Tuesday, March 24, 2015

We Don’t Need No State! Wait. The State Funds That? Never Mind.

Guest Blogger

Deven Desai

For the Innovation Law Beyond IP 2 conference, March 28-29 at Yale Law School

The sub-theme for Innovation Law Beyond IP 2 is “Bringing the State Back In.” That theme prompted me to submit a proposal in part because I am not sure the state ever left. The assumption of bringing the state back in seems to be that it has been pushed out or ignored. Marianna Mazzacuto’s white paper on the state and innovation and her follow-up book, The Entrepreneurial State, on the topic offer another perspective: that society has under-valued the state’s role in innovation.

As I kicked around the conference theme, I thought about the number of times I had said the term. "Innovation" has been gutted of meaning. When I worked it Silicon Valley, I was constantly hearing that everything and everyone was "innovative." What do you want to be? Innovative. Why should we fund you? We are innovative. Why shouldn’t we tax you? We will stop innovating. It reached a point that I’d not be surprised if someone claimed to be innovative in the way they crossed a street. The ever-present invocation of innovation made me think: what exactly do we mean by innovation? And are some innovations more important than others? Furthermore, from where do innovations come?

Part of the problem is that the focus on innovation in general misses that any given innovation is part of a system, and it is the system that matters. If we think about systems that support innovation, it appears that there are three parts to such a system:
  1. discovery
  2. invention
  3. innovation.
The state plays a role for each part. The problem today seems to be that as soon as one talks of the state being involved in anything, what Fred Block has called “market fundamentalism” rises to challenge and deny that the state has any role to play. In addition, the Schumpeterian idea of gales of creative destruction has been claimed by many sides of the innovation policy debate and confuses the debate further. As I read Schumpeter, I found that he recognized the differences between invention and innovation. He also recognized that not all innovations are equal.

Innovation that shifts or builds a sector, that sparks imagination and investment, that in hindsight creatively destroys is in fact a cluster of activity backed by complex system of research, regulation, and reciprocity. When we talk of state policy behind innovation, we must be clear about what innovation we wish to foster. As Fred Block’s work has shown, the state has played an amazing and beneficial role in fostering a host of innovations. I must note that his documentation of growing and persistent state involvement and support during 1980-1992 (the Reagan and Bush Sr. years) is a great way to see that the state matters and indeed “is here to help.”

As society forgets the ways the state matters or that there are some things the state is best-placed to do and some things that the private sector is best-placed to do, policy will suffer. Recent work and changes in the economy mean exact replicas of old, mission-based approaches to innovation are less likely to work. And there are ways in which state policy towards each stage of the system can be improved. Nonetheless, arguing the state must stay out of the way is to forget the history of how the state has helped innovation in massive parts of the economy. If we forget that, we are doomed not to repeat a rather good history, and that would be a mistake.

Deven Desai is Associate Professor in the Scheller College of Business at Georgia Tech. He can be reached at devenrdesai at


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