The Limits of Capital : Transcending the Public Financer - Private Producer Split in R&D

A near consensus has emerged supporting the public funding of industrial Ramp;D as a solution to a host of market failures. However, the common policy prescription urges government to go no further than minimal lsquo;market enhancing' intervention, largely keeping the state to the role of financer of privately conducted Ramp;D. By focusing on three general issues in the context of industrial Ramp;D ndash; trust, coordination, and motivation ndash; this article develops an argument for a more expansive government role. Two models of state intervention are at the center of the analysis: public production of Ramp;D, and state sponsorship of inter-firm and inter-organizational networks. It is argued that both these models have distinct advantages, as well as weaknesses, in addressing common challenges to industrial Ramp;D production. Informed by the positive experiences of different states that have moved in recent years from high technology industries' periphery to the center, this article explains how the two models of state intervention address the various problems associated with pure private production. It is concluded that while even advanced countries with well developed markets might find it advantageous to actively intervene in industrial Ramp;D, the two models should especially be considered in cases of economies that suffer from weak market signals, low retention of value-added functions, limited professional capacities, and limited institutional thickness and networks