Chapter

Innovation Policy, Entrepreneurship, and Development: A Finnish View

Otto Toivanen

in Entrepreneurship, Innovation, and Economic Development

Published in print April 2011 | ISBN: 9780199596515
Published online September 2011 | e-ISBN: 9780191729133 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199596515.003.0008

Series: WIDER Studies in Development Economics

Innovation Policy, Entrepreneurship, and Development: A Finnish View

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This chapter scrutinizes one of the most frequently applied instruments of innovation policy, namely research and development subsidies. Despite a strong theoretical case, the chapter is reluctant to point out that the complexity of crafting an appropriate R&D policy is significant, particularly given the informational challenges facing governments. Furthermore, while R&D subsidies can be useful to realize externalities and can be tailor-made to fit an entrepreneur's needs, they also have a number of shortcomings as a tool to promote innovation in small enterprises. The chapter warns, with reference to the well-run Finnish R&D system, that it is not clear to what extent innovation can be copied by developing countries. It requires well-developed institutional and administrative capabilities, which are not available in all countries. It is stressed that any effective innovation support system will require prior investments in education, labour skills, and human capital.

Keywords: innovation policy; R&D subsidies; developing countries; interim efficiency; market failure

Chapter.  5445 words.  Illustrated.

Subjects: Economic Development and Growth

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