I recently attended a conference in London on mission oriented finance for innovation that sought to rethink the role of the state in modern capitalism, moving beyond fixing ‘market failures’ toward more actively directing innovation.
First, that the state has an important role in directing innovation. This was illustrated by the work of the economic historian Professor Carlota Perez who has described how the innovation of suburbanisation – ‘based on cheap houses, built on cheap land, full of electrical appliances, with a car at the door’ – was stimulated with roads paid for by the taxpayer and even publicly guaranteed mortgages. (This is detailed in a paper, ‘Innovation as Growth Policy: the challenge for Europe’, that accompanied the conference)
Second, was how to evaluate mission orientated research. Many speakers stressed the need to tolerate some failure in what is a high risk, high reward environment.
Third, the need for organisational change. Decentralised networks can be more effective than top down diktat, with Iain Gray, Chief Executive of UK innovation agency the Technology Strategy Board (TSB), stressing the important role his organisation plays in coordinating networks of industrialists, academics and others.
Finally, there is the question of who takes the risks and who receives rewards. Professor William Lazonick of the University of Massachusetts flagged that since the 1990s shareholders have been seen as the primary risk takers in companies suggesting that they are deserving of greater rewards, with the risk taking of employees being sidelined.
The most important contribution from the perspective of the Royal Society came from Dr Arun Majumdar, Vice President for Energy at Google, who emphasised that basic and applied research cannot be separated. Interestingly this followed a short speech the day before by Dr Vince Cable, Secretary of State for Business, Innovation and Skills, who described a doubling of innovation spend as a serious commitment to innovation.
Overall a really interesting event with some excellent speakers, and I was sad to have missed the second day. The only thing missing for me were more challenging voices such as Stian Westlake who recently blogged about a problem with the entrepreneurial state.