Unleashing Society’s Innovative Capacity: An Integrated Policy Framework (International Studies in Entrepreneurship, 55)

This is an open access book. Europe faces significant challenges in the coming decades: geopolitical, demographic, technological, increased competition, climate-related, and health issues due to an aging population, to mention a few. Given these challenges, technological progress and new ways of handling complex issues will be key to continued prosperity and growth. To accomplish a growth process driven by innovation and entrepreneurship, the institutional environment must take into account a multitude of different policy areas that interact to either strengthen or weaken an economy's innovative potential. Innovation is not only about R&D and higher education but is also intimately related to entrepreneurship. Similarly, entrepreneurship is not only about low start-up costs and favorable tax rates. Hence, a consistent and coordinated policy environment conducive to innovation and entrepreneurship is required to translate innovation into high-growth firms and macro-level growth. This book presents the basic cornerstones required to provide a policy regime that can nurture such dynamics. The authors draw extensively on empirical analysis of the development of the Swedish economy, which has been transformed from a so-called "sclerosis" state in the 1980s until the early 1990s to an economy characterized by successful entrepreneurship and innovation. This transformation resulted from a reform agenda that has been gradually rolled out, beginning in the mid-1980s. The authors argue that the Swedish experience provides useful lessons for other nations as well. Preface Acknowledgements About This Book Contents About the Authors List of Figures List of Tables Chapter 1: The Challenge 1.1 The Swedish Example 1.2 The Challenges Ahead 1.2.1 Globalization or Deglobalization? 1.2.2 The Growing Service Sector and the Labor Market 1.3 Competition, Innovation, and Institutions 1.3.1 The Emerging Platform Economy 1.4 Climate Change 1.5 Innovation Is Key 1.5.1 The Flow of Knowledge 1.6 The Importance of the Entrepreneur 1.6.1 Diverse Types of Entrepreneurs 1.7 The Crucial Role of Government 1.8 Sweden in an International Perspective: Some Country-Level Comparisons 1.8.1 Knowledge Accumulation 1.8.2 Knowledge Diffusion References Chapter 2: Theories of Growth, Innovation, and Entrepreneurship 2.1 Development of Growth Models 2.1.1 The Neoclassical School 2.1.2 Endogenous, Knowledge-Based Growth Models 2.1.3 Neo-Schumpeterian Growth Models 2.1.4 Critique of Endogenous Growth Models 2.2 Evolutionary Growth Models: Schumpeter’s Legacy 2.2.1 The Role of Entrepreneurship 2.2.2 The Importance of the Entrepreneur for Growth 2.2.3 The Importance of New Firms 2.2.4 Entrepreneurship as a Factor of Production 2.2.5 The Evolutionary Approach to Economic Growth 2.3 Small Businesses and Entrepreneurs: The Empirical Picture 2.4 In Sum Appendix: Measuring Entrepreneurship References Chapter 3: Promoting Entrepreneurship and Innovation: The Institutional Framework 3.1 The Rule of Law and Protection of Property Rights 3.2 National Innovation Systems 3.3 Public Support for R&D 3.4 National Systems of Entrepreneurship/Entrepreneurial Ecosystems 3.5 Growth at the Firm Level: The Collaborative Innovation Bloc 3.6 Financing Expansion 3.6.1 Stock Options Help to Build Firms 3.6.2 Exit Routes 3.7 Human Capital and Academic Entrepreneurship 3.8 Dynamics in Tax-Financed Welfare Services 3.9 Urbanization, Agglomeration, and Innovation 3.9.1 Agglomerations and Cluster Formation 3.10 In Sum References Chapter 4: Policies to Stimulate Innovation and Entrepreneurship 4.1 The Need for a Broad Strategy 4.1.1 Subsidies to R&D? 4.1.2 Not Only Start-Ups or Small Businesses 4.1.3 The Importance of High-Growth Firms 4.2 The Education System 4.2.1 Test Results and National Economic Performance 4.2.2 The Quality of Sweden’s Primary and Secondary Education 4.2.3 The Role of the University Sector 4.3 Private R&D 4.4 Channeling of Savings 4.5 The Functioning of the Labor Market 4.5.1 Labor Market Regulations 4.5.2 Wage Formation 4.5.3 The Labor Market and the Social Insurance System 4.6 Product Market Regulations 4.7 Tax-Financed Welfare Services 4.7.1 Public or Private? 4.7.2 Customer Choice and Consumer Protection 4.7.3 The Role of Profit in the Welfare Sector 4.8 The Housing Market and the Benefits of Agglomeration 4.8.1 The Importance of Price Efficiency 4.8.2 Driving Forces for Relocation 4.8.3 Other Measures to Increase the Benefits of Agglomeration 4.9 Attitudes and Cultural Perceptions 4.10 Conclusions References Chapter 5: Tax Policy to Stimulate Innovation and Entrepreneurship 5.1 Taxation of Ownership and Different Sources of Finance 5.2 Taxation of Other Entrepreneurial Efforts 5.3 Taxation and the Return on Human Capital Investment 5.4 Conclusions Regarding Taxation 5.5 Lessons from Chapters 4 and 5 Appendix: Owner-Level Taxation of Closely Held Firms References Chapter 6: Conclusions: A Framework for Innovation Policy 6.1 The Use of Frameworks for Key Policy Areas 6.2 An Innovation Policy Framework 6.2.1 Build and Assemble Knowledge 6.2.2 Dissemination, Innovation, and Commercialization of Knowledge 6.3 An Innovative and Inclusive Society References Index