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Working Paper No. 1474

Bottom-Up Policies Trump Top-Down Missions

Working Paper
Henrekson, Magnus and Mikael Stenkula (2023). “Bottom-Up Policies Trump Top-Down Missions”. IFN Working Paper No. 1474. Stockholm: Research Institute of Industrial Economics (IFN).

Magnus Henrekson, Mikael Stenkula

Mission-oriented innovation policies are becoming increasingly popular among policymakers and scholars. We maintain that these policies are based on an overly mechanistic view of innovation and economic growth, suggesting that a more bottom-up approach is called for. By invoking an entrepreneurial ecosystem perspective, we point out that innovative entrepreneurship requires many other actors―besides the entrepreneur―whose skills and abilities are necessary to realize an entrepreneurial project.

When mission-oriented policies play a large role in the economy, connections between actors in the ecosystem risk becoming distorted. An efficient and well-balanced entrepreneurial ecosystem requires instead an institutional framework that levels the playing field for potential entrepreneurs and encourages productive entrepreneurship. To promote this kind of system, we discuss in more detail eight key areas where appropriate horizontal or bottom-up policy measures can foster innovation and, in the end, the welfare-enhancing productive entrepreneurship policymakers and scholars strive for.