Innovation Policy and Industrial Strategy
How governments shape technological innovation through R&D funding, industrial policy, and strategic investment -- and what works.
The Government's Role in Innovation
The myth of innovation as purely a private sector activity ignores history. The internet was developed by DARPA. GPS was a military project. Touchscreens, voice recognition, and the web browser emerged from government-funded research. mRNA vaccine technology was built on decades of NIH-funded basic research. Economist Mariana Mazzucato argues that the state has been the most important risk-taker in innovation, funding the early-stage research that private companies later commercialize.
Global R&D spending reached roughly $2.5 trillion in 2023. The US spends roughly 3.5% of GDP on R&D, with government funding accounting for about 25% of the total. South Korea and Israel lead at over 5% of GDP. China has increased R&D spending tenfold since 2000, now exceeding 2.5% of GDP. The correlation between R&D investment and economic dynamism is robust.