Mazzucato, Mariana; (2022) Rethinking the social contract between the state and business: A new approach to industrial strategy with conditionalities. (Working Paper Series 2022/18). UCL Institute for Innovation and Public Purpose: London, UK.

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Abstract

Governments around the world are embracing industrial strategy to foster innovation and economic growth. To ensure this growth is inclusive and sustainable, investments must be directed towards clear goals and made conditional on recipients meeting requirements aligned with these goals - such as a just green transition. This working paper explores the opportunity for the governments to leverage conditionalities to shape and direct public funding, with a view to maximising the public value of this funding. This means redesigning the very contracts that define the relationship between the public and private sectors. This working paper considers six international cases from various countries - Germany, France, UK, South Korea, Scotland and Israel - to analyse how conditionalities have been designed, implemented, and governed to stimulate innovation and investment that contributes to inclusive and sustainable growth. Specifically, these cases outline four ways in which conditionalities can be leveraged: namely, to (1) increase access to goods and services, (2) direct investment towards climate-friendly goals, (3) profit-share with a wider range of stakeholders, and (4) reinvest in productive business activities, such as R&D and worker training.

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