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Beyond market failures: the market creating and shaping roles of state investment banks

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  • Mariana Mazzucato
  • Caetano C.R. Penna

Abstract

The paper develops a typological framework of the roles of state investment banks (SIBs) in the economy. The typology identifies four different roles: countercyclical; developmental; venture capitalist; and challenge-led. The paper conceptually elaborates the typology by first providing a historical overview of SIBs, and then discussing how the mainstream “market failure theory” justifies them. It then advances a different conceptualization based on insights from heterodox economics, showing that all roles of SIBs are more about market creating/shaping rather than market-failure fixing. The paper concludes with a proposal of a new agenda for research on SIBs based on our typological framework.

Suggested Citation

  • Mariana Mazzucato & Caetano C.R. Penna, 2016. "Beyond market failures: the market creating and shaping roles of state investment banks," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 19(4), pages 305-326, October.
    • Handle: RePEc:taf:jecprf:v:19:y:2016:i:4:p:305-326
    DOI: 10.1080/17487870.2016.1216416
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    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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