A core insight of classical liberal thought is how top-down control often produces unintended consequences in complex systems. Innovation flourishes when individuals have the freedom to develop new solutions, backed by secure property rights and a reliable legal system. When policymakers replace these incentives with artificial mandates, attempting to direct the market toward specific outcomes, the results are often inefficient and counterproductive. IHS provides crucial support to cutting-edge scholarship documenting and studying this phenomenon, backing up these important truths with robust data and concrete examples.
Natalia Lamberova, an assistant professor of business and technology at the University of Texas at Dallas, is one such scholar. A long-time participant in the IHS academic community, Lamberova has attended 27 IHS events and received 23 grants. One of these grants helped her publish “The Paradox of Government-Funded Innovation in Weakly Institutionalized Environments” in the Journal of Innovation & Knowledge. Her research demonstrates how well-intended government efforts to spur innovation can backfire dramatically.
Lamberova’s findings illustrate a striking example from Russia’s nanotechnology sector. Russian authorities, seeking to encourage development of a promising new industry, prioritized the number of patents issued rather than their quality. In particular, after becoming president in 2008, Dmitry Medvedev launched a massive increase in state funding of nanotechnology research and development. But instead of advancing Russia’s position in the world of nanotech, these increased subsidies caused stagnation.
While the number of patents did increase, Lamberova shows that they turned out to be less economically valuable, more vulnerable to legal challenges, and less likely to be commercialized than similar patents in the United States. Instead of fostering genuine innovation, the policy led to an increase in lower-quality patents, reducing overall technological progress in a critical industry. The problem was compounded by Russia’s general environment of corruption, as funds were directed to the politically connected rather than on merit, crowding out more promising, higher-quality work.
By supporting scholars like Lamberova, IHS helps bring critical insights to fruition. Such research leads to real-world results, shaping the terrain of which policy ideas are considered sound by experts and tempting to politicians. As demands for more interventionist industrial policies increase, pundits and politicians claim that they can identify the next big thing and direct resources to it. It is essential to empirically prove that this ‘fatal conceit’—as F. A. Hayek memorably put it—is still just as misleading and harmful.
By supporting IHS, you invest in scholars at a formative stage in their careers—not only with crucial financial support, but also with inspiration and connections to other like-minded and driven intellectual collaborators that they can’t find anywhere else.
