The course addresses the economic problem of funding R&D investments and innovation, with a specific focus on the challenges and opportunities of European economies. Why are potentially valuable new ideas not finding enough financial backing to be developed? What kind of investors are most effective in turning science and technology into successful businesses? How do firms make decisions about resourcing innovation? And what is the role of government in supporting innovation?
Innovation is recognised as a fundamental driver of growth, but its financing entails market failures in the production of knowledge, spillover effects, and pervasive information asymmetries in the investment process. A broad range of financing sources underpin innovation, and a rich ecology of private and public institutions interact in the political economy of innovation financing. Against this backdrop, the aims of the course are:
- To identify and explain the specific characteristics of investments in R&D and innovation;
- To examine the innovation-finance nexus at the micro-, meso- and macro-level of analysis;
- To identify the different types of capital used to fund innovation, their relative advantages and disadvantages, their trade-offs and complementarities;
- To analyse the functioning of private capital markets for innovative firms;
- To explain the most important policy designs in support of innovation and entrepreneurship, and appraise alternative forms of government intervention in this domain.