The rise of mission-oriented state investment banks: the cases of Germany’s KfW and Brazil’s BNDES

Mazzucato, Mariana and Penna, Caetano (2015) The rise of mission-oriented state investment banks: the cases of Germany’s KfW and Brazil’s BNDES. Working Paper. SPRU Working Paper Series.

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Abstract

This paper focuses on the rise of state investment banks (SIBs) as lead funders of missionoriented 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.

Item Type: Reports and working papers (Working Paper)
Keywords: State investment banks, Mission-oriented policy, Societal challenges, Public finance, Financialisation, Innovation
Schools and Departments: School of Business, Management and Economics > SPRU - Science Policy Research Unit
Subjects: H Social Sciences
H Social Sciences > HB Economic theory. Demography
Depositing User: Caroline Cooper
Date Deposited: 11 Jul 2016 15:31
Last Modified: 11 Jul 2016 15:31
URI: http://sro.sussex.ac.uk/id/eprint/61972

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Project NameSussex Project NumberFunderFunder Ref
Finance and the Entrepreneurial StateG0786FORD FOUNDATION1125 1696
ISIGrowth: Innovation-fuelled, Sustainable, Inclusive GrowthG1610EUROPEAN UNION649186