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What makes states entrepreneurial?

by Rainer Kattel | @rainerkattel

If you have successfully avoided the urge to print this article out, you owe your reading experience to the forward-thinking investment of governments. Much of the technology in your reading device was funded either directly by the public sector or is a spillover from this funding. It may have been commercialised and packaged into new desirable and useful products, but the fundamental technologies that makes our modern devices “smart” were publicly funded. This was set out in Mariana Mazzucato’s highly influential The Entrepreneurial State which showed that governments can be — and are — essential actors in co-shaping the direction of innovation.

But what makes states entrepreneurial? What is it that makes government machinery dynamic and bold enough to shape the future of innovation? Some may shudder when encountering such questions: aren’t governments more often failures than markets? Aren’t governments just supposed to provide basic and stable institutions for markets to function and innovate?

Something seems to have shifted with the global financial crisis of 2008. This might not be immediately obvious as the last decade has been dominated (at least in the West) by austerity, rising inequality, migration fears, the rise of populism and terrorism. However, slowly but surely, the state and its relationship to innovation are visibly growing in importance. Even the President of the United States Donald Trump has created an Office for American Innovation — to “bring together the best ideas from Government, the private sector, and other thought leaders to ensure that America is ready to solve today’s most intractable problems”. Whether this is sincere is not the point — the point is that it is recognised, by all parties regardless of political creed, that something must change.

The global debate over the last years has not been so much about the question of “can bureaucracies innovate?” but — at least implicitly — about how they can. The more policymakers realise that an increasing number of policy issues are “intractable” and “wicked” — meaning, simply put, that we as humans are as much the cause of these problems as we are sources for potential solutions — the more innovation and public leadership of innovation seem to matter.

Capacity for innovation in bureaucracy is about having the space — skills, networks, organisations — for both agility and stability.

This sounds oxymoronic but taking care of public business — public administration — often means balancing the needs to change because life around us is changing, and the requirements of permanence because nobody would like policy experiments with their pensions, even if for a moment, investing them in bitcoins might seem attractive. As weird as it may sound, successful governments—entrepreneurial states — manage precisely that: they are able to create space for agility (taking risks and experimenting, responding to new challenges) and providing stability (minimising long-term risks and uncertainty). Originally, the word “capacity”, which seems to be medieval neo-Latin, strictly meant “space for something”, a sense in which it is also still used today. Capacity for innovation in bureaucracy is about having the space — skills, networks, organisations — for both agility and stability.

Nothing exemplifies this perhaps better than the 2015 European refugee crisis. Governments had to find quick solutions from personal identification to housing hundreds of thousands of refugees, while at the same time they needed to make sure that these quick fixes were not only compatible with existing legal frameworks but also offered long-term solutions of integrating the new arrivals.

Niccolo Machiavelli argued that replacing old political institutions with new ones is… innovation

History tells us that governments create capacity for innovation through new organisations or new organisational forms, often led by charismatic outsiders or networks of such people. This seems, in fact, to be the origin of the concept of innovation, as none other than Niccolo Machiavelli argued that replacing old political institutions with new ones is… innovation. Such sentiments apparently led an anonymous author to claim in 1681 that “All innovations in government are dangerous”. Today’s popular call to disrupt the government through innovation is, to say the least, as old a hat as that on the head of a Renaissance soldier of fortune in an Uccello painting. In the European context at least, political peace and order are sustained by including elements and institutions of constant change and innovation into the very order itself.

MindLab was the one of the first public sector innovation labs in the world

Today we see a flurry of activity around the edges of the public sector in the form of innovation, design and policy labs. In some cases, these new organisational forms and ways of working reach close to the heart of government machinery, such as MindLab did in Denmark and or Government Digital Service (GDS) did in the UK. Yet, MindLab will close this year; GDS has arguably lost its revolutionary zeal. Agility itself is not enough, its strengths need to become part of ‘the routine’, part of what governments do in daily life — this capacity for rejuvenation is at the heart of innovative bureaucracy. Without it we can’t change the restrictive narrative that limits the public sector to just being a market fixer — and this means that we will risk losing the important innovations of tomorrow.

This article is based on Rainer Kattel’s forthcoming book, Innovation Bureaucracies, with Wolfgang Drechsler and Erkki Karo, to be published in 2019 by Yale University Press.

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UCL Institute for Innovation and Public Purpose

UCL Institute for Innovation and Public Purpose

Changing how public value is imagined, practiced and evaluated to tackle societal challenges | Director: Mariana Mazzucato | Deputy Director: Rainer Kattel