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The Handbook of Technology and Innovation Management by Scott Shane

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16.6. Conclusions

What then is the role of public entities? Government provides a system of institutions that regulate the functioning of markets, provide infrastructure, protect property rights, and allow firms to engage in contracts for scarce resources. As emerging economies, such as India and China, embrace capitalism and promote entrepreneurship it will be interesting to see how their institutions and policies evolve. The tensions in the policy tradeoff between efficiency and equity are intensified when there are increasing returns to agglomeration economies. Collectively, state and federal programs can offer a framework of supporting public and private services available to firms for technological innovation and economic development.

As a thought experiment, consider a computer game that simulates innovation. The goal is to find an idea for a new product and take that idea to market. The winner is the player who makes the largest profits – simple enough. Where are public entities in this game? First, government defines the rules of the game, affecting everything from the supply of ideas to the demand for final products, the legal and regulatory frameworks that determine the functioning of market, and the ultimate accountings of what are profits and how these will be allocated. Nonprofit organizations, such as universities, government labs, and research consortia organizations, have a role in determining scientific opportunity and the rate of diffusion of innovation. Public ...

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