Mission-oriented public organizations for knowledge creation

The purpose of this chapter is to investigate and discuss the role played by the state in enhancing technological progress, creating knowledge and fostering radical innovation. This catalyst function may take place in different ways. The authors focus on two channels: (a) R&D of traditional state-owned or state-invested enterprises and (b) public procurement for innovation (PPI) through research infrastructures, which according to the authors are a new form of knowledge-based public enterprise. Public enterprises and public organizations in general may in fact play an active role as inventors and innovators. Recent evidence published by Musacchio (2017), Sterlacchini (2012), and Clò, Florio and Rentocchini (2017) shows that public enterprises may innovate even more intensively than their private peers. This is because government can act as a long-term investor while private firms are more likely to have a short-term view and be financially constrained. Moreover, the public sector adopts a more positive attitude to risk taking and engages in more risky research (see Mazzuccato, 2016): it can invest in breakthrough technologies, in pure research and in areas where discoveries may have less marketable applications. On the other hand, private companies are more oriented towards promising technologies with more immediate economic opportunities. The authors shed light on these mechanisms and provide new evidence about the innovative capacity of state-owned enterprises by comparing their R&D and patent behaviours and propensities in high-innovation sectors with those of private companies. A second relevant role for government is to stimulate innovation via public procurement. This is considered an important demand-side innovation policy (see Aschhoff & Sofka, 2009; Martin & Tang, 2007), especially when the development of sophisticated products is required. PPI occurs when public authorities act as launch customers for innovative goods or services that do not exist yet or are not available on a large scale. Acting as first buyer, the government enlarges the size of the market and creates new segments. Again, this is crucial in economic fields characterized by high risk that cannot be borne entirely by the private sector. Empirical studies have shown that PPI has a positive effect on firms’ R&D investment, with a greater demand-pull effect than that of other private contracts (Litchtenberg, 1988), and it is a possible complement or even an alternative to supply-side policies (Edler & Georghiou, 2007). PPI’s impact on firms’ expenditures on innovative activities is stronger than that of R&D subsidies and tax credits (Guerzoni & Raiteri, 2015; Mazzuccato, 2016). Particularly interesting is the case of procurement contracts for large-scale research infrastructures (RIs). The existing literature, mainly based on supplier surveys and case studies, suggests that PPI may generate significant technological spillovers accruing to (private) firms involved in the RI supply chain. This kind of analysis has been applied to different RIs such as CERN (Schmied, 1977; Bianchi-Streit et al., 1984; Autio et al., 2003; Autio, 2014; Florio et al., 2017), NASA (Hertzfeld, 1998; Chapman et al., 1989) and ESA (Schmied, 1982; Schenk et al., 2002). Another relevant strand of the literature has applied cost-benefit analysis to research, development and innovation infrastructure (see Florio, Forte & Sirtori, 2016; Battistoni et al., 2016). The authors critically review existing contributions and summarize their main findings.