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When soft budget constraints promote innovation: Kornai meets Schumpeter in Japan

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  • Max Jerneck

Abstract

The article examines János Kornai’s influential argument that “soft budget constraints” impede innovation, and finds that under certain conditions, they may promote it instead. Kornai’s concept is derived from his analysis of socialism. In capitalism, soft budget constraints can promote innovation if competition is enforced and finance is well regulated. This argument is developed using the same Schumpeterian foundation as Kornai, illustrated empirically with the case of innovation in post-war Japan. Implications are relevant for innovation and industrial policy in general.

Suggested Citation

  • Max Jerneck, 2020. "When soft budget constraints promote innovation: Kornai meets Schumpeter in Japan," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 29(6), pages 1415-1430.
    • Handle: RePEc:oup:indcch:v:29:y:2020:i:6:p:1415-1430.
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    File URL: http://hdl.handle.net/10.1093/icc/dtaa014
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    Cited by:

    1. Xing Gao & Ying Wang, 2023. "Competitive analysis of R&D investment with R&D budget constraint and R&D uncertainty," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2438-2456, June.
    2. Zheng, Li & Ma, Pengcheng & Hong, Jacky Fok Loi, 2022. "Internal embeddedness of business group affiliates and innovation performance: Evidence from China," Technovation, Elsevier, vol. 116(C).

    More about this item

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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