Ratio public expenditure on GDP by country in ...

Ratio Public Expenses on GDP by Country

If we bring some politicians together in order to analyze some actions to improve economy, all of them will think that innovation is a must to act as an impulse of the growth.

The main differences about their proposals are related to two main issues: main driver and finance.

How must a society drive innovation? Must it be driven from private initiative or public administration? And how must it finance innovation?

Going a step down, large corporations divide the innovation work in corporative and operative. Some authors have analyzed the proper role of every department, and there is high consensus about the role of a corporate innovation department. In a diversified company, corporate innovation only should provide finance, standards and should analyze the results and the overall performance of the system.

As a nation can be seen as a diversified production unit, the government should not drive sectorial innovation projects and let this role for the private initiative. Of course, government must control the progress defining standards, supporting innovation financing and measuring the performance of the system. But it could be a huge error trying to impulse innovation substituting private initiative in a market economy, although, there can be some situations where public effort can be needed.

The effect of the different policies will depend on the selected projects to be financed with public funds, the regulation to facilitate the activity and the incentives to join public research (and its human and material public resources) with private innovation.

The goodness of this kind of organization can be explained in terms of complexity. It does not need larger structures that can increase the complexity, and provides a more efficient way to take advantage of the public resources. Other thing that simplifies the performance of the public administration is the management of the funds. If innovation is produced by the activity of the enterprises, it can be controlled by the same public department that controls the regular activity of the enterprises, the Treasury, especially if innovation is promoted through tax deductions, with less structure of officials.