What is meant by “Entrepreneurial State”?
The concept was popularized by economist Mariana Mazzucato. It has features such as:-
- Risk Structuring: It defines a state that acts before certainty emerges, proactively "structuring risk" rather than merely avoiding it.
- Institutional Learning: It involves moving from "compliance to capability," where the state "learns to fail" and corrects course rapidly without policy paralysis. E.g: Republic of Korea built state capacity not only through bureaucratic boldness but through carefully designed institutional sequencing.
- Features of bureaucracy:
- Outcome-oriented bureaucracy: Officials are evaluated on results, not rule following.
- Failure tolerance with learning: Errors are acceptable; stagnation is not.
- Credible withdrawal of support: Exit is as important as entry.
- What it is not?
- It does not mean commercialisation of the state, such as state capitalism, nor does it suggest a privileging of private interests.
- It aims to empower the state to act as a strategic partner in private sector innovation.
Why is Entrepreneurial Governance tough?
- Asymmetric Incentives: Culture of risk aversion leads to problems in the current bureaucratic system.
- Retrospective Scrutiny: conflation of honest errors with malfeasance by oversight bodies.
- Stigmatization of Failure: political leadership must send consistent signals that reversible failure is acceptable, experimentation is necessary, and course correction is a mark of competence rather than weakness.
- Standardized Metrics: It is difficult to measure the success of entrepreneurial initiatives using standard efficiency metrics (like immediate revenue generation), as the payoffs are often long-term and non-linear.
- Democratic Systems: In democratic systems, politicians remain close to public sentiment while bureaucracies ensure continuity and institutional memory. Here the risk lies in politicians sliding into populism and bureaucracies into insularity.
- The Economic Survey suggests that an entrepreneurial state requires a subtler division of labour—political leadership sets direction and articulates priorities, while bureaucracies discover pathways, solve problems, and adapt policy instruments.
