SPRU - Science Policy Research Unit

Economics of Innovation and Industrial Policy

Modern capitalism faces great societal challenges. In an era of financial crisis and austerity coupled with serious global issues such as rising unemployment, climate change, poverty, it is critical to address the pressing challenge of reigniting and redirecting economic growth and driving the innovation needed for sustainable, inclusive growth.

Historically, the study of the Economics of Innovation has acted as a central pillar within SPRU’s diverse research portfolio, providing key theoretical and empirical tools for policy areas such as industrial policy, innovation policy and development policy. For more information see: History of Economics of Innovation at SPRU.

SPRU’s current research focuses on advancing the economic theory of innovation, whilst also resetting the foundations of orthodox economics and advancing the fields of evolutionary and institutional economics. We seek to understand the structure and dynamics of innovating firms and industrial systems, how to enhance innovation capabilities of firms and other stakeholders in developed and developing countries, as well as how to steer structural changes towards sustainable growth.

Our research addresses policy-relevant issues including fostering inclusive growth and innovation, the feedback relationship between finance and innovation and mapping complex patterns in firm and market dynamics. Our key concern is to help strengthen innovation and industrial policies around the world.  

Our work is currently focused on four main areas:

Industrial Policy
We conduct both empirical and theoretical research to explicitly model the interaction between different sources of structural change. In particular focusing on the long-term changes in firm production process, sectors, firm organisation and labour compensation, income distribution and demand patterns.

Economic Development and Growth
Our research has contributed to the analysis of the determinants and impact of long-term structural change which has led to the tertiarisation and de-industrialisation of economies, and linking these processes with major technological paradigms, most notably Information and Communication Technology. Research is currently focused on the evolution of the international fragmentation of production and its implications for industrial policy in developing countries, as well as inclusive innovation, and the role of public policy in creating and shaping markets.

Firm Growth and Industrial Dynamics 
Members of the group are actively investigating a number of different areas such as growth and size distributions; firm population dynamics and growth; entrepreneurship; start-ups; empirical regularities on firm’s entry, exit and growth; and the importance of both demand- and knowledge-related barriers. 

Financing Innovation and Financialisation
Our research has brought together the two central research paradigms in economics - the Keynes-Minsky vision ands the Schumpeter-Minsky vision - to provide rigorous and critical analysis of competition in the financial sphere and how it interacts with competition in the industrial sphere. Recent research has analysed the micro-level obstacles to channelling investment into new growth-promoting technologies and the large-scale effects of disruptive innovation. Another key are of research has been into understanding the relationship between value creation and value extraction as well as venture capital and its relationship with the structure and scale of the stock market.

For more information please contact:

Professor Mariana Mazzucato