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Old 08-14-2014, 04:12 PM   #174
Tinordi
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APPLE is generally regarded as an embodiment of everything that is best about innovative businesses. It was started in a garage. For years it played a cool David to Microsoft’s lumbering Goliath. Then it disrupted itself, and the entire entertainment industry, by shifting its focus from computers to mobile devices. But there is something missing from this story, argues Mariana Mazzucato of Sussex University in England, in her book, “The Entrepreneurial State”. Steve Jobs was undoubtedly a genius who understood both engineering and design. Apple was undoubtedly a nimble innovator. But Apple’s success would have been impossible without the active role of the state, the unacknowledged enabler of today’s consumer-electronics revolution.

Consider the technologies that put the smart into Apple’s smartphones. The armed forces pioneered the internet, GPS positioning and voice-activated “virtual assistants”. They also provided much of the early funding for Silicon Valley. Academic scientists in publicly funded universities and labs developed the touchscreen and the HTML language. An obscure government body even lent Apple $500,000 before it went public. Ms Mazzucato considers it a travesty of justice that a company that owes so much to public investment devotes so much energy to reducing its tax burden by shifting its money offshore and assigning its intellectual property to low-tax jurisdictions such as Ireland.

Likewise, the research that produced Google’s search algorithm, the fount of its wealth, was financed by a grant from the National Science Foundation. As for pharmaceutical companies, they are even bigger beneficiaries of state research than internet and electronics firms. America’s National Institutes of Health, with an annual budget of more than $30 billion, finances studies that lead to many of the most revolutionary new drugs.

Economists have long recognised that the state has a role in promoting innovation. It can correct market failures by investing directly in public goods such as research, or by using the tax system to nudge businesses towards doing so. But Ms Mazzucato argues that the entrepreneurial state does far more than just make up for the private sector’s shortcomings: through the big bets it makes on new technologies, such as aircraft or the internet, it creates and shapes the markets of the future. At its best the state is nothing less than the ultimate Schumpeterian innovator—generating the gales of creative destruction that provide strong tailwinds for private firms like Apple.
http://www.economist.com/news/busine...ive-businesses
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