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REFERENCES
Chapter 1: Innovation, Risk and Government:
Perspectives and principles from the social
sciences
A full bibliography can be found at the end of
the reference list for this chapter.
1. The authors would like to warmly thank
Nick Crafts, David Newbery and John
Vickers for their thoughtful comments and
guidance. We have also benefited greatly
from discussions with Tim Besley, Stefan
Heck, Mark Schankerman and Cathy Zoi, and
with the other contributing authors to this
volume. We are grateful to the Grantham
Research Institute on Climate Change & the
Environment at the LSE for their support
in producing this chapter. Any errors or
omissions are our own.
2. See Perez (2010) and Stoneman (1995).
3. Hall & Rosenberg (2010) and Balconi et al.
(2010).
4. In addition, innovation applies to the
understanding of innovation itself — and a host
of other social processes and policy problems.
Hall & Rosenberg (2010) point out “the topic
of innovation systems and institutions is still in
its infancy empirically”. Gallagher et al. (2012)
point out that we need better measurement,
modelling and theorising about innovation.
This will allow better policy design, and a
more powerful innovation system, in the
future.
5. Department for Business, Innovation & Skills
(2014).
6. Crafts & O’Rourke (2014).
7. Crafts & O’Rourke (2014).
8. Christensen (1997).
9. In some cases, such as those of displaced
workers, those who lose may deserve
supportive policies; in other cases, like that
of firms in a competitive market, the threat
of being a loser is often what spurs further
innovation.
10. Sometimes strong stimulus for innovation
comes from threat and war, but not all
resulting innovations enhance human wellbeing.
11. Perez (2010).
12. Solow (1956); Swan (1956).
13. See, e.g., European Commission (2001), 5, 11.
Innovations increase productivity by using
existing resources in new or more productive
ways.
14. Galasso & Schankerman (2014).
15. Hall & Rosenberg 2010 p5.
16. Other market failures that may be relevant to
the incentives for innovation in certain sectors
(e.g. the energy sector) include network
infrastructure, coordination problems and
inadequate information.
17. Griliches (1992); Hall et al. (2009); Griffith et
al. (2004).
18. Galasso & Schankerman (2014).
19. Jaffe, et al. (2005).
20. For example, the political literacy and
enculturation that results in stable institutions
and a healthy society: see, e.g. Friedman (1962).
21. E.g. see Moretti (2004) Lange and Topel (2006).
22. Gallagher et al. (2012).
23. Stern (1989) provides a list of reasons why
government interventions can fail (at p. 616).
24. Winston (2006).
25. This concept draws on work of Schumpeter
(1934) and later ‘evolutionary’ theorists of
innovation (e.g. Nelson and Winter 1982).
26. Freeman (1995); Lundvall (2010).
27. Crafts & Hughes (2013). For example,
numerous authors conceive of the state
playing a role within innovation systems
beyond merely fixing market failures and
“facilitating” private sector innovation: see,
e.g., Johnson (1982); Chang (2008); Mazzucato
(2013).
28. E.g. see Lundvall (2007); Dasgupta & David
(1994).
29. See Knight (1921).
30. The Tick-Tock model is a chip technology
roadmap, where every 12-18 months either
a “tick” or “tock” is expected. A “tick”
represents a shrinking of transistor size, and
a “tock” represents a new microarchitecture
taking advantage of that smaller size. This
relative predictability is marketed to investors
as an attractive feature of Intel’s model. http://
www.intel.com/content/www/us/en/siliconinnovations/intel-tick-tock-model-general.html.
31. Gallagher et al. (2012).
32. See Grossman and Helpman (1991); Lipsey et
al. (2005); Ruttan (2006).
33. Cohen (2010).
34. Cohen (2010). Though of course, in the ICT
sector, there are many large firms as well, such
as Google, Apple, Microsoft and Facebook.
35. Cohen (2010); Schumpeter (1934).
36. Network linkages between firms and public
sector agencies (e.g. universities) are also
important and are discussed in the following
section on firms and other institutions.
37. Schilling and Phelps (2007); Nooteboom
(1999).
38. Coe and Helpman (1995).
39. LSE Growth Commission (2013).
40. Mazzucato (2013). Nicholas Stern was
directly involved as Chief Economist in the
1990s building principles and strategies for
the investments of the EBRD, on the board
preparing for the UK’s Green Investment
Bank, as Chief Economist of the World Bank
(2000-2003), and in the design and launch
of the new BRICS-led development bank
(announced on 15/7/2014).
41. Cohen (2010).
42. Cohen (2010).
43. Bloom and Van Reenen (2006).
44. i.e. innovators are unable to capture the full
returns from their innovation.
45. Baumol (2002).
46. Galasso & Schankerman (2014).
47. When patents are annulled, small firm
innovation increases by a remarkable 520% on
average: Galasso & Schankerman (2014).
48. Foray and Lissoni (2010).
49. Many studies find that the co-location of
start-ups and universities has little effect upon
innovation or the strength of cross-sectoral
relationships: see Foray & Lissoni (2010) pp.
303-305 and references there cited.
50. Foray & Lissoni (2010)
51. Azoulay et al. (2011); Editor (2009).
52. Azoulay et al. (2011).
53. E.g. see Etzkowitz, H. (2003).
54. See Foray & Lissoni (2010); Agrawal and
Henderson (2002).
55. Dasgupta & David (1994)
56. Foray & Lissoni (2010); Philpott et al. (2011).
57. See Higgs (2013); Zimmer, M. (2009). GFP:
from jellyfish to the Nobel prize and beyond.
Chemical Society Reviews, 38(10), 2823-2832;
and Azoulay et al. (2011).
58. Kahneman & Tversky (1979).
59. Chen and Miller (2007); Chen (2008).
60. IEA (2014), Data Services Table. See public
energy R&D spending from 1970s to
the present day. http://wds.iea.org/WDS/
TableViewer/tableView.aspx.
61. This debate is framed as intrinsic motivation/
extrinsic incentive in behavioural economics
(e.g. see work by Swiss economist, Bruno Frey
(1994 and 1997) on how intrinsic motivation
can be crowded out by extrinsic incentives).
Or for example, using financial incentives to
improve teacher and student outcomes—
one prerequisite for an effective innovation
system—can actually harm educational
outcomes. E.g. Fryer (2010 and 2011).
62. E.g. on soft vs. hard institutions see: Klein
Woolthuis et al. (2005); Lundvall (2010).
63. See, e.g., Kahneman (2011); Thaler and
Sunstein (2008); Mullainathan and Shafir
(2013).
64. Johnson and Goldstein (2004).
65. E.g. see Behavioural Insight Team (2012) Paper
on Fraud, Error and Debt; Wenzel (2004).
66. Camerer et al. (2003).
67. Haynes et al. (2012).
68. As countries “approach the frontier” of
innovation, it “becomes more important
to have high-quality education”: Crafts &
O’Rourke (2014).
69. See the above discussion on patents in section
B(ii).
70. Smits and Kuhlmann (2004).
71. Azoulay, Graff Zivin and Manso (2011); Editor
(2009). Further, we note that principal/
agent issues would be relevant to how much
freedom is needed to foster innovation and
how such a system would be managed. At the
same time, it would be beneficial to find the
right balance between the micro-management
of innovators and total freedom.
72. Griliches (1992); Hall et al. (2009); Griffith et
al. (2004).
73. European Council for Nuclear Research, see
http://home.web.cern.ch/.
74. Mazzucato 2013.
75. Abbate (1999); National Research Council
[US] (1999); Mazzucato (2013).
76. Motoyama et al. (2011). The US Government
currently spends $1.8 billion across 13 state
agencies on the National Nanotechnology
Initiative: Mazzucato (2013); http://