as…Read moreThe whole problem in this situation is to know what the ideal place of the state is in encouraging innovation. It seems obvious that each state has to encourage innovations in firms. But I don’t think that financing too much R&D in firms is the best way to reach this objective. First of all, Innovation is not only about R&D, as it could be written in some opinions. The 3 main common ideas of Innovations (creativity, R&D and the fact that Innovation is good for a firm) are not correct. Here, the main idea is to finance R&D department, developing scientists education, etc… It consist on seeing Innovations as a technological revolutionary product, or as a patent. The fact is that what should be encouraged is the use of a patent, of an idea. A Belgian firm can for example buy a patent from another country and use it, develop an innovation with it, without having the needs of investing a lot in R&D. That’s a first point of view that has to be mentioned. Moreover, some people said that the state was taking risks. Investing of innovations is always a risk. It’s a fact. But this risk is necessary. But it depends again on the way that the state is seeing the promotion of an innovation. If it’s the technological progress, of course there is an huge risk. If it’s the launch of an innovation on the market, then it’s another kind of risk. What’s the difference ? A lot of firms that have an R&D department don’t necessarily launch it later on the market. A lot of money is then lost (that’s the first kind of risk). But if you use an existing patent, coming from another R&D department that yours (if you have one), then you avoid the first type of risk. You just still have the possibility of a failing introduction on the market. And that’s a solution to avoid too much risk. Then, Mariana Mazzucato sees the investment in innovation from the state as a good investment having both positive consequences : the use of patent for other national cases and the income coming from the profits that the innovation generated. Those are both good points and at this point, investing in R&D is interesting. But then it depends on the state motivations. Does the state wants to have patents at disposition or does the state want to just make the economy progress ? The Economist advice makes the difference between a private venture, knowing when to stop and how to manage an innovation depending on the risks but the state can’t really do that, because the danger is less important for them. And that’s a good point. It depends of the state’s taste of risk. This is like playing in a casino. If it succeed, then there will be more money for everybody. If it fails, the money invested is lost. But the fact is that playing with population’s money in a casino is dangerous. The comparison is maybe too big but it is playing with some risk. And again, it depends on the kind of risk you’re taking (and then by which way the state is encouraging Innovations in firms). In conclusion, states has to take risks, so that their firms stay competitive and that the economy still grows. States have to develop patents, invest in R&D, etc… But they’re other ways for them to invest in Innovation. And it depends on the motivations of the state. Show less Reply Marta de Sousa Lucas Caeiro 28 September 2014 Does the State can do the difference? Since the establishment of the concept of Providence or Social State in twenty century one has been able to recognize three main functions of the State as an active economic agent: income redistribution, provision and consequent insurance of public goods and the correction of market failures. The need to create a social institution…Read moreDoes the State can do the difference? Since the establishment of the concept of Providence or Social State in twenty century one has been able to recognize three main functions of the State as an active economic agent: income redistribution, provision and consequent insurance of public goods and the correction of market failures. The need to create a social institution as the Providence State emerged from the fact that the markets my themselves ( during the Liberal State) – were not able to fulfil all the economical and social requirements in order to promote adequate living conditions. This was particular revealed after the Second World War. On the following comment I will address the question “ What makes a state a successful entrepreneur?” , with special incidence in what concerns innovation and its fields. Firstly, one should notice that innovation, which involves knowledge and information as the main inputs and outputs is defined as a public good, since in terms of consumption it is non- rival ( the consumption of one individual does not undermine the consumption of others) and, in principle it is also non – excludable, that is, it is not easy to exclude someone from benefiting from innovation. At the same time, innovation is recognized to have an appropriability problem, in the sense that entails all the identified market failures – indivisibilities, uncertainty (moral hazard) and externalities. As a consequence, innovation, by itself detains all the requirements to be considered an object of intervention by the State, therefore it should provide the adequate mechanisms – policies and instruments – to minimize the wedge between social and private returns of innovation that are a result of the appropriability problem. Furthermore, the Government as a principal Institution of a democratic State might provide alternative solutions to the mostly common current situation that characterizes the IPR – patents. A patent is seen as possible match between dynamic (incentives) and static efficiency (outcomes and social value) considerations, and it deem to make innovation excludable. Nevertheless causes a market failure based in a monopoly power. The most known case is the pharmaceutical industry with strong repercussions on social welfare – measured by “disability – adjusted life years – DALYs”, specially for the ones who cannot afford to have access to innovation. And one of the basic human rights is the access to healthcare, which a democratic State should ensure. I underline democratic State, because for developing countries (low- income countries) this example is a great issue, aligned with biopiracy, therefore if the State is corrupt, it is not worthy to impede monopoly power. The State should be considered as an intermediate agent, complementing innovators interests – returns from their investment and marginal social return. One typical example of State interventions on this particular sector is subsidizing the innovators, that is reduce the costs of production of Knowledge. It often happens within academic environment. Although, one should not ignore that sometimes what motivates innovators is not financial benefits but the dissemination of their work and effort. According to Mariana Mazzucato, the State, as an intervenient in the process also take risks and might not only support companies in R&D, but also get a return from it. And, as a public good provider, is simultaneously promoting the achievement of a higher welfare in society: “(…)This will ensure that education, health, and transportation can benefit from state investments in innovation(…)”. As referred by Stiglitz, in” Economic Foundations of Intellectual Property Rights”, the support from the State also entails some advantages, namely the huge incentive to disseminate, less risk beard, lower transaction costs and the provision of resources to input and not output, that is the Government gives money for the research unconditional of the results, what explains the lower risk beard. However, within the State the bureaucracy is a great obstacle to conduct the improvement of innovation systems, because there is some political interests when choosing the field of intervention – not always technology or science is included. Stiglitz also argued that an efficient innovation system supposes mixed systems, therefore the State plays a fundamental and decisive role on this purpose. What one has been observed last years in developed regions – US and Europe – is that besides the effort to include investment in innovation – R&D in economic policies to enhance economic growth, it is observable that, due to financial crisis, the States of developed countries are more concerned about equality and social welfare , reduction of poverty and austerity measures ( reduce public debt through taxation) , compromising, undoubtedly the spread of innovation. In conclusion, the State as an economic agent should intervene, in a moderate and sustainable way, in economic and social affairs, yet being Knowledge a global public good, it is also needed a cooperation in a State and within States in order to adopt policies that can guarantee the efficiency of innovations systems. Show less Reply Regina Tukhfatullina 28 September 2014 Sustained economic growth is not possible without the production of new or improved competitive products based on advanced technologies. Therefore, the state seeking to leading positions on the world stage, should develop their scientific and innovative potential. From the given article is clear that it's extremely hard to define part of the state intervention into innovation system. Both views…Read moreSustained economic growth is not possible without the production of new or improved competitive products based on advanced technologies. Therefore, the state seeking to leading positions on the world stage, should develop their scientific and innovative potential. From the given article is clear that it’s extremely hard to define part of the state intervention into innovation system. Both views (The Economist’s and Ms.Mazzucato’s) are based on striking examples like Apple or Silicon Valley. In my opinion, the best solution for promotion of innovations can be only effective public-private partnership. Later i will try to provide some examples of that, but firstly let’s look why too active state intervention could discourage the development of innovation. First of all, often government funding leads to a probability of ignoring the needs of the market by investing in the promotion of regions and sectors where private interest is totally absent. Secondly we can notice that question of developing entrepreneurship and hight technologies cannot be solved by politicians. It’s an issue of entrepreneurs and creative people. The state could be consumer or owner of innovation but it don’t have to intervene into the process of production by itself. Nevertheless state can intervene not only through the finance investments, but also using wide spectrum of other instruments. For example, creating incentives for potencial investors (like tax benefits), creating a supportive environment for fundraising with lower risks, promoting the innovation entrepreneurship, creating a culture of tolerance to failure etc. Thirdly the over investments of state can lead to the lack of motivation to save the project by all possible means. Knowing that in the case of serious problems the big sponsor in the face of state will always support and provide the defence from failure can make enterpreneurs more “lazy” and too confident. Nowadays Sweden is one of the countries where well-balanced public-private partnership causes a high developed innovation system. Sweden has been ranked as the second most innovative country in the world according to the 2013 Global Innovation Index. The key to this success is a presence of an extensive network of organisations and companies, in the public and private sectors working with academic bodies. For example some of them ; The Swedish Foundation for Strategic Research (SSF) is an independent organisation that supports research in the natural sciences, engineering and medicine. The Swedish Governmental Agency for Innovation Systems (Vinnova) focuses on innovations linked to research and development; particularly information and communication technology (ICT), biotechnology, working life, materials, transportation and bringing products to production. Other point is the investments in R&D. A contributing factor to Sweden’s strong position is that, relative to GDP, industry invests a great deal in R&D. The majority of R&D performed outside of industry is carried out by universities, as a consequence of which Swedish industrial research institutes as well as the government authorities represent only a minor part of the total R&D investment.  If we look for the structure of public R&D investments we can see that 56% of them is a direct government funding to universities and strategic research areas while other 44% are R&D funding from the Swedish Research Council, FAS, Formas, VINNOVA, the Swedish Energy Agency and the Swedish National Space Board.  Of course the Sweden’s way of promoting innovation system cannot be applied for all countries but one should realize that innovation system starting with needed for success conditions can lead to the economic result in the form of innovation, labour productivity growth and wealth. Therefore the aim of state is to create this conditions. As a sort of conclusion i quote Ben Verwaayen, CEO Alcatel-Lucent : The reality is that no organization – no government, company, research institution or nongovernmental organization – by itself can solve our biggest problems… They must partner. They must collaborate. … It means sharing resources and responsibilities, depending on others to do their part in the collaborative action, and embracing these interdependencies. References used: 1.The Global Innovation Index. (2014) Data analysis. https://www.globalinnovationindex.org/content.aspx?page=data-analysis. 2.Innovation in Sweden. https://sweden.se/business/innovation-in-sweden/ 3.VINNOVA – Sweden’s Innovation Agency http://www.vinnova.se/en/About-VINNOVA/VINNOVA-and-the-outside-world/Swedens-innovation-system/ 4. The Global Innovation Index 2012. Foreword: Embracing New Types of Partnerships to Drive Open Innovation By Ben Verwaayen, Chief Executive Officer, Alcatel-Lucent. http://www.wipo.int/edocs/pubdocs/en/economics/gii/gii_2012.pdf Show less Reply Yick Tang 28 September 2014 When we talk about government intervention, we have to mention another term that is market regulation. In the modern development of market economy, the market is called “the invisible hand” and “the visible hand” is government. Market regulation and government intervention are closely intertwined. Each of them are essential because effectiveness of market system turn into complete only under strict…Read moreWhen we talk about government intervention, we have to mention another term that is market regulation. In the modern development of market economy, the market is called “the invisible hand” and “the visible hand” is government. Market regulation and government intervention are closely intertwined. Each of them are essential because effectiveness of market system turn into complete only under strict conditions. However, government intervention is not perfect. It would be perfect only in “ideal government. That means there are inherent flaws and failures in market economies but the process of market operation will inevitably be in market failure. Private sector has been unable to resolve configuration resources problems completely. At that time, a government have to intervene to conduct a series of macro-control for which improving the efficiency of resource allocation. In my opinion, some innovations have to be leaded by governments because some products that even if everybody want to purchase or not, they inalienably share profit to whole community such as national defense, road, streetlight, etc. Public goods have two characteristic which are non-exclusiveness of consumption and noncompetitive. That is the reason why some products need governments to provide. So, what is the functions of innovation? It always perform on something like a public good but completely exclusiveness. For instance, I think the internet is a good example. If the internet was controlled by governments, the surfing speed would be the same as ten year. If private enterprises were in charge of the internet, we wouldn’t imagine what the world become. As we all know, the internet research cost thousand millions of capital. It needs a big investor that is a government. In this process, enterprises get a certain of development and governments get new technologies. So, governments don’t need to cost capital and invest again in some familiar industry. However, the technologies are non-exclusive. That will hurt innovators’ activeness but for whole society, people are very happy about technologies sharing. In conclusion, government intervention and innovation need to be in balance. That means innovators’ profit rate is the same as societies. Show less Reply Christopher Maier 27 September 2014 After reading the article “How entrepreneurial should the state be?” and analyzing the opinions given by The Economist, as well as by Ms. Mazzucato, I think that the right answer lies somewhere in the middle of the spectrum, rather than on its edges. First of all, I would agree with the Economist that in general, the state is not the best…Read moreAfter reading the article “How entrepreneurial should the state be?” and analyzing the opinions given by The Economist, as well as by Ms. Mazzucato, I think that the right answer lies somewhere in the middle of the spectrum, rather than on its edges. First of all, I would agree with the Economist that in general, the state is not the best entrepreneur and decisions should be left to experts, rather than to politicians. In fact, bureaucracy is a great problem in many countries, which poses a barrier to innovation and thus cripples economic growth, and eventually the well being of the population. While it is true, that the state has to fulfill supportive tasks in order to promote innovation (e.g. providing necessary input factors, such as education, infrastructure, and a legal framework), the translation of innovative ideas into projects should be left to the private sector. In fact, since on average only 2% of start-ups survive, having the state involved, would increase the risk of keeping unsuccessful ideas unnecessarily alive, due to political or ideological reasons. The outcome would be an inefficient use of taxpayers’ money. Therefore, in my opinion, the state should concentrate on creating an appropriate environment, which attracts innovative companies, as well as investors, and thus creates an innovation cluster. For instance, the US provided the right inputs to allow for the creation of the Silicon Valley, which attracts many entrepreneurs, as well as investors, which ultimately triggers innovation and economic growth. This will give the US a huge advantage, since IT technologies become more and more important, and other countries failed to set up comparable innovation hubs. However, I am convinced that there are some cases which do require a more proactive state involvement. In fact, with private-public-partnerships, the state helps funding innovative projects, whereas the operative work is carried out by private companies. This provides sufficient funds for projects that would normally not receive enough funding from the private sector, and at the same time avoids the problem of wasting tax payers’ money. This approach should be applied with regard to crucial technologies, which are expected to be highly important for the future. In addition, some business areas like transportation and energy often involve high sunk costs, which pose an entry barrier for entrepreneurs and thus require some state involvement in order to promote innovation. In conclusion, in my opinion, a state is a successful entrepreneur, if it is able to provide the necessary input required for innovation (e.g. education and legal system), while letting the private sector take care of translating innovation into business ideas. However, in order to be a successful entrepreneur, the state also has to identify crucial business areas, where the market does not provide sufficient promotion for innovation. In this case, a more proactive approach should be used. Show less Reply Kasper Vagle 25 September 2014 The best of both worlds? Its inspiring how an article can make you change your mind several times throughout your first read. From the beginning the point of view given by The Economist seemed to be reasonable, but then later Ms. Mazzucato presents some highly valid points. From my point of view there are pros and cons for both “extremes”,…Read moreThe best of both worlds? Its inspiring how an article can make you change your mind several times throughout your first read. From the beginning the point of view given by The Economist seemed to be reasonable, but then later Ms. Mazzucato presents some highly valid points. From my point of view there are pros and cons for both “extremes”, some which are presented in the article above. Having this in mind I would take a stand in the middle. I strongly agree that the state should have as their number one priority, good education and a well functioning economy. But at the same time I believe that the government can contribute as an active entrepreneur. Good education and a dynamic and transparent economy is a no brainer, its vital for a country that’s wants to develop in a healthy way. But how much the state should intervene when it comes to funding innovations is not such an easy question (as the article above highlights). I believe the state can solve this issue by focusing on two different aspects at the same time. First, create easy paths for start-ups and R&D focused companies, while at the same time funding specific fields that are of a more national or global interest. If you mange to do this, I believe that you would be able to help the revolutionary brains in whatever field of interest they have, while at the same time making sure that innovation also focuses on issues that are important for the state itself. Show less Reply Mister_Master 4 April 2014 As economists we must be able to recognize the limits of knowledge and foresight. No more shall the scientistic hubris cloud our judgement. Ideas and innovations do not fare on their own, but rather as a process of interaction with a world that evaluates their use: incidentally, the outcome of this judgment process tends to be unpredictable. It is only…Read moreAs economists we must be able to recognize the limits of knowledge and foresight. No more shall the scientistic hubris cloud our judgement. Ideas and innovations do not fare on their own, but rather as a process of interaction with a world that evaluates their use: incidentally, the outcome of this judgment process tends to be unpredictable. It is only by hindsight that the internet, say, seems to have been a good idea to connect people in chat rooms and write comments in blogs, such as I am doing now. Successful innovations are the result of a perceived need, usually born in the mind of an entrepreneur, and of a relentless process of trial and error that weeds out the many losers. Neither does the state nor the entrepreneur know what the outcome will be, and no one-policy fits all measure can be adopted. Some innovations are so costly that they can only come about by state intervention, usually with a projected end completely different from what was envisioned and after an embarrassingly long list of failures. Once again, the outcome is uncertain and no policy made in an uncertain world can be successful. This is the gist of some of the Austrians doctrine, which we would be ill advised to forget. It can be very dangerous to tamper with a complex system that we don´t (and can´t) fully know. I believe this hindsight bias, as Kahneman and Nassim Taleb brilliantly put it, is responsible for many policy blunders. It´s not economists´ fault: there was no way they could have known better. Our object of study is simply too complicated to perform analysis of that kind, and it is moronic to attribute to the state that kind of foresight as Ms Mazzucato does, anymore than it is pointless to attribute perfect foresight to someone who happens to win the state lottery. This is my departure point. The solution to this is: do nothing. DO NOT interfere with the functioning of the system. Innovations like the Internet will crop up again and again as a perceived need is replaced by effective demand (possibly, and in fact quite likely, for a different objective than the one that was envisioned) and the idea takes on a life of its own as it enters the turbulence of real life processes and needs, which are inescrutable, ever changing and complex. Such is the case of drones, for example, that started out as a military technology and are now responding to demand for other uses. Make no mistake: there was no committee sitting down one fine afternoon discussing whether drones for non-military applications were worth funding. The same for internet. This takes me back to my first sentence: let us lose the hubris and allow ourselves to be surprised. Then let us answer to the surprises with a short-term logic, allowing failures and the tinkering of minds to work. Show less Reply Paul Belleflamme 18 April 2014 Thanks for sharing your opinion! Bertrand RIbonnet 16 October 2013 To some extent I believe that the state should massively invest in R&D on a “pro bono” basis. I will first explain my view and then turn to one limit of this policy. Risk is a huge barrier against innovation. A lot of potential entrepreneur just don’t dare to invest in their ideas. This is particularly important if activities including very…Read moreTo some extent I believe that the state should massively invest in R&D on a “pro bono” basis. I will first explain my view and then turn to one limit of this policy. Risk is a huge barrier against innovation. A lot of potential entrepreneur just don’t dare to invest in their ideas. This is particularly important if activities including very high fixed costs are concerned. We isolate here a second source of inefficiency, the lack of money. A potential solution to this problem could be massive investments from the government in order to launch their own researches with their own structure. My argument is based on the fact that innovation is often cumulative. If the government takes the majority of the risk by starting researches from scrap, there is a greater incentive for other entrepreneurs to build afterward on these researches, with a significant reduction of their own risk. An intervention of the public sector could in my opinion foster innovation. This view goes against the one proposed in the article “The third industrial revolution” (The Economist) stating that the government should leave innovation to the revolutionaries. But the article only takes into account the example of people innovating from their garage. What about activities involving high investments? Secondly, we must address the problem of IP protection. As the goal of the government is only to foster innovation, I would say that the protection offered to them should be as limited as possible. Indeed this protection should only enable the authority to recover its initial investment (minimal reduction of social welfare) so that the innovation falls rapidly in the public domain and can thus be exploited by other (the final goal of this policy). The cumulative feature of innovation calls for a patent protection on a short period. Finally, the limit highlighted by Ms Mazzucato seems relevant. States just don’t manage their money in the same way as entrepreneur. To avoid this problem the authority should perhaps try to hire for the leading of their R&D programme people with an entrepreneurship state of mind but that don’t want to invest their own money for a reason or another. The aim would be on the one hand to set these programmes as independent as possible of the short-term political views and on the other hand to better manage risk. Show less Reply Paul Belleflamme 3 October 2013 You can read a summary of the comments posted so far at http://www.ipdigit.eu/?attachment_id=2797. This summary has been kindly prepared by Eva-Maria Scholz. Reply Shashank Goel 2 October 2013 For me two things stand out from the above article. One how the author defines public goods and second the way Ms Mazzucato advocates the state deserving a higher return on its investment In my opinion, it is unquestionable that the state should be actively taking part in the development of new technologies and breakthroughs for goods that benefit the whole…Read moreFor me two things stand out from the above article. One how the author defines public goods and second the way Ms Mazzucato advocates the state deserving a higher return on its investment In my opinion, it is unquestionable that the state should be actively taking part in the development of new technologies and breakthroughs for goods that benefit the whole state and its residents. But when it comes to innovations that are revolutionary in their own sense but do not promise any benefit for the larger section of society, the state should take a backseat and leave the private players to take the risks and reap the benefits. For eg. an innovation like the iPhone does not deserve state funding but an innovation like a new communication technology should be actively pursued and supported by the state. Secondly, talking about the returns on investment for the state, I believe the state is nothing but the people and the biggest return the people can get out of their investments is the benefits that the whole society stands to enjoy as a result of the new innovation. In case of public goods, the state should not think of direct monetary returns but indirect returns which will result from the increased standard of living of its people. Show less Reply Christophe Speth 2 October 2013 While it is generally admitted that state intervention may take place to promote basic research, it is less obvious why the state should invest a considerable amount of money in applied research. To defend the claim that the state should not invest in applied research, I am comparing basic and applied research with respect to indivisibility, uncertainty and externalities. I…Read moreWhile it is generally admitted that state intervention may take place to promote basic research, it is less obvious why the state should invest a considerable amount of money in applied research. To defend the claim that the state should not invest in applied research, I am comparing basic and applied research with respect to indivisibility, uncertainty and externalities. I am then building on other considerations to raise potential issues related to state intervention. Conducting basic research implies high fixed costs that private enterprises generally cannot afford. Applied research is building on basic research. While fixed costs can also be huge in the latter case, it is also possible to conduct applied research for lower fixed-costs. The problem of indivisibility is therefore higher in the case of basic research. Basic and applied research are equally prone to technical uncertainty. Either it works, or it does not. Applied research being closer to the end consumer, one has a better understanding of the potential chance of commercial success once this step is reached. The problem of market uncertainty therefore seems to be higher in the case of basic research. Clearly, basic research can be used for many purposes. That is, someone that does basic research to market a product is expected to internalize only a small part of the benefits related to such an invention. Conversely, applied research can only be used for a small number of purposes, so that someone that does applied research is likely to internalize a larger part of the benefits related to his innovation. The problem of externalities therefore seems to be higher in the case of basic research. When analyzing the characteristics of basic research, one therefore reaches the conclusion that the problems of indivisibility, uncertainty and externalities are limited. Put differently, the advantages of introducing state intervention in applied research are not considerable, if at all. Let’s now turn to the drawbacks related to state intervention in promoting innovation. There are several of those. I decided to focus on one that I thought particularly relevant: asymmetric information. It is reasonable to make the assumption that experts are better informed about the chance of success of a project than politicians. Even with the help of consulting services, politicians are getting the information, but they have to catch the next train so to say (ie. it typically takes months to write a reliable report to inform non-initiated people). It is also reasonable to make the assumption that the NPV of a dollar is decreasing with time. Therefore, if the quality of a decision is held constant, it is better to take it as soon as possible. From those two assumptions, one automatically derives the conclusion that, ceteris paribus, it is more efficient for the state not to intervene in promoting innovation. After weighing the advantages and the drawbacks of state intervention to promote applied research, it seems to me that a decentralized decision-making process is more likely to conduct to a good allocation of resources. Show less Reply Cibuabua Yves 2 October 2013 My point of view is that the equilibrium is the thin between a lot of interventionism of the government and a totally free market. A country where there is only uneducated people who can not exist because of the competition between countries. We must find in which sector we get a comparative advantage for promoting exchanges with the…Read moreMy point of view is that the equilibrium is the thin between a lot of interventionism of the government and a totally free market. A country where there is only uneducated people who can not exist because of the competition between countries. We must find in which sector we get a comparative advantage for promoting exchanges with the rest of the world. But for all this computation we need educated people, so we need the government to invest in schooling. e.g. In my country (DRCongo) education is not the priority of the government and thus, the development of a country depends on the education level of the future generation but here professors are underpaid and their motivation to teach students in a good way is nearly inexistent. This is not a kind of “deserve” system. Corruption is also a negative externality that we need to fight against. In this system investors are demotived because the money you can invest in R&D is split between bribes and real investment. The state is also there to guarantee and protect the right of ownership. But in some others countries where there is free market, with a majority of educated people the state intervention is not very needed. The market foundations must be then very well established to support the prosperity. Change the mind to help the country growth. And to conclude, the equilibrium depends on the kind of country, the mind of his population and the kind of sector. (P.S. : sorry for my English) Show less Reply Henrotte Philippe 2 October 2013 I think it's very important for government to give strong incentive for innovation. If we take the example of space exploration, wa can consider that it really began during the cold war, at the time there was absolutely no financial incentive to explore the space. Space "projects" were intirely financed by states (or group of states like E.U). At the…Read moreI think it’s very important for government to give strong incentive for innovation. If we take the example of space exploration, wa can consider that it really began during the cold war, at the time there was absolutely no financial incentive to explore the space. Space “projects” were intirely financed by states (or group of states like E.U). At the time, it thoses projects were launch for political (and military) reasons. Thousands of Billions were spend on space reaserch, and it’s still going today. The difference is that today, private compagnies invest their own money on space reasearch. Differents sectrors are active on the space market (or will be soon) : tourism, mining (they are going to capture asteroids to axtract the minerals), reality tv-show, satelite launch (Space X),… It’s important to mention that none of thoses private compagny could have existed withouth the previous reaserch made by the government. It’s was way to expensive and way to risky at the time for private compagnies, and thanks to governments intervention an entirely new market is available for private compagnies. I think it’s very important that governments continues to invest in reaserch for the sake of the umanity. Of course the problems descibed by The Economist reamain. Therfore I think that some policies must be established in order to avoid any abuses from politics. Show less Reply Lefebvre Jean-Christophe 2 October 2013 Innovation is nowadays a critical issue for firms. There is no future without it, even more in the field of technology. Therefore, it is important for governments to support its industries and economy. However I don’t totally agree with Ms Mazzucato who encourages more than financial participation. In my opinion, states can’t take this risk today. This would mean playing…Read moreInnovation is nowadays a critical issue for firms. There is no future without it, even more in the field of technology. Therefore, it is important for governments to support its industries and economy. However I don’t totally agree with Ms Mazzucato who encourages more than financial participation. In my opinion, states can’t take this risk today. This would mean playing with the money of the people. Choose budget destination takes already enough time while there are other more important subjects they should manage like education, unemployment or environment. For this reason, I think states should be big brothers for start-ups and support them, but not spend time to lead them by being proactive and taking risks. Financial support for strong and safe beginning companies would create jobs and improve competition. In my point of view the biggest problem is not really how much the state should invest in innovation (time or money). The critical point is the time and the knowledge of states and politicians. Innovation takes time and we usually see that politicians in charge don’t have enough of it because of their mandate. When they are elected, they take time to establish the budget and to get use to their new position. At the end of term, they also take time to prepare the next elections. In the meanwhile they have to manage with bigger crisis than ever before. That doesn’t let them a lot of time to really think about innovation. Moreover, the next authority in charge can totally disagree with the previous decisions and decide to cut off financial helps, which would kill the concerned start-up. As such, GMO cultivation is a long-term innovation that takes much more time than one mandate. This is probably why this innovation is not still a reality. The knowledge of politicians is also a problem. Because of the democracy, any person can be in charge of investment in innovations. Therefore, they can be easily manipulated to invest on a project or other. Thus, the state could invest on a too risky project, which can also have bad consequences on a long-term basis. A good example is cigarettes. During years, governments enhanced tobacco’s industry but nowadays they back off and argue the bad effect on health. With all, I think that the role of governments must not be leading innovations but empowering start-ups to invest in innovation’s research with, among others, tax reductions. One question remains: How effectively choose which start-up to empower? Show less Reply Tiago Fins Joaquim 2 October 2013 Mariana Mazzucato points out the importance of military expenditure in creating new technologies. She mentioned the GPS as a prime example of innovation brought by the military. Digging a little deeper, the GPS requires satellites orbiting Earth and this can only be achieved with rockets. A very prominent name is the field of rocket science is Wernher von Braun, the…Read moreMariana Mazzucato points out the importance of military expenditure in creating new technologies. She mentioned the GPS as a prime example of innovation brought by the military. Digging a little deeper, the GPS requires satellites orbiting Earth and this can only be achieved with rockets. A very prominent name is the field of rocket science is Wernher von Braun, the father of rocket science who worked for the Nazi regime and went on to work for NASA after WWII. Would von Braun have been able to concretize his ideas without government/military funds? The answer is obviously no. Going even further, the GPS owes its success to the accuracy at which it can calculate the position objects on the ground. This level of accuracy (a few meters for most commercial GPS systems) is only possible with Albert Einstein’s theory of relativity . He developed his ideas while working for a publicly funded university in Switzerland. He had no other motivation than trying to understand how nature works. From a commercial point of view however, his ideas were only marketable many decades later. But the point is this – every ground breaking innovation has its roots somewhere in government funds. Would a private company have paid Einstein to let him pursue his passion of figuring out the laws of nature? It is doubtful. One recent scientific feat with promising applications, is a solid material that is lighter than air. It was developed by Chinese scientists who are based in a public Chinese university . From , we read “Chao and his team published their work in February in the journal Advanced Materials”. So it is now a public good. What kind of return will the Chinese government get from this? Probably not much. However, one must also consider that every scientific discovery that led to the development of this new material, did not originate solely from China. So, it’s obvious that governments do the necessary things when it comes to do the ground work. Should it invest directly into firms like it did with Apple? The answer could be that the decisions where to invest might be taken based on political reasons. In the US, campaign donations are vital for an election campaign. Companies can almost donate limitless money to the party or candidate that they think should win. In return, the winner of the election will pay back the donors in some way or the other. That can lead to decisions based on political grounds rather than reason. Apple received $500,000 and it turns out that they performed quite well in the following decades (although it almost went bankrupt in the 90’s). Other companies such as Microsoft did just as well and it did not receive money directly from the government. Recently, the government guaranteed loans for a company called Solyndra. Solyndra went bankrupt in 2011 and it cost the government $500 million in tax payer money. Suspicion that politics might have played a role in giving those loan guarantees was also raised . Of course, this is not the norm but the point is that bad outcomes do happen. To conclude, we should distinguish two things – creating an idea and monetizing that idea. Governments should fund basic research and foster education while investments are better left in the hands of the market and private sector. References :  http://physicscentral.com/explore/writers/will.cfm  http://www.popsci.com/science/article/2013-03/new-worlds-lightest-material-super-absorbent-too  http://abcnews.go.com/Blotter/solyndra-collapse-waste-half-billion-obama-gop-critics/story?id=14424323 Show less Reply Yasuhiro Minami 2 October 2013 I think that the government should not invest entrepreneurs or intervene the market. Because I have some reasons. First, I think the role of government is keeping the balance between “freedom” and “regulation”. You know, if the government made a commitment to one side of them, the society would become corrupt. So, the government keep it using the law and…Read moreI think that the government should not invest entrepreneurs or intervene the market. Because I have some reasons. First, I think the role of government is keeping the balance between “freedom” and “regulation”. You know, if the government made a commitment to one side of them, the society would become corrupt. So, the government keep it using the law and policy. It is true that the innovation makes countries richer as Ms Mazzucato said. But it is just conclusion that companies in a country make efforts and find some innovation, not the government. If the government invested entrepreneurs or intervened the market, the governments would break the balance by yourself, I think. So, the governments just make the environment for entrepreneurs to begin or make his plan or business using its policy. For example, the government makes some chance where entrepreneurs can find their partner, companies. Second, I wonder whether the government use money to entrepreneur or to the market without waste if the government invest entrepreneur or intervene the market. If the government use money for its purpose, it should make some inspections. So, if the government invest entrepreneur or intervene the market, it needs some inspections, and the inspections should be strict ones. This is because the governments’ money is composed mainly of taxes, so the governments have the big responsibility for its people and for the taxes. The governments have to use the money to make their life better. So, if the government invest entrepreneur or intervene the market, the reason for it should be making the people’s life better. But when doing so, it is difficult to decide that the governments support who and how. And the risk is very big if the invest is failed. It is true that we need some risks to make successes. But I think many people in a country cannot accept such failure and such risk that are responsible for specific groups. The government should use the money as they accept. For these reasons, I think the government should not invest entrepreneurs or intervene the market. The governments should just make some environment for making innovation. Show less Reply Tatiana Nsiangani 2 October 2013 After examining these different points of view, very interesting by the way, my opinion on the topic is rather between both. Certainly businesses drive innovation, but as far as they depend on the State as they are part of the economy of a country at large, it would be advisable that government intervenes by investing in basic knowledge…Read moreAfter examining these different points of view, very interesting by the way, my opinion on the topic is rather between both. Certainly businesses drive innovation, but as far as they depend on the State as they are part of the economy of a country at large, it would be advisable that government intervenes by investing in basic knowledge , generating sources of new ideas;moreover, government must ensure that the conditions are conducive to business innovation, the various regulations are supportive and encourage innovation but also competition. The regulatory system in place should also facilitate the cooperation and coordination of different potential actors of innovation, ie companies, universities, research institutes and the State itself. If we consider a kind of set gathering actor+innovation,seen as the central element, the state intervention should be thus indirect, in that it does not play on the innovation itself, but on the environment influencing it. Sources: Rapport aux Ministres sur la Stratégie de l’OCDE pour l’innovation http://www.oecd.org/fr/sti/45329799.pdf L’innovation: Rôle de l’Etat, R.Barre,Economie politique,tome 1,Coll, thémis http://www.klubprepa.fr/Site/Document/ChargementDocument.aspx?IdDocument=5052 Show less Reply Lorant Dourte Sarah 2 October 2013 The opinions of The Economist and Mrs. Mazzucato are quite opposite to each other. We could consider that the middle between the two positions would be more relevant but I don’t agree. My view is that each of these opinions helps to apprehend different contexts that need thus different approaches. Indeed, the world is composed with very different countries which…Read moreThe opinions of The Economist and Mrs. Mazzucato are quite opposite to each other. We could consider that the middle between the two positions would be more relevant but I don’t agree. My view is that each of these opinions helps to apprehend different contexts that need thus different approaches. Indeed, the world is composed with very different countries which economies work very diversely and wich investors have different culture. To illustrate that point, I will use a sentence of Mrs. Mazzucato who says that the states should receive more direct return on their investments. Consider two countries. The first one has a high taxation rate and the second has a low one. In the first country, when the state gives a subsidy for an innovation to a firm, he will receive an indirect return on investment much higher than the second one via the taxes on the profit generated by the investment. It seems obvious that the second state deserve a higher direct return on their investments than the first state. What’s important is not to know who‘s is right, but to ask ourselves which vision fits better to a particular context. The Economist and Ms Mazzucato also are opposed on the role the state should play: the economist says he has to do the minimum (education and so on) but Ms Mazzucato thinks that his role must be more important because it could redistribute more fairly. Here I think Ms Mazzucato is too much extreme. The Public Economics shows us that the governments are not perfect and that they don’t always consider the social welfare. But as Ms Mazzucato, the European countries that made less public investments are those who suffer more from the crisis so it means that the role of the state in investment should be more important that The Economist says. If I agree that the state should play a role in the innovation, it is important to ask how the state should play a role. Is it better to subsidy, regulate with IP protection, and so on. We spoke before about the subsidization but what about the IP protection. Here too the opinions are very different among the economists. One opinion is J. Stiglitz who is against the IP protection. He thinks that it reduces the total surplus generated by the innovation and that we don’t really need it to promote innovation ( Stiglitz, J. (2008). Economic foundations of intellectual property rights, Duke Law Journal 57(6), 1693-1724.). In their book, Lévêque and Ménière expose a different argumentation. They show the market imperfections in the intellectual goods market(s) to prove that it needs a public intervention (Lévêque, F. and Ménière, Y. (2004). The Economics of Patents and Copyrights. Berkley Electronic Press.). Show less Reply De Bont Eloïse 2 October 2013 I think that the « The Economist »'s position and Ms Mazzucato's position are both too extreme. In fact, it would be possible to satisfy the needs of everyone and to have a more balanced and fairer opinion. First of all, I believe that the mission of the State is not exclusively to “stick to the basics”. Obviously, this is…Read moreI think that the « The Economist »’s position and Ms Mazzucato’s position are both too extreme. In fact, it would be possible to satisfy the needs of everyone and to have a more balanced and fairer opinion. First of all, I believe that the mission of the State is not exclusively to “stick to the basics”. Obviously, this is one of its mission and it is not the only one. Of course, government has to ensure education and protection but government also has to ensure the growth of its country. However, I’m convinced that Mariana Mazzucato’s view is too extremist. In fact, she doesn’t only want that state helps their companies but she also wants that the state takes some risk. On this point, I absolutely disagree. In fact, the mission of the state is not to take risk. During this crisis’ period, government musts reassure the inhabitants of its country and recover their trust. During this period, a lot of countries couldn’t be able to survive if they invest money in an innovation and that this innovation proves to be a failure. So government musts be careful and judge every propositions before accepting one. As far as I’m concerned, I believe that government has a role to play in the economy. And if it wants to be successful, it musts respect some rules. Firstly, its intervention has to organize relations between the different economic actors in order that theses relations are fair and equitable and that they advantage everyone. Secondly, the process of the innovation is quite complex. In fact, it involves a lot of different partakers who come from multiple sectors. New successful products are often the result of close collaboration between these sectors. So I believe that government should try to identify the barriers of the collaboration and should try to destroy or reduce these. Finally, government should have an own and appropriate system according to its current economic situation. Show less Reply Guillaume d'Oreye 2 October 2013 According to the European Union R&D and Innovation are the sectors where countries and companies have to invest if we (Europe) want to stay competitive and try to keep our current level of life. So it is true that we need innovation and that countries like Belgium must invest and stimulate companies in this way. Thus, my opinion is that a…Read moreAccording to the European Union R&D and Innovation are the sectors where countries and companies have to invest if we (Europe) want to stay competitive and try to keep our current level of life. So it is true that we need innovation and that countries like Belgium must invest and stimulate companies in this way. Thus, my opinion is that a state should be able to provide money to companies asking for it if they have a concrete innovating project. I don’t want to be linked to any side but I think state should not interfere with the economy but should help it if needed. From my point of view, in some cases, if the state wants to be interventionist it should be fully done. Providing money is good for companies but why couldn’t the state receive shares or any retribution in compensation if the project works? Maybe receiving shares is too interventionist but retribution would be quite fair. As it is not the role of the state to interfere with the economy I think it’s normal that when it provides money it gets a return, even small, other than being happy to see a flourishing company. There is no free money in the business world and a state should not be conned so easily. I think a state should act as a company which mission would be to insure the welfare of its people. This company should be independant and should not have contacts with other companies if it’s not about business or mission related. So should the state take risk and invest in high-tech innovation? Yes if it gets any kind of retribution and if the other company asked for funds. A State should be like the last solution for a company in need of funds. So there i partially agree with Ms Mazzucato. But the real problem for me is not to know what are the limits which a state can intervene in but the fact that those limits should be the same for each country in the world. And as Europe wants to be the good guy many companies within it suffer unfair competition. Show less Reply Mariam Ammour 2 October 2013 I think that we have to move between the Economist’s theory and Ms. Mazzucato’s theory to find an equilibrium; no interventionism and too much interventionism may be an non-appropriate strategy. I think also that we have to analyze the economic situation of each country ( and the firm’s sector), a model which works in a country (sector) can fail…Read moreI think that we have to move between the Economist’s theory and Ms. Mazzucato’s theory to find an equilibrium; no interventionism and too much interventionism may be an non-appropriate strategy. I think also that we have to analyze the economic situation of each country ( and the firm’s sector), a model which works in a country (sector) can fail in another one. There are always limits to partially adopt what works in other nations, regardless of the consistency of the resulting set. For example, in Germany the cooperation works very well (interventionism) while in England, the British system of innovation is based on a free market economy where the state is kept to the bare minimum and it is run well too (non- interventionism). I agree with Ms. Mazzucato on the fact that governments invest heavily in innovation projects of companies but although the idea of giving them a yield equivalent to their involvement makes sense, I don’t think it is normal because governments are here to encourage and support innovation and not to draw any return on an investment knowing that it does not bear risks primarily as does the company itself. If government really wants to invest in education, it can do it directly and not going through a project with risks. The role of government is to support firms which need funds and deserve it. Government should support research mainly because it takes time, it’s expensive and presents a high risk, this support boosts the knowledge economy. The government will need to create an environment propitious to innovations in ensuring the stability of the macroeconomic framework, the capital market and the establishment of regulatory mechanisms on innovation for protection but should also clamp down on institutional and organizational rigidity that may stifle innovation. Finally, government should be concerned with improving the innovation system by reducing barriers to cooperation between companies and universities or public research institutions, for example. These missions allow the state to deal with the three sources of market failure related in the article. That’s why government plays a central role in the innovation system and cannot be reduce to the minimal interaction because of its position. At the end, I agree with a “The Economist” ’s point of view; it’s true that investors know say stop to invest when they reckon that there is no more interest to inject money but government doesn’t. It’s the taxpayer’s money that government use to finance firm’s R&D so that’s why investors take more care than government. In my opinion, if the interest is public, allow government to be more active and in the others cases follow the decisions of experts. To conclude, the role of government is to encourage research & innovation, they cannot adopt the role of investor with aim to generate more return. They have to promote education, health, … but not relying on speculative income. Prevent government to act in the system is not the solution for ensuring a economic growth for that we have to find the right balance. Show less Reply Taelemans Charles-Edouard 1 October 2013 In my point of view if a state wants to be a succesful entrepreneur , it must follow the ideas of Ms Mazzucato more than the ideas of The economist . We live in a society where all the companies are in a constant competition between themselves and if they want to be profitable here , they have to innovate. Like Ms…Read moreIn my point of view if a state wants to be a succesful entrepreneur , it must follow the ideas of Ms Mazzucato more than the ideas of The economist . We live in a society where all the companies are in a constant competition between themselves and if they want to be profitable here , they have to innovate. Like Ms mazzucato said the state has to play a role in the innovation of the industry but not only with subsidies. It’s true that subsidies are a big plus for all the investments a firm may have and could be enough for the well-being of the firm like it was the case with apple, but i want to go further than Ms mazzucato and add that a state can do more for innovation if it really wants to! the patent(already used ) is a good example, if you protect your technology from the others it can be possible to make a huge return on investment. The government can also prevent bankruptcy by reducing taxes in the early years of a firm which are the riskier. Indeed , we know that a lot of promising companies can’t afford the taxes on their beginning, if the state can increase the number of companies in the country he will encourage the competion between them and the price war will be more effective. Thus,if a company doesn’t want to reduce it’s prices and survive,it has to innovate (patent , new technology) in conclusion i approve the point of view of Ms mazzucato but i just want to go further saying that state can intervene in the market but subsidies are not the only way of doing that. The important thing to reach is increasing the number of firms in the market so that the competion will increase together with innovation ! Show less Reply Francesco Battino 1 October 2013 The point of Mrs Mazzucato is surely interesting, and I think that it's not wrong to say that the state is a central force in the innovation of new technology in some field. At the same time, the position offered by “The Economist” is based on solid argument and point out the problem of leaving too much power to the…Read moreThe point of Mrs Mazzucato is surely interesting, and I think that it’s not wrong to say that the state is a central force in the innovation of new technology in some field. At the same time, the position offered by “The Economist” is based on solid argument and point out the problem of leaving too much power to the state (and bureaucrats) in the innovation field. The role which is played by the government in the technology production and development is sure central, so we can surely say that the state is an entrepreneur. The problem is know how it can become a successful one. In my honestly opinion, the state (like an enterprise do with different business units), have to act differently in different field of research, fitting the feature of the market and acting accordingly. It’s true that knowledge and innovation are all public goods, but not all the knowledge and the innovation can be considered equals or the same. The state must, also, take in account eventual negative externalities from difficult market condition. For this reason, I think that both position are true, but they can only be used to solve part of the problem, without fully solving it in practice. I think that every field of research need a different balance of power and influence between public and private, and so different type of measures must be taken to assure the highest productivity of innovation. I think that is possible to fine three macro classes of cases, accordingly to the subsides interest of the field of research. In some field the state will follow the way traced by Mrs Mazzucato, becoming first hand innovator and entrepreneur, “taking on risks, promoting the spread of existing technologies, and seeking potentially lucrative scientific breakthroughs”, without excluding the presence of private company in support to the state intervention. For example the field of military technologies, or the education and the basic research and all the field with primary public interest . In other field, the state have to follow a mediate way between the position indicated by Mrs Mazzucato and the one chosen by The Economist, acting with force and supervising the market with law and economical intervention, with the help of expert. For example in field of research with strong public interest like pharmaceutical or energy innovation and all field with strong public interest. In other field again, the state have to follow the way indicated by The Economist and leave all the power to the private, only “make scientists compete for research grants, and businesses compete for start-up funds—and leave the decisions to experts, rather than politicians or bureaucrats” in all the other fields, like advanced pharmaceutical research or advanced research that is better left to extremely specialized company or researcher and private innovation, just fixing the market failure. On the other hand, in period of negative market condition, the state have to invest more in R&D, because private will have less money to invest and so it will need to compensate the reduction of contribution from the private sector to guarantee a “good” input in the R&D, or, for example, giving founding to small or medium R&D which can gave birth to new great industries and boosting the stand alone innovations. In conclusion, I think that the state have to be a cleavage plan, moving accordingly with the dynamic ambient, acting differently in base of the economical general situation, accordingly to the type of interest which subsides the field of research and to the dimension and opportunities of the entities who form the market of innovation, in order to maximize the innovation output (or, at least, try to do it). Show less Reply Suzanne Beguin 1 October 2013 The main point of the problem is the way the governement can generate knowledge and how induce firms to innovate. Governement has a role to play, the debate is in which ways and in which measure it can do it. I agree partially with Mrs Muzzacato's point and much more with the one of The Economist. In fact, the Schumpeterian theory…Read moreThe main point of the problem is the way the governement can generate knowledge and how induce firms to innovate. Governement has a role to play, the debate is in which ways and in which measure it can do it. I agree partially with Mrs Muzzacato’s point and much more with the one of The Economist. In fact, the Schumpeterian theory and the neo-schumpeterian theory lead to the vision that the State must be osbessed by competition. In the first theory, that is the threat of newcomers that encourage innovation by the incombents, and that a monopolist makes enough profit to invest in innovation, in the second theory, that is intense competition between firms that encourage innovation. Innovation become so a way to break away. I’d like to illustrate the previous point with European “building” (considering European Institutions as the governement).The creation of a common market increased the competition between the firms within the european borders. I’m sure this measure boosted the incentive to innovate in Europe in the first years of the european “building” but maybe not enough to compete with others, like US, in the long term. In fact, the OECD observed that the product market competition is less intense in Europe than in the US. That’s why the idea of Mrs. Muzzacato could have sense. In the european case, a way to generate knowledge is to invest in firms and innovative projects. European institutions invest a certain % of the european GDP (1.9%- for the EU-15 countries) in R&D. The institutions hope to increase this % to 3% for 2020. I’m not so sure that these investments are as efficient as the regulation/drawing of the market because Europe is less and less productive and competitive over the years than other countries as US or Japan. I agree that a reward could benefit for all (health, education) and will make that investment a fair investment. But a what prize? As we know, knowledge is a risky asset, that involve commercial and technological uncertainty. Are taxpayers ready to trust the governement to invest a part of their money in a assets with uncertain returns, and mostly after the banking sector crisis? I think the governement should directly invest in health and education rather to risk money when there are other ways to encourage innovation, as above, by creating a certain market sructure (here competition) that lead firms to fight for innovation. I ‘d like to remind too that a european patent is in prep. I will maybe be a way to increase innovation in Europe, and a solution to fill the gap between Europe and its competitors. Show less Reply Brasseur Amandine 30 September 2013 My view states between those of the Economist and Mariana Mazzucato’s view. It’s not sustainable to say that government should just “stick to the basics” as we can read in the text “The digitisation of manufacturing will transform the way goods are made—and change the politics of jobs too”. As you had written, intangible assets imply externalities which conduct to market…Read moreMy view states between those of the Economist and Mariana Mazzucato’s view. It’s not sustainable to say that government should just “stick to the basics” as we can read in the text “The digitisation of manufacturing will transform the way goods are made—and change the politics of jobs too”. As you had written, intangible assets imply externalities which conduct to market failures (=> not enough innovation from a social point of view). So the government is concerned by this problem and we need its help to solve market failures. We can’t say that the state should just be involved on education, health security and other basics concerns. So I agree that the government should go further. But Mariana Mazzucato’s idea goes too far. She doesn’t want the state only resolving the market failures, she wants the state taking risks. In my opinion, we have to take into account, with the crisis, that some countries are not strong enough to take those risks and to survive if innovations are going wrong. Of course if it’s a success there will be lots of good consequences as she had written: “This will ensure that education, health, and transportation can benefit from state investments in innovation, instead of just the small number of people who see themselves as wealth creators, while relying increasingly on the courageous, entrepreneurial state”. She takes the example of USA which is a big country with lots of sources of power. But we cannot translate her idea to a small country like Belgium for which taking too many risks could be catastrophic. I think that it’s a too much optimistic view without taking into account the “bad sides” of this idea. My opinion is really that we have to evaluate this question for each country. In Belgium there are grants and subsidies for innovation like Service public de Wallonie (SPW), Agence de stimulation technologique (AST) and Agence de stimulation économique (ASE) (there are similar organizations in Flanders and Brussels). (source: http://economie.fgov.be/fr/entreprises/propriete_intellectuelle/Innovation_et_propriete_intellectuelle/innovation_et_subsides/#.Uklp4Ia-2So) . I believe it’s possible to do more in this area than what Belgium does. But countries are still weak because of the crisis. Even if taking initiatives to promote the innovation in the aim of sustaining economic growth is a primordial step to go out of this crisis, I find more important to have a deep analysis of what each country is able to do without becoming weaker. In conclusion, we need to take time to make a clear analysis of each government’s state (which is always changing with the evolution of the crisis) before saying how far should government go in question of innovation. Show less Reply Valerio Serse 29 September 2013 The point of view of the Economist and the one of Ms. Mazzucato seem to be too much extreme and I believe that we can find the best way to stimulate the creation of information and knowledge between these two different positions. In my opinion, before deciding in which measure the state should intervene on the economy to boost…Read moreThe point of view of the Economist and the one of Ms. Mazzucato seem to be too much extreme and I believe that we can find the best way to stimulate the creation of information and knowledge between these two different positions. In my opinion, before deciding in which measure the state should intervene on the economy to boost innovation, we should evaluate better the impact of public investments in R&D on private ones. Even if the point of Ms. Mazzucato is very interesting, I partially agree with her analysis. Ms. Mazzucato is right to say that some states had a central role in the development of many important innovations in technology, and the Apple’s case-study is of course a good example of that. Moreover, I agree with Ms. Mazzucato when she say that the state should do more than simply fix market failures, but I’m not convinced by her conclusion that governments should capture a more high return on investment in innovation. The state should create incentives to innovate using different kinds of instruments and policies, but if it goes to far in financing R&D there could be a crowding out effect on private investments in research and development. However, because public investments in R&D are also likely to stimulate private investments, I think that the state should invest in R&D in a measure that maximize the incentive of private enterprises to innovate. So, in addition of a good and efficient set of IP rights, governments should invest carefully in R&D taking into account the effect that this investments will have on the private sector. In conclusion, I believe that the real issue isn’t whether or not the state should intervene but in which measure it should do it, and I believe that we can give an answer to this question only if we understand in which way public investments in innovation affect the private ones. Show less Reply Goergen Stephanie 29 September 2013 Governments certainly play an important role in technology development, be it by funding R&D in government labs, in universities or done by for-profit companies or by offering tax credits to companies for their internal R&D expenditures. There are many companies, especially small and medium sized enterprises, which have compromising ideas but which cannot afford to invest in basic research. The…Read moreGovernments certainly play an important role in technology development, be it by funding R&D in government labs, in universities or done by for-profit companies or by offering tax credits to companies for their internal R&D expenditures. There are many companies, especially small and medium sized enterprises, which have compromising ideas but which cannot afford to invest in basic research. The time frames for basic research are long, and only a small portion of this research actually results in commercially viable products. Yet, this research constitutes the basis of future industries. Investment in basic research, through universities and research institutions, that yields licensable technologies, is a way through which government can help to develop new technologies. I don’t agree with Ms. Mazzuccato’s point of view. Technological innovation should not only be attributed to governments. Governments do not create innovative businesses. They just support firms that deserve funding. In the end, the success of a business depends on the company itself and should be acknowledged without any reference to the government. According to the trilogy of ‘Invention-Innovation-Diffusion’, innovation does not only depend on invention, creation or discovery but it also relies on the ability of a firm to make change happen and to promote the diffusion of a technology. When funding research projects, the government only takes part in the invention process by inducing the generation of new ideas but has nothing to do with the actual adoption of change, i.e. the management of innovation which involves the introduction of novelty in an established organization. In my point of view, the role of the government should be restricted to designing policy measures, regulating and providing high standards of living for the population. Governments should only focus on demand creation and not try to manage supply. In doing so, it will encourage and propel talented entrepreneurs and thus increase economic well-being. Show less Reply Diogo Machado 28 September 2013 The state will always play a crucial role on promoting innovation, thus the debate is whether this promotion should be done indirectly by, for example, managing incentives, regulating and providing stability, or by intervening directly as a player pumping tax-payers money into specific ventures. The only right side of this debate is: it depends! In fact, one may expect that private…Read moreThe state will always play a crucial role on promoting innovation, thus the debate is whether this promotion should be done indirectly by, for example, managing incentives, regulating and providing stability, or by intervening directly as a player pumping tax-payers money into specific ventures. The only right side of this debate is: it depends! In fact, one may expect that private entrepreneurs and managers will devote their time to promote efficiency and innovation, as their income is dependent on that. On the contrary, when it comes to politicians and bureaucrats, their current and future income is much dependent on their political connections than on maximizing efficiency of the organization there are leading. However, as stressed in this post, innovation can be seen as having the typical characteristics of a public good, so without public intervention one may expect its under provision bellow what would be socially desirable. Here is where the government kicks in, assuming the technological and commercial risk, as well as covering the huge initial and fixed costs. As a final result one has the following dilemma. If a private investment is successful, the society must maintain incentives to innovate, rewarding the risk-taking and innovative attitude with monopoly rents. Since this creates a dead weight loss to society, if the successful investment was public, then setting a lower price would increase wellbeing. In the other hand, if a private investment fails, that is shareholders’ own money, while if it is public, then tax-payers’ money is lost. Letting someone take risks with others’ money is not a good incentive for prudent investments. I believe that the correct answer to this question is country specific, because it will depend on the culture and working of institutions. As an example, Hofstede (1980) indicated that weak Uncertainty Avoidance (high-risk tolerance) societies tend to take risks easier, are relatively tolerant of behaviours and opinions different from their own, and are enamoured of technology, traits which encourage entrepreneurship and innovation. Moreover, Hofstede (1984) also shows that societies which score high on individualism and low on the power dimension have a greater tendency to innovate. Thus, one might argue that in this kind of societies, the government should be less interventionist, as the private sector is able to do the job, while maybe in the opposite kind of societies, government’s direct intervention is most needed to promote innovation. I will finish this comment with two examples of both sides of the question. As a pro for government intervention, in East Asia, governments invest directly in firms, as long as the latter prove to be competitive worldwide. This common practice gave birth to the term “state capitalism”, where public-funded firms are managed as private ones, proving to be highly competitive in the world market. The so called East Asian miracle, despite strongly associated with the Washington Consensus type of policies, functioned in a highly state interventionist atmosphere, which provided sustained rapid growth and dramatic declines in poverty. As a con, I will give a current event from my country. Portugal Ventures is a public institution working supposedly as venture capitalist firm, funding risky entrepreneurs with promising projects. In the last 20th September it bought a completely indebted and highly unprofitable racecourse in Algarve, showing that there is no need for positive NPVs when some friends need to be bailed out with taxpayers’ money. Hofstede, Geert (1980), Culture’s Consequences. London: Sage; Hofstede G. (1984) Culture’s consequences: international differences in work-related values. Newbury Park, CA: Sage Publications. State capitalist: http://www.economist.com/node/21543160 Portugal Venture news (in Portuguese): http://autosport.pt/portugal-ventures-comprou-autodromo-de-portimao=f114774 Show less Reply David Encaoua 24 September 2013 Cet article tombe à point nommé en France. Notre président de la république et le ministre du redressement productif viennent de présenter ce qu'ils appellent " une nouvelle politique industrielle de la France". Elle consiste à dresser une liste de 34 chantiers industriels à promouvoir. Cette liste a été établie avec l'aide de McKinsey Global qui avait précédemment publié un…Read moreCet article tombe à point nommé en France. Notre président de la république et le ministre du redressement productif viennent de présenter ce qu’ils appellent ” une nouvelle politique industrielle de la France”. Elle consiste à dresser une liste de 34 chantiers industriels à promouvoir. Cette liste a été établie avec l’aide de McKinsey Global qui avait précédemment publié un rapport sur les technologies d’avenir. Par ailleurs, la liste a été établie en concertation avec les milieux industriels, chaque projet étant confié à la direction d’un chef d’entreprise. depuis, le débat (auquel je participe) fait rage. Il s’inscrit tout à fait dans le débat présent dans l’article entre la position défendue par The Economist et celle défendue par Mariana Mazzucato. Pour aller plus loin, je dirais que la question essentielle ne me paraît pas être de savoir s’il faut être pour ou contre l’intervention publique en matière industrielle. Elle serait plutôt de porter une appréciation sur le type d’intervention. Pour faire court, je dirais qu’en France, pays où le pouvoir des “insiders” écrase celui des “outsiders” , il paraît tout à fait préjudiciable de laisser les entreprises en place dicter ce qui leur paraît être le plus prometteur en matière de technologies. En plus, si tous les pays industrialisés suivent les mêmes conseils (de McKinsey), bonjour les dégâts. Il y aura beaucoup de perdants…Mariana Mazzucato a raison de dire que l’Etat américain joue un rôle important dans l’émergence de nouvelles technologies. Mais la manière de s’y prendre est assez différente de celle employée en France (voir l’histoire d’Internet par Greenstein). Show less Reply Leave a Reply Cancel reply Your email address will not be published. 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