66International Studies in Entrepreneurship 53, https://doi.org/10.1007/978-3-030-94273-1_4 S. Murtinu et al.

58Introduction

Until recently, most academics, pundits, and policymakers saw the collapse of socialism and the poor record of nationalized firms and industries as evidence that private ownership and market competition were the superior drivers of economic growth and societal well-being. The neoliberal consensus held that entrepreneurs with skin in the game, rather than state bureaucrats, should direct productive resources to their highest-valued uses. Instead of targeting particular technologies, firms, and industries for public support, policy should focus on creating a competitive environment in which private entrepreneurship and innovation can flourish (Bradley et al., 2021). Within the last few years, however, prominent voices have called for significantly more government involvement in the economy. These calls have been prompted in part by corporate scandals perceived to be driven by short-term thinking and unethical behavior by managers, scandals that destroyed value for shareholders and for society as a whole. Enron went through the largest bankruptcy in history after hiding billions of dollars through controlled special purpose vehicles; Lehman Brothers collapsed due to its exposure to subprime mortgages; Volkswagen faked emissions data to pass environmental rules. While details of these cases were complex (and the result of regulatory failure as much as unfettered capitalism), they suggested to many that the government has been playing too passive a role and needs to intervene more actively to curb abuses by private actors.

Many of these calls focus on social issues such as inequality and health care, as well as grand challenges like environmental protection, but governments have also asked to play a stronger role in managing the innovation process. The public sector has long been involved in funding basic scientific research, typically through government-owned national laboratories and research institutes, as well as grants to public and private universities. Applied research and the development of commercial technologies was thought to be the realm of the private sector. That line is increasingly blurred, however, with writers such as Mariana Mazzucato (2011) arguing that state support lies behind the most important new commercial products, firms, and markets and that, therefore, the state should play a more active role in financing and directing these developments. In the United States, the neo- Brandeisian school of antitrust (exemplified by new Federal Trade Commission chair Lina Khan) envisions a more vigorous role for government experts in managing the competitive process, particularly in the tech sector. Support for market solutions seems to be waning, with the entrepreneurial state playing a stronger role.

Such arguments must confront the well-known incentive and information problems facing public actors. Government decision-makers lack the high-powered incentives and access to the specialized knowledge held by market participants, those whose livelihoods depend on creating economic value. The differences in incentives between private-sector entrepreneurs (who seek to maximize profits) and government officials (who seek to maximize influence) and politicians (who seek to maximize votes) have been explored in detail in the property rights, rent-seeking,