Political Failures in Innovation Policy: A Cautionary Note

34 Pages Posted: 3 Jun 2020 Last revised: 7 May 2021

See all articles by Anders Kärnä

Anders Kärnä

Research Institute of Industrial Economics (IFN); Örebro University - Department of Economics

Johan Karlsson

Jonkoping University - Jonkoping International Business School (JIBS)

Peter Svensson

affiliation not provided to SSRN

Erik Engberg

affiliation not provided to SSRN

Date Written: May 5, 2020

Abstract

Within the field of innovation studies, researchers have identified several market failures that hamper investment in R&D, innovation and growth in a market economy. Several policies such as government subsidies, tax deductions, soft loans, and public venture capital provided to firms that pursue R&D have therefore been recommended by researchers, in addition to regulations to increase the quality and standards of goods and services. Less attention has been paid to government failures in cases where a policy fails to achieve its stated goal, often due to conflicts between the interests of special interest groups and the public. This paper discusses the concept of government failure within an innovation policy context and why this perspective is important for policy design since it is likely that policies that aim to reduce market failures could suffer from political failures. A text analysis of all papers published in 5 leading innovation journals between 2010 and 2019, a total of 5,526 papers, indicates a lack of research about government failures, which could lead to recommendations from researches to policymakers not being successful due to political failures.

Keywords: Innovation Policy, Political Economy, Political Failure, Market Failure, Public Choice

JEL Classification: L52, O38, H81, L26, G28, P16

Suggested Citation

Kärnä, Anders and Karlsson, Johan and Svensson, Peter and Engberg, Erik, Political Failures in Innovation Policy: A Cautionary Note (May 5, 2020). IFN Working Paper No. 1334, 2020, Available at SSRN: https://ssrn.com/abstract=3593332 or http://dx.doi.org/10.2139/ssrn.3593332

Anders Kärnä (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Örebro University - Department of Economics ( email )

SE-70182 Orebro
SWEDEN

Johan Karlsson

Jonkoping University - Jonkoping International Business School (JIBS) ( email )

Jönköping, 55111
Sweden

Peter Svensson

affiliation not provided to SSRN

Erik Engberg

affiliation not provided to SSRN

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