Entrepreneurs or entrepreneurial state? Perspectives on innovation policy

Joost Haddinga

No 4, LEF Policy Papers from Ludwig-Erhard-Forum für Wirtschaft und Gesellschaft (LEF), Berlin

Abstract: This policy paper explores the role of the state in innovation policy, with a particular focus on Mariana Mazzucato's concept of the "Entrepreneurial State." Mazzucato advocates for a proactive and directive state that not only corrects market failures, but actively creates and shapes markets through mission-oriented innovation strategies. Her approach seeks to direct public resources toward addressing major societal challenges. The paper critically assesses the feasibility of this framework, highlighting fundamental issues such as knowledge limitations, incentive misalignments, and bureaucratic inertia that constrain effective state intervention. A warning against excessive government steering is formulated, since such a steering could hinder innovation and foster distorted incentives. Instead of relying primarily on state-led initiatives, the paper advocates a balanced innovation strategy that combines public and private strengths. The state should focus on supporting basic research and providing infrastructure, while allowing firms and entrepreneurs to define innovation pathways. Innovation policy, the paper argues, should enable decentralized experimentation and competition, rather than being confined by top-down directives.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:lefpps:336633

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