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The Rise of Mission-Oriented State Investment Banks: The Cases of Germany’s KfW and Brazil’s BNDES

Author

Listed:
  • Mariana Mazzucato

    (SPRU (Science Policy Research Unit), School of Business, Management & Economics, University of Sussex, Brighton, BN1 9SL, U.K.)

  • Caetano Penna

    (SPRU (Science Policy Research Unit), School of Business, Management & Economics, University of Sussex, Brighton, BN1 9SL, U.K.
    Institute of Economics, Federal University of Rio de Janeiro, Brazil)

Abstract

This paper focuses on the rise of state investment banks (SIBs) as lead funders of mission-oriented innovation in various countries’ agendas regarding smart (innovation-led) growth, and not just fixers of ‘market failures’. The market failure justification for public finance fails to capture the active mission-oriented role that such banks are playing in shaping and creating markets, rather than just fixing them. In tackling innovation priorities and shaping new markets, these banks are developing new financial tools that also help to reform the financial system from within, addressing issues of short-termism and financialisation. This paper documents and analyses the roles of such banks, building on the Neo-Schumpeterian work on mission-oriented policies (that is, policies that aim to address societal issues or challenges). The paper presents a rich analytical description of mission-oriented investments in two of the leading SIBs: Brazil’s BNDES and Germany’s KfW. We discuss the directionality of the investments, the various tools used, and the lessons to be learned for evaluating these tools outside of a market failure framework.

Suggested Citation

  • Mariana Mazzucato & Caetano Penna, 2015. "The Rise of Mission-Oriented State Investment Banks: The Cases of Germany’s KfW and Brazil’s BNDES," SPRU Working Paper Series 2015-26, SPRU - Science Policy Research Unit, University of Sussex Business School.
    • Handle: RePEc:sru:ssewps:2015-26
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    Citations

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    Cited by:

    1. Zenghelis, Dimitri, 2021. "Why sustainable, inclusive, and resilient investment makes for efficacious post-COVID medicine," LSE Research Online Documents on Economics 110936, London School of Economics and Political Science, LSE Library.
    2. Geuna, Aldo & Piolatto, Matteo, 2016. "Research assessment in the UK and Italy: Costly and difficult, but probably worth it (at least for a while)," Research Policy, Elsevier, vol. 45(1), pages 260-271.
    3. Mariana Mazzucato, 2015. "The Green Entrepreneurial State," SPRU Working Paper Series 2015-28, SPRU - Science Policy Research Unit, University of Sussex Business School.
    4. -, 2018. "The Inefficiency of Inequality," Documentos de posición del período de sesiones de la Comisión 43443, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    5. Lorenz Gollwitzer & David Ockwell & Adrian Ely, 2015. "Institutional Innovation in the Management of Pro-Poor Energy Access in East Africa," SPRU Working Paper Series 2015-29, SPRU - Science Policy Research Unit, University of Sussex Business School.
    6. Friedemann Polzin & Steve Sorrell & Colin Nolden, 2015. "Innovative Procurement Frameworks for Energy Performance Contracting in the UK Public Sector," SPRU Working Paper Series 2015-31, SPRU - Science Policy Research Unit, University of Sussex Business School.
    7. Geddes, Anna & Schmidt, Tobias S. & Steffen, Bjarne, 2018. "The multiple roles of state investment banks in low-carbon energy finance: An analysis of Australia, the UK and Germany," Energy Policy, Elsevier, vol. 115(C), pages 158-170.
    8. Mazzucato, Mariana & Semieniuk, Gregor, 2018. "Financing renewable energy: Who is financing what and why it matters," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 8-22.
    9. Geddes, Anna & Schmidt, Tobias S., 2020. "Integrating finance into the multi-level perspective: Technology niche-finance regime interactions and financial policy interventions," Research Policy, Elsevier, vol. 49(6).
    10. Sofia Patsali, 2021. "University Procurement-led Innovation," GREDEG Working Papers 2021-13, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    11. Alessandro Maffioli & Joao A. Negri & Cesar M. Rodriguez & Gonzalo Vazquez-Bare, 2017. "Themed Issue: Cash Transfers and Microfinance," Development Policy Review, Overseas Development Institute, vol. 35(5), pages 675-702, September.

    More about this item

    Keywords

    State investment banks; mission-oriented policy; societal challenges; public finance; financialisation; innovation;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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