The Role of Commercialization Competence in Endogenous Economic Growth

While innovation supply is creative, unpredictable, and not necessarily related to future economic usefulness, resource provision is focused on economic returns, experience based and narrower, implying a positive economic risk of not understanding innovative commercial winners. We demonstrate through simulation experiments on an economy wide firm-based model that industrial growth is explained by industrially competent identification and financial support of winners that are carried on to industrial scale production and distribution. The simulations capture the dynamic economic systems effects on the entire economy, from micro responses to macro and the feedback on micro behaviour of expectational mistakes. Competence bloc theory is used to model the supply of innovations and their commercialization in what we call an Experimentally Organized Economy. We demonstrate that lack of commercialization competence, notably industrial competence embodied in venture capitalists´ ability to identify, select and finance radically new innovations breaks the conventionally assumed linearity between innovation supply and economic growth. We also demonstrate the existence of long-term and possibly very large losses in output from the loss of winners during the commercial filtering of the competence bloc, and that the economy wide costs incurred by protecting losers may be large.