Innovation through collaboration?

Contributing to the Swedish Economic Forum Report for 2021 with a piece on whether innovation happens through collaboration or not. Complete reference below:

Sandström, C. (2021) Innovation through collaboration in order to meet grand challenges? A critique of current trends in industrial policy, in Andersson, M., Deiaco, E. and Eklund, J. Swedish Perspectives on Industrial Policy, Entreprenörskapsforum, Stockholm, 2021.

The chapter can be accessed here.

Here’s the summary:

“First, theories on the division of labor would suggest that firms collaborate to the extent that they find to be useful, and beyond doing so, they specialize in their own businesses and capabilities. Why should we expect that the presence of government money and effort to bring actors together who had little business with each other in the first place would create so much unrealized value? Evidence suggests that few posi-tive effects are seen from such collaborations, and an important reason for this could be that firms and universities are in fact too different to collaborate productively. Incentives, capabilities and cultures are developed for very specific purposes and may diverge to such an extent that collaborations are fruitless.

Second, government efforts to create innovation by facilitating collaboration are based on the underlying assumption that innovation is primarily a process not characterized by conflict. Applying classical Schumpeterian thinking around innovation as a process of creative destruction, I have argued that collaboration efforts are likely to extend the dominance of established actors effectively blocking institutional entrepreneurs from renewal efforts.
Third, collaboration efforts may simply be directed toward the wrong technologies, as they simply do not have enough information. Several contemporary examples of this dilemma have been described, and more systematic documentation of such cases is welcomed.

Fourth, government funds aimed at collaboration and innovation may distort incenti-ves to such an extent that firms effectively become dependent on support and end up as subsidy entrepreneurs. Incentive structures may in the end become so skewed that the presence of large amounts of public money makes it rational to pursue financially and technologically hopeless initiatives.”