2. Economic Analyses of Innovation and Government Functions

This chapter delves into the economic analyses of innovation and government functions, highlighting the pivotal role of innovation in driving economic growth. It begins by examining the comparative advantage theory and the Solow model to explain the rapid economic growth of Shenzhen under a labor-intensive development model. The text then shifts to Romer's endogenous growth theory, which emphasizes the importance of knowledge creation and technological progress in economic growth. It discusses how innovation swarms and industrial clusters contribute to economic transformation and the role of government in fostering these processes. The chapter also explores the concept of knowledge commons and the government's role in creating them. It concludes by discussing the effectiveness of government innovation industry policies and the importance of embedded autonomy in successful industrial policy implementation.