A Critique of the Book “The Entrepreneurial State

Khodapanah, Bahman

doi:10.30465/crtls.2025.50313.2881

A Critique of the Book “The Entrepreneurial State

Document Type : Research

Author

Bahman khodapanah

Assistant Professor, Department of Business Management, Faculty of Social Sciences, University of Mohaghegh Ardabili, Ardabil, Iran

10.30465/crtls.2025.50313.2881

Abstract

Abstract
This article critically examines Mariana Mazzucato’s seminal work, “The Entrepreneurial State” (2013), assessing the state’s role in promoting innovation and economic development from an analytical perspective. The research substantiates Mazzucato’s strong argument for the active role of the state, emphasizing that targeted industrial policies, rather than market forces alone, are the key factors in fostering transformative innovations. Nevertheless, this theory is subject to significant criticisms. First, the book’s theoretical framework overlooks the constraints of scarce resources and the central role of consumers within a market economy. Second, its predominant focus on the twentieth-century United States experience, devoid of sufficient attention to the contextual and institutional conditions of other nations, diminishes the comprehensiveness of the analysis. Third, Mazzucato’s historical claims regarding the state’s entrepreneurial role in funding research do not necessarily confirm that the state is inherently mission-oriented or entrepreneurial; rather, they may simply be the result of specific historical circumstances. To address these shortcomings, this article suggests that the entrepreneurial state theory necessitates a more precise conceptual definition, the strengthening of transparency and accountability mechanisms, and the prioritization of social justice within policymaking.

Extended Abstract

Abstract
In today’s world, the concept of the innovation ecosystem has become a commonplace term among experts, researchers, and policymakers. It refers to a complex network of diverse actors, including governments, the private sector, universities, and startups that collaborate to foster innovation. However, a fundamental question arises: does government investment in such an ecosystem foster constructive and complementary coexistence with the private sector, or might it instead create contradictions and dysfunction between the two? A key concern is whether government intervention diminishes the private sector’s incentives to invest, prompting it to redirect resources toward short-term profits, or whether, conversely, such investments encourage the private sector to undertake riskier endeavors, such as investing in skilled human capital, research and development, and long-term projects. These debates are deeply rooted in economic theory and reflect the enduring tension between the role of the state and that of the free market.
Introduction
In fact, the notion of an “entrepreneurial state” and targeted industrial policies is far from new. Modern economic history abounds with examples of the state’s central and pioneering role in the emergence of key industries. For instance, the development of the computer industry owed much to massive initial investments by the U.S. government, which laid the groundwork for companies such as Apple and Microsoft. Similarly, the Internet, the backbone of today’s digital economy, originated from government-funded military research projects, notably ARPANET. In the biotechnology and pharmaceutical sectors, many breakthrough drugs, including vaccines and cancer treatments, stemmed from public investment in basic research. The fields of nanotechnology and green technologies, such as renewable energy, would not have reached their current levels without early and sustained government support. In all these cases, the state has done far more than merely correct market failures; it has dared to envision the seemingly impossible, creating new technological paradigms, making high-risk initial investments, forging decentralized networks of actors to share risk, and ultimately accelerating commercialization to generate dynamic and sustainable growth. This active role challenges the traditional liberal view that casts the state as a passive observer of the market. The present article critically examines Mariana Mazzucato’s influential book The Entrepreneurial State: Debunking Public vs. Private Sector Myths (2013). Mazzucato argues that the state is not merely a facilitator of innovation but has often been the boldest and most risk-taking actor in driving transformative technological change. This article evaluates Mazzucato’s arguments analytically and critically, explores the state’s role in promoting innovation and economic development, and offers suggestions for refining her theory.
Materials & Methods
This study is a critical review based on an in-depth analysis of Mazzucato’s “The Entrepreneurial State”. It adopts an analytical-critical approach to assess the state’s role in innovation and economic development. In terms of research classification, the study is fundamental, as it engages deeply with one of the most prominent and influential contemporary economic theories—the “entrepreneurial state.” This theory challenges conventional assumptions about the respective roles of the state and the market and proposes a new paradigm. Methodologically, the research is descriptive-documentary. Primary sources include the text of Mazzucato’s book, the historical evidence it presents, and related literature on industrial policy and the economics of innovation.
Discussion & Result
The findings reveal that Mazzucato presents a compelling case for an active, entrepreneurial role of the state in driving innovation. She emphasizes that many transformative innovations, such as the iPhone’s core technologies (including touch-screen displays and GPS) and the Internet itself, trace their origins to substantial government investment, often resulting from deliberate industrial policies rather than purely market-driven forces. Mazzucato dismantles the widespread myth that the private sector is the primary innovator while the state merely fixes market failures, demonstrating instead that the public sector frequently assumes the greatest initial risks, with private firms entering later to commercialize the results. One of the book’s strongest arguments is that many technological breakthroughs would not have occurred without active industrial policy. In green energy, for example, governments created the foundations for today’s solar and wind markets through early and sustained investment. Nevertheless, the theory invites significant criticisms that cannot be overlooked. First, Mazzucato’s framework largely neglects the constraint of scarce resources: in real economies, public funds are limited, and directing them toward particular projects may crowd out alternative opportunities. It also underemphasizes the vital role of consumers and market signals in guiding innovation. Second, the analysis draws predominantly on the successful twentieth-century experience of the United States, without adequately addressing varying institutional, cultural, and historical contexts in other countries. This limits the theory’s universality, particularly for developing nations or economies with different systems. Third, while Mazzucato’s historical examples illustrate extensive government funding of research, they do not necessarily prove that the state is inherently entrepreneurial; such interventions may reflect unique historical circumstances, such as the Cold War or major economic crises rather than a replicable pattern.
Conclusion
In summary, although the entrepreneurial state theory holds considerable potential to reshape economic policymaking, it requires careful refinement. To mitigate risks such as corruption, inefficiency, or excessive concentration of power, robust monitoring and evaluation mechanisms are essential. This article proposes that the theory could be strengthened by more precisely defining “state entrepreneurship,” enhancing transparency in decision-making, ensuring accountability of public officials, and explicitly incorporating principles of social justice, particularly the equitable distribution of innovation’s benefits. Despite its criticisms, Mariana Mazzucato’s entrepreneurial state theory provides a valuable lens for understanding the state’s role in the modern economy. With the suggested refinements a clearer conceptual framework, greater emphasis on transparency and accountability, and a commitment to social justice and equitable resource distribution, the theory can contribute not only to economic growth and innovation but also to social sustainability, reduced inequality, and enhanced public trust in government institutions. Successful implementation demands precise operational models and ongoing evaluation. Future research should explore the theory’s application across diverse institutional settings, particularly in countries such as Iran, which face unique challenges including economic sanctions and the imperative of technological self-sufficiency. Comparative studies contrasting successful international experiences with the Iranian context could offer practical guidance for policymakers and advance sustainable development.

Keywords

Public Sector Innovation

Mission-Oriented Economy

Industrial Policy

Entrepreneurship

Research and Development

Subjects

Economy

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