This article is an excerpt from Professor Rainer Kattel, Wolfgang Drechsler and Erkki Karo's book ‘How to Make an Entrepreneurial State. Why Innovation Needs Bureaucracy’. Rainer Kattel is Professor and Deputy Director at the UCL Institute for Innovation and Public Purpose. Wolfgang Drechsler is Honorary Professor at the UCL Institute for Innovation and Public Purpose and professor of governance at the Nurkse Department of Innovation and Governance at TalTech, as well as associate at Harvard University’s Davis Center. Erkki Karo is Associate Professor and Head of Department at the Nurkse Department of Innovation and Governance at TalTech.

_‘How to Make an Entrepreneurial State. Why Innovation Needs Bureaucracy’ explores the complex and often contradictory positions of innovating public bodies — and shows how they can overcome financial and political resistance to change for the good of us all. _

What would a world without quantum mechanics look like? There would be no computers, no iPads, no mobile phones and certainly no satellites. Most twentieth- and twenty-first-century electronics and, obviously, all the content that runs on them, from space communication to ‘Ghost of Tsushima’, would not exist. Data is often portrayed as the new gold or oil and, as McKinsey has claimed, by 2016 the value of global data was larger than that of the global trade in goods. This would not have happened without quantum mechanics, yet it is still possible to imagine a world without them. The 1880s are not that far from us. We continue to read and maybe even discuss Dostoyevsky and enjoy Monet and many other cultural phenomena from the pre-quantum mechanics era – in British law courts and at weddings men still more or less dress like they did in the nineteenth century – but when we think about economic development and innovation, we tend to look back only as far as the aftermath of the Second World War.

This book makes a simple argument: innovations need bureaucracy. The birth and development of quantum mechanics required scientists, entrepreneurs and innovators, but it also required bureaucrats and bureaucracies. And it was not accidental. Behind the development of quantum mechanics was a complex bureaucratic web of public and private capacities and capabilities, able to envision, plan, iterate and deliver. This book tells the story of these organisations, which we call innovation bureaucracies, public sector organisations tasked with fostering innovation by creating, funding, regulating and procuring those innovations, and we argue that ‘innovation bureaucracy’ is not an oxymoron.

It is a counterintuitive combination of words. Literally the rule of the office – the French bureau for office and the Greek krateìn for rule – to be called a ‘bureaucrat’ is never a compliment for a public servant. ‘Bureaucracy’ is a term that has always signalled slowness, complicated and superfluous procedures, getting the run-around. In short, outside of the world of public administration academics at least, it is a negative word, an insult almost, indicating the bad aspects of public administration, the professional management of public sector affairs and the implementation of public policy. (There are often even larger bureaucracies in big private sector firms and in NGOs as well, but this is not what people primarily associate with bureaucracy and is not our topic.)

The charismatic networks provide agility and dynamism for innovation bureaucracies to search for new directions and ways of doing things, while expert organisations bring long-term focus, predictability and stability to deliver needed policies and results.

We owe a lot of what came to be known as quantum mechanics to a rather obscure public organisation, the Physikalisch-Technische Reichsanstalt (PTR), established in 1887 in a small German town of 30,000 people. Until 1920 Charlottenburg was a separate city, next to Berlin, and the main purpose of the PTR – to develop physical standards and measurement instruments – does not sound wildly exciting or innovative for today’s readers. However, the PTR played an important role not only in the pioneering work of Max Planck and others in quantum physics but also as a crucial cog in the rise of German industrial leadership, particularly for the electrical industry, and it helped to create technologies and global players that still exist today, such as Siemens and AEG.

It took more than 15 years of discussions to establish the PTR, but its success was phenomenal. By the early 1900s it was the global leader in its fields and it helped to win two Nobel prizes (Wilhelm Wien in 1911 and Max Planck in 1918). According to David Cahan, “Between 1875 and 1907 the number of factories increased from 88 to more than 1000 and the number of employees from slightly less than 1,300 to more than 91,000.” In other words, the PTR was one of the key drivers in shifting the global technology and innovation leadership from the UK to Germany.

The establishment of the PTR – who was involved, how and why, its initial resources and its organisational evolution – offers an almost ideal-typical example of how (successful) innovation bureaucracies are established and how they evolve. The PTR was established on land donated by Werner Siemens, one of the leading industrialists of the time. Moreover, Siemens heavily lobbied for the PTR with the German government, covered initial construction costs and recruited its first leader in Hermann Helmholz, an outstanding German scientist and science organiser. In fact, Siemens also provided, based on his own experiences as an industrialist, its organisational design – the departmental division, hierarchy of authority and control – and guidelines on how to develop it. His idea was to find a strong or charismatic leader for the new organisation who would then build up a ‘scientific bureaucracy’ – a blueprint of how to move from the agile and search-driven or startup phase of an organisation to a more stable delivery-focused one.

…

Perhaps somewhat surprisingly, this dynamic is well described, and indeed predicted, by none other than the great sociologist Max Weber, one of the most eminent social scientists of the last but one turn of the century, who had his own intimate connection with the emergence of Germany as industrial leader. Often a strawman for bureaucratic, legalistic and rigid organisations, Weber in fact described a variety of ways in which authority, or legitimacy, is generated and exercised, as well as how one type of authority (charismatic) becomes another type (legal-rational or bureaucratic), only to be challenged again by the initial type (charismatic). Innovation is an area where these Weberian dynamics play out rather well.

In this book, we argue that these Weberian notions reveal themselves in the context of innovation bureaucracies through two ideal-typical categories of organisation – charismatic networks and expert organisations – and that their evolution is often an oscillation between the two extremes, within the same organisation, or leads to the emergence of new ones. These two ideal-types of organisation possess rather different capabilities and skills sets, and they perform different functions. As we show, the charismatic networks provide agility and dynamism for innovation bureaucracies to search for new directions and ways of doing things, while expert organisations bring long-term focus, predictability and stability to deliver needed policies and results. Both are key to the success of capitalist systems. Indeed, we propose to call this symbiosis agile stability. It is this contradictory, once-again counterintuitive combination that creates the success of the entrepreneurial state.

We argue that genuinely entrepreneurial states have capacities and capabilities for ‘agile stability’ – that is, they are entrepreneurial not in the sense of go-getter startuppery but oriented towards overall success in context. This requires both agility- and stability-oriented mindsets and for organisations to be able to go along with, support and sometimes even lead the economic and societal transformations. In the public sector, this may be more difficult to ascertain than in a simple business framework where the bottom line matters, because public value is not easy to agree on.

This is an excerpt from ‘How to Make an Entrepreneurial State. Why Innovation Needs Bureaucracy’ by Rainer Kattel, Wolfgang Drechsler and Erkki Karo. Used with permission of the publisher © 2023 Yale University Press. All Rights Reserved.

👋 You can create a post like this one! Share your thoughts with a community of public servants. Learn more

(Image Credit: Unsplash)