To achieve innovation and investment-led growth, the EU requires patient, long-term committed finance. This report, which incorporates two previously published papers supported by the ISIGrowth project, examines the role of state investment banks (SIBs) in providing patient finance. We first review how the mainstream “market failure theory” justifies the existence of SIBs. We then propose an alternative conceptualisation drawing upon insights from heterodox economic theory that argues SIBs can help deliver mission- oriented innovation policies via their market shaping and market creating role. We then present an analysis of eight different SIBs, including six in Europe, examining their mission and vision, economic role, investment activities, management of risk and reward and their links to government policy. The paper concludes by drawing out lessons for the way in which the EU could increase patient finance by expanding the role of the European Investment Bank and member state investment banks.
The role of patient finance in mission-oriented innovation: the market shaping role of state investment banks
Mariana Mazzucato
Institute for Innovation and Public Purpose, University College London
Institute for Innovation and Public Purpose, University College London
Science Policy Research Unit, University of Sussex and Institute of Economics, Federal University of Rio de Janeiro, Brazil
Institute for Innovation and Public Purpose, University College London