Lecture

Market Failures: Innovation Challenges

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In course

MGT-408: Transitions, sustainability and technology policy

This course addresses the issue of designing innovation strategies and technology policies to support transitions towards sustainable development goals. ...

Description

This lecture discusses the challenges of innovation due to market failures, focusing on four types: positive externalities, unhedged uncertainty, high fixed costs, and coordination failures. It explores how these failures impact the innovation process, financing difficulties for small firms, and the role of large firms in overcoming market obstacles.

Instructor

Dominique Foray

1 - Current occupations and activities I am Full Professor at the Ecole Polytechnique Fédérale de Lausanne (EPFL) and hold the Chair of Economics and Management of Innovation (CEMI). I am a member of the Swiss Council for Science (SWR); chairman of the Advisory Board of the Swiss Economic Research Institute (KOF); and a foreign member of the Center of Capitalism and Society (Columbia University, New York). From 2007 to 2015, I served as a member of the Swiss National Research Council (Division IV - Large Scale Programs) From 2013 to 2016, I was a member of the Expert Commission for Research and Innovation of Germany (E-FI) and a member of the Expert Group for the National Report on Research and Innovation (SBFI, Switzerland). From 2008 to 2011, I served as chairman of the expert group Knowledge for Growth; a group of prominent economists created to advise Commissioner J. Potocnik (European Commission, DG research). This is during this service as member of this Group that I developed the concept of smart specialisation (together with P.A.David and B.Hall) that is now a key policy mechanism of the EU (cohesion policy). My expertise includes the economics of innovation and knowledge and the economic policy implications of the new knowledge-based economy. I have presented many opening speeches and key note address in academic and policy conferences on these topics. I have written numerous academic papers as well as two books and have edited several books and special issues in these fields. Among these books,I like to highlight : Technology and the Wealth of Nations (Pinter, 1992) ed.with C.Freeman; Unemployment and Growth in the Knowledge-based Economy (OECD, 1996), ed. with B.A.Lundvall; Knowledge economies and societies (a special issue of the International Social Science Journal, Basil Blackwell, 2002, with editions in French, Spanish, Chinese, Arabs, Russian); The Economics of knowledge (MIT press, 2004, paperback in 2006) with editions in France, Italy, Korea, China, Greece, Syria and Algeria The New Economics of Technology Policy(Edward Elgar)2009, ed.; . Smart specialisation : opportunities and challenges for regional innovation policy(Routledge, 2015) Since 2017, I regularly contribute to the Swiss Science Council blog: https://blog.wissenschaftsrat.ch/ 2 Education, previous appointments and academic positions - I received my Ph.D. in economics in 1984 and my "habilitation à diriger des recherches" in 1992 from the University Lumière of Lyon. - In 1985, I joined the Centre National de la Recherche Scientifique (CNRS) as a Research Fellow in economics. - In 1990, I joined the Ecole Centrale de Paris as professor of economics, and taught in the program ingénieur économiste. - In 1993, I was nominated as Research Director at CNRS and joined the Institut pour le Management de la Recherche et de l'Innovation (IMRI) of the University of Paris-Dauphine. - In 2001-2004, I worked as a Principal Analyst at the Center for Education, Research and Innovation of OECD (Paris). - I joined the EPFL as Professeur Ordinaire in 2004. 3 - Honours and awards Best young economist award - City of Lyon (France)1986 Outstanding research in 1995 (médaille du CNRS)(France) Futuris award in 2012 for his work on smart specialisation Best paper award, EJIM, 2014 Doctor Honoris Causa, University of Cluj Napoca, 2017 I was also elected as Research Fellow at ICER (International Center for Economic Research) in Turin, at the Wissenschaftskolleg in Berlin and at IIASA in Laxenburg; and I was Invited Professor at the Universities of Santiago de Compostela, Torino and Padova. 4 - Consulting activities I have done consulting work for the UNESCO, the OECD, WIPO, UNCTAD, UN/ECE, the European Commission, the Swiss Government and other public organisations. I am currently strongly involved into the "smart specialisation" debate in Europe, giving talks and providing advices in many countries and regions in Europe.

Official source

Related concepts (26)

Market failure

In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where individuals' pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point of view. The first known use of the term by economists was in 1958, but the concept has been traced back to the Victorian philosopher Henry Sidgwick.

Government failure

Government failure, in the context of public economics, is an economic inefficiency caused by a government intervention, if the inefficiency would not exist in a true free market. The costs of the government intervention are greater than the benefits provided. It can be viewed in contrast to a market failure, which is an economic inefficiency that results from the free market itself, and can potentially be corrected through government regulation. However, Government failure often arises from an attempt to solve market failure.

Islamic banking and finance

Islamic banking, Islamic finance (مصرفية إسلامية masrifiat 'iislamia ), or Sharia-compliant finance is banking or financing activity that complies with Sharia (Islamic law) and its practical application through the development of Islamic economics. Some of the modes of Islamic banking/finance include Mudarabah (profit-sharing and loss-bearing), Wadiah (safekeeping), Musharaka (joint venture), Murabahah (cost-plus), and Ijara (leasing).

Market (economics)

In economics, a market is a composition of systems, institutions, procedures, social relations or infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services (including labour power) to buyers in exchange for money. It can be said that a market is the process by which the prices of goods and services are established. Markets facilitate trade and enable the distribution and allocation of resources in a society.

Theory of the firm

The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market. Firms are key drivers in economics, providing goods and services in return for monetary payments and rewards. Organisational structure, incentives, employee productivity, and information all influence the successful operation of a firm in the economy and within itself.

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