Public-Steering and Private-Performing Sectors: Success and Failures in the Swedish Finance, Telecoms, and City Planning Sectors

Abstract

Mariana Mazzucato embraces state-directed public/private investment in innovation to achieve goals that society as a whole would benefit from. The idea is that the state should direct and the private sphere perform the innovation needed. We argue that this view is biased toward successful examples of innovation created by public sector steering and the private sector performing. Generally, vested interests are created by these kinds of public-steering–private-performing innovations, which hinder or malinvest resources through their interests or information problems when market forces are put out of play. We present examples that explore the process of two successful deregulation cases and one failed case to highlight differences in the processes leading to the different outcomes; the most important being the existence of institutional entrepreneurs acting as typical change agents in the successful cases and the lack thereof in the failed example. These cases highlight the importance of both passive incumbents and proactive entrants for enabling institutional change. We contrast these examples with the public-steering and private-performing framework.