The Failure of Market Failure | #4 | Venture Capital in the 21st Century

What are the rationales for State support for technical innovation? Adopting the Neoclassical approach of "market failure", Nelson and Arrow suggested that private business firms will invest less in research & development than is socially optimal. Empirical estimates suggest that the gap between private and social benefit is quite large. This has served as a justification for the large increase in State investment in basic research since WWII. But historically, State intervention in innovation was driven by concerns for national security and economic development. Janeway suggests it is better to think in terms of national systems of innovation, rather than market failure.

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In this eight-part series, Bill Janeway investigates the relationship between #venturecapital and technological #innovation, and the interdependent roles of entrepreneurial firms, the mission-driven State and financial speculation in the overall innovation system.

Credits: Matthew Kulvicki, Nick Alpha, Gonçalo Fonseca, Athullya Roytman, Kurt Semm

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