Sir, Professor Mariana Mazzucato's concerns about lack of investment in innovation and its likely impact on longer-term growth are well placed...But her analysis of the cause is misquided. She suggestst that today's cash-rich companies could invest and do well in the long term, but choose not to because of their short-term orientation.
My research concludes that, on average, companies will not get a good return even in the long term. The reasons taxpayers need to invest in innovation is that the majority of benefits from innovation accrue to consumers as "consumer surplus" rather than to producers as profits. Take semiconductors, for example. Society has benefited immeasurably. But the producers made low returns for decades.
Governments do not need to intervene because of market failure. They need to intervene because the market is too efficient. It is not short-termism that makes companies reluctant to invest. It is the low returns caused by efficient competition
Andrew Campbell
Director
Ashbridge Business School
London.
