Non-market failure: The role of public science in the development of generic technology.

Maria Theresa Larsen
DRUID/CBS

Nick von Tunzelmann
SPRU, University of Sussex

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     Last modified: June 1, 2006

Abstract
Public intervention in the coordination of R&D is justified by the need to correct some failure of the market to ensure adequate incentives for private investment in R&D. We propose, however, that much R&D is undertaken not on the market, but in firms, networks or government, and that the market failure argument fails to address this non-market dimension of R&D. We introduce the notion of non-market failure and argue that misinterpreting non-market failure as market failure may create excessive emphasis on appropriation, thus undermining the efficiency of non-market based exchanges of knowledge that play a crucial role in technological progress.