The Entrepreneurial State

Mariana Mazucatto

Using its funding networks, DARPA increased the flow of knowledge across competing research groups. It facilitated workshops for researchers to gather and share ideas while also learning of the paths identified as ‘dead ends’ by others. DARPA officers engaged in business and technological brokering by linking university researchers to entrepreneurs interested in starting a new firm; connecting start-up firms with venture capitalists; finding a larger company to commercialize the technology; or assisting in procuring a government contract to support the commercialization process.

Pursuing this brokering function, DARPA officers not only developed links among those involved in the network system, but also engaged in efforts to expand the pool of scientists and engineers working in specific areas. An example of this is the role DARPA played in the 1960s by funding the establishment of new computer science departments at various universities in the US. By increasing the number of researchers who possessed the necessary and particular expertise, DARPA was able, over an extended period of time, to accelerate technological change in this area. In the area of computer chip fabrication during the 1970s, DARPA assumed the expenses associated with getting a design into a prototype by funding a laboratory affiliated with the University of Southern California. Anyone who possessed a superior design for a new microchip could have the chips fabricated at this laboratory, thus expanding the pool of participants designing faster and better microchips. The personal computer emerged during this time with Apple introducing the first one in 1976. Following this, the computer industry’s boom in Silicon Valley and the key role of DARPA in the massive growth of personal computing received significant attention, but has since been forgotten by those who claim Silicon Valley is an example of ‘free market’ capitalism. In a recent documentary, Something Ventured, Something Gained, for example, the role of the State is not mentioned once in the 85 minutes spent describing the development of Silicon Valley (Geller and Goldfine 2012)...

[Characteristic] of the DARPA model: A series of relatively small offices, often staffed with leading scientists and engineers, are given considerable budget autonomy to support promising ideas. These offices are proactive rather than reactive and work to set an agenda for researchers in the field. The goal is to create a scientific community with a presence in universities, the public sector and corporations that focuses on specific technological challenges that have to be overcome.

Apple, Steve Jobs

Given the critical role of the State in enabling companies like Apple, it is especially curious that the debate surrounding Apple’s tax avoidance has failed to make this fact more broadly known. Apple must pay tax not only because it is the right thing to do, but because it is the epitome of a company that requires the public purse to be large and risk-loving enough to continue making the investments that entrepreneurs like Jobs will later capitalize on...

Steve Jobs talked ... in his charismatic 2005 Stanford lecture on the need for innovators to stay ‘hungry and foolish’, few have admitted how much such foolishness has been ‘seriously’ riding on the wave of State-funded and -directed innovations...

[M]ost of the radical, revolutionary innovations that have fuelled the dynamics of capitalism – from railroads to the Internet, to modern-day nanotechnology and pharmaceuticals – trace the most courageous, early and capital-intensive ‘entrepreneurial’ investments back to the State. And, .. all of the technologies that make Jobs’ iPhone so ‘smart’ were government funded (Internet, GPS, touch-screen display and the recent SIRI voice activated personal assistant). Such radical investments – which embedded extreme uncertainty – did not come about due to the presence of venture capitalists, nor of ‘garage tinkerers’. It was the visible hand of the State which made these innovations happen. Innovation that would not have come about had we waited for the ‘market’ and business to do it alone – or government to simply stand aside and provide the basics...

A recent study by MIT claims that the current absence in the US of corporate labs like Xerox PARC (which produced the graphical user interface technology that led to both Apple’s and Windows’ operating systems) and Bell Labs – both highly co-financed by government agency budgets – is one of the reasons why the US innovation machine is under threat (MIT 2013). [The study] has looked at the strengths and weaknesses of the US innovation system and the causes of relative decline of manufacturing in America. The study has strived to understand why the development of promising innovations are stalling or simply moving abroad before reaching commercial scale. One of the reasons unveiled by the study is the fact that large R&D centres – like Bell Labs, Xerox PARC and Alcoa Research Lab – have become a thing of the past in big corporations; they have mostly disappeared. Long-term basic and applied research is not part of the strategy of ‘Big Business’ anymore, as corporate R&D now focuses on short-term needs.