Innovation needs State as much as the private sector

From Moon landings to mRNA vaccines, many breakthroughs were seeded by governments willing to do what markets could not.

- Lloyd Mathias is an angel investor and independent director and Harsh Lailer is with the Quality Council of India. The views expressed are personal.

Yet today, the State is often told to step aside and let the private sector lead. This creates a paradox. Governments are blamed for not innovating, yet also told not to try. At the same time, many private firms have shifted from building to optimising. Instead of investing in research or transformational ideas, they focus on quarterly targets and stock buybacks. Innovation has become a buzzword rather than a behaviour.

True innovation ecosystems need both sides. They emerge when governments stop acting like cautious regulators and become mission-driven investors. They grow when businesses take risks and focus on long-term value. The world’s most iconic innovations are rarely the work of lone entrepreneurs. They are the outcome of public ambition meeting private execution. Apple's success owes much to State-led innovation. Technologies like GPS, touchscreens, and the internet began with Darpa funding when private investors stayed away. Finland followed a similar approach. SITRA, its public funding agency, retained equity in early investments in Nokia.

In the 1960s, South Korea picked automobiles, where it had no advantage, and used State support and learning-by-doing to turn Hyundai into a global brand. China, seeing it could not win with combustion engines, bet early on EVs. It backed firms, secured minerals, and shaped demand through procurement. Today, it makes 60% of the world’s EVs.