Policies to Stimulate Innovation and Entrepreneurship

Most advanced industrialized countries today justify their innovation policies on the basis of the dominant knowledge-based growth paradigm—primarily investment in R&D and education, as we saw in Chap. 2 . However, in terms of how growth policy should be formulated, this provides an incomplete guide which even borders on the misleading. The reason behind this misguided thinking is simplistic assumptions, both about how an economy functions and about the innovation process itself. Innovation is still seen as an exogenous force that can be stimulated through government funding targeting R&D, start-ups, and small businesses, which will then fuel higher growth and increased prosperity.