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Unable to innovate or just bad circumstances? Comparing the innovation system of a state-led and market-based economy

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  • Ann Hipp
  • Udo Ludwig
  • Jutta Günther

Abstract

State socialism failed due to its inner contradictions. Despite huge investments in R&D-intensive industries, the soviet-type economy collapsed in 1989 in Eastern Germany, and the market-based system in the Western part prevailed. We compare the two parallel existing innovation systems in Germany to shed light on the success and failure of the state-led innovation system. Based on newly created indicators from archive data we show in a natural experiment setting that modernization efforts in relation to GDP was much bigger in the socialist as compared to the market economy in the last decades.These achievements, however, could not fully unfold in favor of economic growth due to obstacles related to the setting of research priorities, innovation incentives, and knowledge flow.

Suggested Citation

  • Ann Hipp & Udo Ludwig & Jutta Günther, 2021. "Unable to innovate or just bad circumstances? Comparing the innovation system of a state-led and market-based economy," Bremen Papers on Economics & Innovation 2111, University of Bremen, Faculty of Business Studies and Economics.
    • Handle: RePEc:atv:wpaper:2111
    DOI: https://doi.org/10.26092/elib/1330
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    References listed on IDEAS

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    More about this item

    Keywords

    Comparative economic systems; natural experiment; innovation system; Germany;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • N94 - Economic History - - Regional and Urban History - - - Europe: 1913-

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