Public financing of innovation: new questions

By Mariana Mazzucato, G. Semieniuk. 2017

260 citations recorded by the source corpus.

Economic theory justifies policy when there are concrete market failures. The article shows how in the case of innovation, successful policies that have led to radical innovations have been more about market shaping and creating through direct and pervasive public financing, rather than market fixing. The paper reviews and discusses evidence for this in three key areas: (i) the presence of finance from public sources across the entire innovation chain; (ii) the concept of ‘mission-oriented’ policies that have created new technological and industrial landscapes; and (iii) the entrepreneurial and lead investor role of public actors, willing and able to take on extreme risks, independent of the business cycle. We further illustrate these three characteristics for the case of clean technology, and discuss how a market-creating and -shaping perspective may be useful for understanding the financing of transformative innovation needed for confronting contemporary societal challenges.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/ab19226cc45791c31a2e66ff317c64eae05cb112

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Citations in the corpus

Mission-oriented innovation policies: challenges and opportunities (2018, unknown): “…that drive innovation across multiple sectors and actors have much to learn from “mission-oriented” policies that in the past has been aimed at achieving specific objectives, whether landing a man on the moon or battling climate change (Ergas, 1987; Mowery 2010; Mazzucato, 2014; Mazzucato 2017).”
Low‐carbon transition risks for finance (2020, background): “This makes low-carbon products more competitive by creating markets, financing, and helping innovation proceed at pace or simply altering prices directly (Block & Keller, 2011; Mazzucato & Semieniuk, 2017).”
Innovation policy: What, why, and how (2017, background): “Innovation projects are inherently risky (Mazzucato and Semieniuk, 2017, this issue), avoiding risk may easily lead to not very innovative projects being selected for support (projects that perhaps could have been financed in other ways), thereby making the policy less effective and undermining its…”
Financing Renewable Energy: Who is Financing What and Why it Matters (2018, unknown): “Therefore, although we cannot analyze causality, it would be plausible to relate the higher risks taken by private finance between 2009 and 2011, at least in part to the contemporaneous government stimuli; further evidence for this is analyzed in Mazzucato and Semieniuk (2017).”
Innovation, growth and the transition to net-zero emissions (2021, background): ““missions-driven” (Mazzucato, 2013), providing direction to the innovation efforts of firms (Mazzucato and Semieniuk, 2017).”
Modelling innovation and the macroeconomics of low-carbon transitions: theory, perspectives and practical use (2019, background): “A debate also exists as to whether government or other finance of innovation in the early stages of the innovation chain crowds-out or crowds-in other private finance in later stages (Hottenrott & Rexhäuser, 2015; Mazzucato, 2011; Mazzucato & Semieniuk, 2017, 2018; Popp & Newell, 2012).”
Regional innovation policies for new path development – beyond neo-liberal and traditional systemic views (2018, background): “The market failure argument as a rationale for science, technology and innovation policies, thus, seems to be ‘ … increasingly inadequate to … guide the design and implementation of innovation policy more broadly ’ (Edler & Fagerberg, 2017, p. 8; Mazzucato & Semieniuk, 2017).”