There is increasing interest in the role of institutions and governments in driving innovation, so I’ve recently been reading a few books that make the case for why institutions matter for the economy and society: Why Nations Fail: The Origins of Power, Prosperity and Poverty by Daron Acemoglu and James A. Robinson, Institutions, institutional change and economic performance by Douglass C North and The Entrepreneurial State: Debunking public vs private sector myths by Marianna Mazzucato.
You only have to look at a photo of the Haiti/Dominican Republic border and see the deforestation in Haiti compared to the lush landscape of the Dominican Republic to know that institutions and governments matters. Why Nations Fail makes this argument in a fantastically well written and absorbing book. The authors argue that sound institutions are key to enable ‘virtuous circles of innovation’ and explains that they make the differences between nations that have thrived versus ones that are in crisis in otherwise similar circumstances. This is a must-read for those interested in innovation and economic development and is fascinating in the examples it presents.
Much of it brings right up-to-date the analysis of a book I read 20 years ago as an Economic Geography student: Institutions, Institutional change and economic performance. This presents an analytical framework for understanding how institutions affect economic performance and can lead to either growth and development or stagnation. It also uses history as well as more contemporary examples in one of those short, punchy formats that clearly and brilliantly makes the case for a new theory.
Meanwhile I had also been reading The Entrepreneurial State by Marianna Mazzucato who was a keynote speaker at our Social Frontiers conference in November. She makes the case for the state as a driver of entrepreneurship and innovation, debunking the myth that states are negative bureaucracies that act as a drag on economic growth. She argues that from the iPhone to the energy sector the state has taken risks that have paid off, and that its role should be recognised in driving innovation.
If you’re interested in how institutions can drive innovation, these were certainly a good place to start for me.
This was also published on Nesta’s website on 27 January 2014
