342345 K. Wennberg, C. Sandström (eds.), Questioning the Entrepreneurial State, International Studies in Entrepreneurship 53, https://doi.org/10.1007/978-3-030-94273-1_18 N. Elert and M. Henrekson

346Equally laudable is Mazzucato’s insight that innovation requires focus on “high growth, high risk areas,” and her ecosystem emphasis. Where we differ from her is in the view of (i) how innovation comes about; and (ii) as an immediate consequence, what the state’s role should be in promoting innovation. This is not to say that there is no such role. Scholars (in this volume and elsewhere, see, e.g., McCloskey & Mingardi, 2020) have scrutinized and criticized the historical account of US industrial policy that Mazzucato touts when making her case for why governments should “lead the process of industrial development, by developing strategies for technological advance in priority areas” (Mazzucato, 2013, p. 40). It is certainly legitimate to object against state involvement and the very notion of a Ministry of Innovation (McCloskey & Mingardi, 2020, p. 169), but the fact is that many industrialized nations already have such a ministry, Sweden among them. This situation is unlikely to change. A more fruitful approach, we believe, is to take “public–private entanglement” (Wagner, 2016) as a given. Government agencies will want a seat at the innovation table—whether for purely altruistic public interest reasons or for public choice reasons of power. Treating government involvement in innovation as unavoidable allows us to think about what government entities currently do, and what they should do to maximize innovation—a laudable goal we share with Mazzucato—while simultaneously minimizing errors and distortions. Although Mazzucato pays lip service to the latter goal, she makes no secret of her wish to tilt the playing field when necessary, a point to which we will soon return. We hope to convince the reader that realism is a key virtue of our approach.

The state does have roles to play when it comes to innovation, and while some of them are quite proactive, we consider them to be of a different nature than Mazzucato does, although our perspectives do intersect. In her (2013) view, governments should strive to achieve “mission-oriented innovation” or (2018) “missionoriented programs for innovation policy—and indeed policies aimed at investmentled growth.” To achieve these goals, “(w)hat is needed is a ‘systems’ perspective, but one that is more realistic on the actual—rather than the mythological—role of the individual actors, and the linkages between actors” (Mazzucato, 2013, p. 196). Moreover (p. 198), “acknowledging the different roles played in the ecosystem— over time and along the bumpy risk landscape—will make it more difficult for overhyped economic actors that have captured the public imagination to argue for handouts and subsidies.” We fully agree with the emphasis revealed in these quotes, but the devil is in the details, of which there are precious few in Mazzucato’s 2013 book The Entrepreneurial State. It seems possible to interpret her level of ambition as both an immense expansion of government powers (e.g., McCloskey & Mingardi, 2020) and as a fairly modest correction of market failures (e.g., Karlson et al., 2021). Therefore, we will focus on the six lessons she draws in her 2018 article “Mission-oriented Collaborative Innovation Blocs and Mission-Oriented Innovation Policy: An. . .

347innovation policies: challenges and opportunities,” precisely because they are sufficiently detailed to merit a fruitful critique that steers clear of unwarranted assumptions and straw men. Discussing these six lessons from an ecosystem perspective will, we believe, offer food for thought for Mazzucato’s critics and advocates alike. That said, we do differ from Mazzucato in our view of what an entrepreneurial ecosystem entails; all our writings on the subject see innovations as shrouded in uncertainty in Knight’s (1921) sense, meaning it is impossible for private and public actors to know where the next generation of high-growth firms and radical innovations will emerge (e.g., Elert et al., 2019). A key goal for policy should, therefore, be to level the playing field, to make sure that no paths are closed unnecessarily, leaving the final selection to the entrepreneurial society rather than the entrepreneurial state (e.g., Elert et al., 2019). Mazzucato would likely call such a view “old-fashioned;” after all, she specifically highlights that mission-oriented agencies do (and one assumes, should) tilt the playing field (2018, p. 804): the relevant organizations made choices on what to fund, going against the more classic

position that the point of policy making is simply to level the playing field. Indeed, these

agencies, and the wider programs around them, ‘tilted’ the playing field through missions

aimed at a public objective, with other policies needing to be introduced to make it more

profitable to move in that direction. This is an issue on which we disagree fundamentally with Mazzucato. However, mission-driven innovation and government interventions more broadly necessarily entail directing resources in a particular direction and away from another. This is something governments do, and while there are ample grounds for criticism of this fact, a more important concern is how governments do this. Treating mission-driven innovation policy (i.e., a considerable level of government involvement) as a given, how should this involvement take the existence of entrepreneurial ecosystems into account? To answer this question, we will adopt a collaborative innovation bloc (CIB) perspective, which focuses on the actors and competencies necessary for an idea or invention to become an innovation that eventually becomes an efficiently produced and widely disseminated high-quality good or service (e.g., Elert & Henrekson, 2019a, 2020, 2021; Elert et al., 2019). The CIB perspective shows how successful innovation, especially in “high-growth, high-risk areas,” depends on an entrepreneurial ecosystem that evolves spontaneously. As the name suggests, the ecosystem is inherently collaborative, and the perspective stands out in the ecosystem literature for its clear distinction between actors and institutions. A CIB consists of six pools of economic skills from which people are drawn or recruited to form part of a collaborative team. The six pools include entrepreneurs, inventors, early- and later-stage financiers, key personnel, and customers. The value of successful innovation materializes when entrepreneurs’ talents, insights, and efforts are combined with the labor effort, human capital, and financial capital of other input providers drawn from the other pools to form a collaborative team. As such, entrepreneurial venturing and innovation are matters of collaborative effort, although each N. Elert and M. Henrekson

348collaborative team competes against other collaborative teams, causing competitive pressures that create favorable macro-level outcomes.

CIBs emerge spontaneously in modern economies, provided that the right policy and institutional conditions are at hand, but they will not emerge if those conditions are missing. For example, the system of CIBs known as Silicon Valley only emerged when (largely unrelated) reforms had created the right conditions, especially surrounding venture capital (see Sect. 4.6). While the ecosystem may be surprisingly resilient along some margins, it can be fragile enough along others that one single institutional bottleneck or one single flawed policy impedes an entire high-growth, high-risk area. In fact, given the complexities involved, one may wonder how successful collaboration can come about at all. This also emphasizes the need for a CIB-grounded analysis of government interventions and “mission-driven innovation”—and what they potentially entail for CIB actors and their collaborations. Specifically, we tie the perspective to the lessons Mazzucato draws in her 2018 article. Briefly, our lessons, drawn from her lessons, are as follows: 1. Mazzucato argues against picking winners, in favor of picking the willing, i.e., to

promote and embolden firms and organizations that are ready to do what is

necessary to achieve a certain mission-oriented policy goal. In our reading, this

is just another way to say picking winners. While it may limit the risk of

unwarranted failures in the CIB, it will also increase the risk that unsound

economic ideas survive for too long, which will be detrimental to the CIB’s

selection processes and its long-term survival. 2. Mazzucato argues in favor of the state actively co-shaping markets, even creating

new markets, rather than merely trying to fix them. As alluded to earlier, this is

something most governments do. It is sometimes warranted, e.g., with respect to

health care and education, but it will result in CIB problems. This is especially the

case if governments curtail private citizens in their role as consumers, since they

are usually the final arbiters of an innovation’s success in the CIB. 3. Mazzucato argues that governments should welcome experimentation (instead of

fearing failure). We agree that this is a laudable goal, not least in the policy arena.

Yet, market selection (through entry and exit) offers a way for private actors to

learn from such experimentation (and offers incentives to care) in a way that is

unavailable to public actors, meaning that the more learning occurs through

bottom-up process in CIBs, the better. 4. Mazzucato argues that governments should focus on the quality of finance (rather

than the quantity), a point which, if we read her correctly, mainly seems to

concern the way R&D is financed. We disagree; in fact, the CIB perspective

reveals that a focus on government investments in R&D as a driver of innovation

reveals a far too narrow and mechanical view of how innovation comes about. 5. Mazzucato argues for engagement, i.e., democratization and the inclusion of

more stakeholders in mission-oriented projects. This is important for government

activity writ large. Returning to point 2 above, however, we wonder if citizens

qua consumers are not better placed than a government agency to decide what

they want.

349Collaborative Innovation Blocs and Mission-Oriented Innovation Policy: An. . .

6. Finally, Mazzucato argues that governments should share both risks and rewards

if they engage in venture capital (VC) activity. This is reasonable, but the “if”

does much of the heavy lifting. Government involvement in VC rests, in our

view, on a flawed idea regarding what early- and later-stage financiers should do

in CIBs, wrongfully labeling sound investment behavior as shortsightedness.

The list should make clear that while we often disagree with Mazzucato’s perspective, there is common ground. Few of her points can be disregarded out of hand. Hopefully, a fair reading of this article by advocates of Mazzucato’s view will inspire hope, humility, and afterthought.

2

How Does Innovation Come About in the CIB?

Human collaborations are often superadditive, meaning that they have an “explosive upside, what is mathematically called a superadditive function” (Taleb, 2012, p. 238). Baumol (2005, p. 3) notes much the same thing when discussing the revolutionary innovations of small and new firms and the incremental innovation of large firms, stating that “the contribution of the two together is superadditive, that is, the combined result is greater than the sum of their individual contributions.” This collaborative effect characterizes many economic interactions and likely explains both why many ventures are founded by teams (Schjoedt & Kraus, 2009) and why innovation and entrepreneurship are often localized phenomena (Zucker et al., 1998). A critical mass of firms in dense, knowledge-intensive areas seems to be required for a dynamic innovation environment to emerge (Feldman & Audretsch, 1999), with strong clusters enhancing growth opportunities in adjacent industries and clusters (Delgado et al., 2014). The CIB perspective promises a greater understanding of such clusters and the conditions enabling collaborations within them. Its roots can be traced to the works of earlier Swedish economists (Erixon, 2011), but the perspective also shares features with the more recent literature on entrepreneurial ecosystems (Stam, 2013) and the National Systems of Entrepreneurship approach (Acs et al., 2014).1