Comparative Analysis on Science, Technology

and Innovation Policies

Book Title: The entrepreneurial State: Debunking Public vs Private Sector Myth
(Ch.4 & 5)
Author: Mariana Mazzucato
Student: PHD 14407
GRIPS
October 2014

OUTLINE
• General Summary
• The US Entrepreneurial state

• State Behind the iPhone
• Lesson Learned

General Summary

There is notion that free market is efficient system to drive economic growth and
state need to interfere only to fix market failure leaving entrepreneurship and
innovation to the private sector.

US is been perceived as private led wealth creation nation where by market is
perceived to drive innovation and the economy. But ……

– the government has been playing bigger role in taking entrepreneurial
decision by investing in areas where venture capital will not invest to spur
innovation.
– The government has been providing early finance to risk areas and support
innovation.

United State has been supporting innovations by using procurement, commission
and regulatory functions to shape markets and drive technological advance

The US Entrepreneurial state
The book gives four (4) key successful examples
• DARPA – Defense Advance Research Project Agency
• SBIR – Small business Innovation research
• ODA – Orphan Drug Act
• National Nanotechnology

DARPA (1958)
It has budget for more than $ 3 billion per year
• Funded beyond basic science,
• Interaction between public and private agents led to the development such as
computers, jet plane, civilian nuclear energy, lasers and biotechnology.
• Providing funding assistance to researchers, scientists and engineers to propose
innovative ideas
• Funded formation of computer science department, provided startup firms with
early research support, contributed to semiconductor research and support
human computer interface research and over saw the early stage of internet.
• Government acted as a major customer for the products produced by these firms
eg semi conductor

DARP played brokering function by Linking university researchers too entrepreneur
interested in starting a new firm, connecting start up firms with venture
capitalists, finding larger companies to commercialize the technology or assisting
to procuring government contracts to support the commercialization process.

Build laboratory which can be accessed by researchers.

SBIR (1980s )
• The program provided more than$ 2 billion a year to support high-tech firms
• Setting consortium between the SB and different government agencies
• Government agencies with large research budget to designate a fraction of
their research funds to support small business.
• Local governments and state funded organizations to assist entrepreneurs to
submit successful application to SBIR to secure funds for their projects
As a result SBIR has fostered development of new entrepreneur and
commercialization of hundreds of new technology from laboratory to the market.

Orphan Drugs
• 1983 passed ODA to help small, dedicated industries
• The Act includes certain tax incentives, R&B subsidies, fast track approval,
strong intellectual and marketing rights
• This ODA has helped to development of biotech industry
• The government is major investor in knowledge creation, subsidizer of
drug development, protector of market and purchaser of drugs

National Nanotechnology Initiative







Government has been leading visionary of nanotechnology
Provided initial investments`
Networks that brings together public actors (universities, national labs, government agencies)
and private sector to kick start ajir revolution innovations
It was the first to define none technology through NNI
Government has to invest in this because private sector cannot invest in which results would
be seen after 10 to 20 years away from commercial market
Reviewed rules and regulations to back nanotechnology
Became larger investor on nanotechnology
US currently spends approximately $1.8 billion annually in NNI

STATE BEHIND THE iPHONE



Role of State in Apple’s success.
Massive investment behind the computer and internet, GPS, touch screen display and
communication technology.
Apple is not concentrating in developing new technologies and components but integrating
them in to innovative architecture
Direct equity investment during the early stage of venture creation and growth eg It received
$500,000 as an early stage investment.
Access to technology that resulted from the major government research programs, military
initiatives, public procurement contracts, Creation of tax, trade or technology policies that
supported US companies
Innovations which enabled development of semiconductors, Giant Megastore resistance,
SIRI, GPS, internet, malt touch screen, etc. where result of state investment in R&D which
cost billions of tax payers dollars. Eg $ 800 million was allocated to Technology Reinvestment
Program TRP, subsidy to Semiconductor manufacturing Technology (SEMATEC) R&D $ 100
million p.a, $ 1 billion to support Strategic Computing Initiatives (against Japan
semiconductors), maintenance of GPS costs $705 annually.

STATE BEHIND THE IPHONE


Government has played role in protecting intellectual property of companies like apple and
helped to access global market
Provide various other types of tax and procurement support such as research and experiment
tax credit, R&D Tax credit
The conclusion is that the core technology embedded in Apples’ innovative products are
results of decades of federal support for innovation. State investment in support of research
by state and military played a key role.

Key Findings from Book
• The author concludes that private sector only
invest after the entrepreneurial state has made
the bold high risk investment,
• Urged that for innovation to occur need to have a
highly networked and coordinated economy to
enable knowledge to be shared,
• Having a national system of innovation is not
enough.
• Results can be achieved when state is a major
player operating within the system.

Leeson learned

The role of state is very vital for innovation
For countries to be able to develop innovation the state has to play catalyst rol
Coordination
Define policy and coordination
Put in place institutional and legal framework which will motivate innovation
**** government reward innovation and direct resources to fund start up inventions, brokerage and
vision building, actively funded early radical research, create network between state agencies and
private sector and facilitate commercialization.
This caper has highlighted the important role that the government has played in leading innovation in
many important modern industries with private sector often take back seat.








Application to other context

Most of countries lack this kind of state support, entrepreneurial
Government must support innovation by:
Pioneer of idea and inovation
Direct funding
Industrial policies
Human development
Legal and institution support
Having research fund and picking specific sectors is not the key

Key massage
 Having national system of innovation is not enough. More results can be achieved
when the state is major player. Thr state through its various agencies and
laboratories have potential to agencies and laboratories have potential to desminate
new ideas. It can also use procurement commisiong an regulatory fanctions to
shape markets and drive technological advances.
 Most of innovations ware successful because of government support in one way or
another. The government has been introducing idea, coordinating, funding and
proctecting to incourage innovation. The US Government has been for years using
its resources and agencies to support novation in the private secto. Through varios
programs managed to support innovation in the strategic areas.
 Because most of private sector and venture capital can not invest in resercha and
developmeni in which

THANK YOU!

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