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

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posted on 2023-06-09, 02:07 authored by Mariana Mazzucato, Caetano Penna
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.

Funding

ISIGrowth: Innovation-fuelled, Sustainable, Inclusive Growth; G1610; EUROPEAN UNION; 649186

Finance and the Entrepreneurial State; G0786; FORD FOUNDATION; 1125 1696

History

Publication status

  • Published

File Version

  • Published version

Publisher

SPRU Working Paper Series

Pages

35.0

Department affiliated with

  • SPRU - Science Policy Research Unit Publications

Institution

University of Sussex

Full text available

  • Yes

Legacy Posted Date

2016-07-11

First Open Access (FOA) Date

2016-07-11

First Compliant Deposit (FCD) Date

2016-07-11

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