This book review was written by Eugene Kernes
“These companies are of course helping to push the innovation frontier by further developing State-funded technologies, and, crucially, contributing to a transition to a more environmentally sustainable economy. But all we hear in the media is the one-sided myth of the lone entrepreneur.” – Mariana Mazzucato, Introduction: Thinking Big Again, Page 43
“Public venture capital, for example, is very different from private venture capital. It is willing to invest in areas with much higher risk, while providing greater patience and lower expectations of future returns. By definition this is a more difficult situation. Yet the returns to public versus private venture capital are compared without taking this difference into account.” – Mariana Mazzucato, Chapter 1: From Crisis Ideology to the Division of Innovative Labour, Page 61
“The State’s role is not just to create knowledge through national labs and universities, but also to mobilize resources that allow knowledge and innovations to diffuse broadly across sectors of the economy. It does this by rallying existing innovation networks or by facilitating the development of new ones that bring together a diverse group of stakeholders. Rather than fixing ‘market failures’, evolutionary economists and innovation scholars have therefore put emphasis on the State’s role in fixing ‘system failures’.” – Mariana Mazzucato, Chapter 2: Technology, Innovation and Growth, Page 83
Is This An Overview?
There is a myth that governments cannot make appropriate investments, and intervention in the market would create problems. The myth implies that the main role of the government is to fix the private sector, to fix market failures, and to provide equitable laws. This myth enabled the dismantling of public organizations and outsourcing responsibilities. Leading to governments lacking tacit knowledge, and preventing long term agendas. The myth of government’s ability, is associated with the myth of the lone entrepreneur who knows how to invent and invest in the future.
In practice, many entrepreneurs innovated state-funded technologies and used public funding sources. Private sector investments tend to occur when an idea is ready for commercialization, after various failed ideas have been filtered out. Governments tend to invest in earlier stages of an idea before commercialization. Governments invest in the seed stage of an idea, which carries more uncertainty and higher risk than the later commercialization stage. The private sector invests in ideas after government has transformed the uncertainty of an idea into much lower risk.
Government has more patience with lower expectations of returns to ideas. A strategy that has been effective, given that while government is spending more on Research and Development, the private sector is spending more on boosting share prices. Government investments enabled forthcoming innovations, thereby stimulating private investments rather than crowding out investments.
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Caveats?
In trying overcome one myth, another myth was written. Although the author references that effective innovation is a collaboration between public and private sectors, the book prioritizes state activities. A myth that the private sector is secondary to the state, being not as effective with financing and social functions. Sharing only little reference to the consequences of state activities. The bias in favor of state action, reduces the value of collaboration.
