14sectors such as education and health have also been subject to competition, with many innovative, high-growth companies emerging as a result.

These reforms have led to Sweden rising in international rankings on competitiveness and innovativeness (Karlson, 2018), yet at the same time a strong welfare state provides a cushion and environmental legislation is strict: During the time period 1990–2018, total domestic carbon dioxide emissions in Sweden fell by 27%, driven by a transition to more renewable energy, more efficient utilization of resources, and more growth related to IT and services as opposed to heavy industry (Grafström & Sandström, 2021). We have also witnessed remarkable improvements with regard to fuel efficiency in Sweden and other countries. Water consumption has been subject to steep declines, both in absolute and relative numbers. Air quality has improved a lot over the past three decades. Out of 26 different air pollutants, 24 have been reduced in absolute figures, with an average decline of 52%. In relation to GDP, the decline is even greater—77%. Lead emissions have seen the greatest decline (97%) (Grafström & Sandström, 2021). In short, Sweden has been on a successful path toward sustainability, which has primarily been focused on regulation, taxes, and legislation.

6

Swedish Failures Are Failures

of the Entrepreneurial State

In some sectors, however, Sweden has followed the route of the entrepreneurial state, initiating grand, moonshot projects in order to accomplish great leaps toward sustainability. It is also in these areas that we see the greatest disappointments, as outlined in chapter “Directionality in Innovation Policy and the Ongoing Failure of Green Deals: Evidence from Biogas, Bio-ethanol, and Fossil-Free Steel” (Sandström & Alm, 2022) of this volume: Municipal investments into biogas failed to deliver anything but mounting debt and technology that did not work. Ethanol cars that were Introduction

15heavily subsidized in the early 2000s resulted in a bubble that eventually burst in 2009–2010. Efforts were made to extract ethanol from cellulose in the rural north in order to reindustrialize the region and create sustainability and new jobs. This turned out to be a financial disaster in the years after 2008 (Sandström & Alm, 2022).

What all these policy failures have in common is that ideas related to the entrepreneurial state and the innovation-systems perspective underpinned them. Large sources of public funding at the regional, national, and European levels were combined, making actors immune to risks, resulting in overinvestments in technologies that had little potential.

7

Toward Credible Innovation Policy

Revisiting the guiding principles of Elert et al. (2019)—neutrality, transparency, moderation, contestability, legality, and justifiability—we would argue that the success in recent decades with regard to innovation is related to these guiding principles. Markets have become contestable through open access and competitive reforms, and broad reforms focused on things like skills development and broadband access have resulted in neutrality and moderation.

The findings of this book imply that innovation policy should not be about schemes for public-private collaboration, technology-specific large public investments, or targeted support schemes for specific types of innovators or firms. Instead, innovation policy needs to be inverted. Instead of giving active and specific support to firms or technologies that are deemed to contribute to certain grand challenges, it needs to be passive in focusing on general conditions and incentives, while also actively dealing with interest groups. Instead of being mission and technology oriented—regardless of how important those missions may seem to be—innovation policies seeking to move society in a more equitable, productive, and sustainable way need to focus on the conditions required to create desired outcomes: broad reforms improving the conditions for any person to be able to launch or join new disruptive organizations, whatever their background; ensuring competence through a well-functioning educational system; and dealing constructively with vested interests to make industries more contestable. The protection of common-pool resources