Innovation, the State and Patient Capital

Document Type : Translation


1 Assistant Professor, Institute for Science and Technology Studies, Shahid Beheshti University, Tehran, Iran

2 Master Student, Science and Technology Policy, Shahid Beheshti University, Tehran, Iran

3 Master of EMBA, Islamic Azad University, Arak Branch


The study examines the role of government, financing policies in particular, in the long - run innovation and growth of firms and countries, subsequently. Mentioning the deficiencies of Orthodox economic schools, especially the neoclassical model, in analyzing and perceiving innovation through limiting policy interventions to the market failure, the author introduces Evolutionary and Schumpeter economic schools as appropriate analysis frameworks in this case. The pivot role of government in developing innovation and its active role in financing innovation are among the other critical issues that are analyzed in this paper based on evidence from developed countries. The findings indicate that the role of government is beyond fixing market failure, but forming and creating new markets; and, in other words, governments are supporting innovation process in the form of a high-risk “entrepreneurial government”. In contrast, since firms and private sectors mainly assume that innovation creation and its achievements belong to them and are derived from their actions, they are following a stronger risk-aversion behavior than the government in supporting innovation and financing. Development and investment banks are among the most important governmental means to actively support innovation –along with the risks- mainly in contexts and areas where firms and private sector are not willing to invest. Finally, there are some suggestions and considerations regarding government intervention in favor of innovation development.


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