Pioneer scholar Aghion celebrated in Stockholm

Aghion 2Philippe Aghion, Professor Collège de France, visited Stockholm and Grand Hôtel on 10 May to receive the Global Award for Entrepreneurship Research 2016. After the ceremony he held a prize lecture about growth enigmas and discussed innovation and growth policy with an expert panel.

Johan Eklund, Managing Director Swedish Entrepreneurship Forum, commenced the Award ceremony by sharing some information about the prize. It was instituted 1996 by Swedish Entrepreneurship Forum and co-founded by the Institute for Industrial Research and has since been awarded to 25 scholars. The awardee is chosen through a careful, thorough process and must have contributed with original and influential research to their field.

Christer VillardChrister Villard

Next, Christer Villard, Stockholm Köpmansklubb, was invited up on stage to say a few words about why they came to sponsor the prize. Supporting research is an important task and encouragement to researchers in the business field is always a positive thing, he said. With those words Charlie Karlsson, Chairman of the Global Award for Entrepreneurship Research’s prize committee was invited up on stage to give the award motivation; it read:

Professor Philippe Aghion has been one of the most influential scholars in economics worldwide during the last two decades. Aghion’s research has advanced our understanding of the relationship between, on the one hand, firm-level innovation, entry and exit and, on the other hand, productivity and growth. Hence, he has theoretically aligned macro-level outcomes with a more complete and consistent micro-economic setting. 

Utdelning Global AwardChrister Villard, Charlie Karlsson, Johan Eklund and Philippe Aghion

Lilla akademienLilla Akademien Brass Quintet

After this, Aghion received his award and was congratulated by the audience. Subsequently, Aghion gave his award lecture “Rethinking growth enigmas – a Schumpeterian perspective“.  There has been a lack of an explanatory model within the Schumpeterian perspective, something Aghion has tried to build.

– Growth is driven by innovation – accumulating capital cannot alone accelerate growth – this is the first idea, he said.

The other bases for the model are that innovations result from entrepreneurial activities motivated by the prospect of innovation rents, and creative destruction: new innovations displace old technologies. One implication of this should be that competition is bad for growth – but as Richard Blundell has shown – it is the other way around.

– However, innovation come from both active and inactive firms. There are both frontier firms as well as lagging firms. The frontier firms are excelling under competition, while the lagger firms are not.

Philippe AghionPhilippe Aghion

Nevertheless, there are a few enigmas in need of answers. One of those is the debate about secular stagnation where growth is seen as slowing down for every new wave of innovation. Aghion contested that we are currently in a period of stagnation and pointed to the fact that growth from creative destruction is estimated to be at the most one percent in the USA, and total growth is at three percent.

– There is a positive correlation between patenting and labour productivity growth in sectors with lower levels of creative destruction.

Before turning towards the subject of inequality and growth Aghion concluded that smart polices accelerates growth, and most countries have room for reforms.

Innovation creates temporary rents and enhances social mobility but it also increases inequality. Nevertheless, innovation does not increase broad inequality, it increases top income inequality.

– People that have parents with high incomes are more prone to become inventors or entrepreneurs.

But what matters the most is education. Having a rich poet as a father will not make you more likely to become an inventor but having a rich engineer as a father will. In a lot of cases rich people have better access to good education, which will increase their chances of becoming innovators. Education is the key input to innovation, Aghion concluded.

Pontus Braunerhjelm, Research Director Swedish Entrepreneurship Forum and Professor KTH, who led the panel discussion followed up with a question about Aghion’s most important policy recommendations. Philippe Aghion stressed education and flexibility and security in the labor market.

– Do not copy the Danish flexicurity example but find the Swedish way to reach the goal.

When it comes to job market integration of immigrants Aghion suggested labor market training and an apprenticeship system similar to the German system.

Anna Breman, Chief Economist Swedbank, was the first commentator and referred to the 1990s reforms that drove productivity and growth in the succeeding decades. However, she noticed that Swedish productivity growth has been close to zero since the financial crisis.

Anna BremanAnna Breman and Magnus Henrekson

– Your research highlights the need for a new reform agenda for Sweden. Sweden has been a positive example, but we need changes in the education system, labor market legislation and reforms to enhance innovation and growth in the future.

Göran Marklund, Director of Vinnova, commented on Aghion’s contribution to rebuilding the Schumpetarian growth model of creative destruction. He accentuated the innovators and the essence of finding incentives to encourage them. These incentives can be monitored, since what gets measured gets done.

– It is important to continuously review the laws and regulations to ensure that they actually drive innovation.

Göran Marklund said that it is difficult to design regulations, we have to put on the right glasses to truly find the adjustments that promote innovation capacity the best.

Göran Marklund och Annika RickneMagnus Henrekson, Göran Marklund and Annika Rickne

Magnus Henrekson, President and Professor IFN and Co-Founder of Global Award for Entrepreneurship Research, said that firms on the frontier are those that continue to innovate, while companies that are lagging behind are no longer even trying. Something that also applies to other areas, for example the extremely inefficient Swedish police force, Henrekson said. The existance of sucessful complementary security firms like Assa Abloy and Securitas  create even less incentives for the police to improve.

– In the US, however, everyone is competing for everything, even for university studies. How do you create incentives for a monopolistic system to deliver world class education?

Annika Rickne, Professor KTH and Member of the Prize Committee, highlighted that Philippe Aghion’s research results are derived through a process:

– You’re taking a research trip that goes between micro and macro which lead to policy relevant results.

But there are enigmas still not solved. How do we, for example, get inclusive growth? What happens when today’s immigration are transferred to the innovation and growth dilemmas? What do we really mean with innovation? How does your models hold up for other than technological innovation? Annika Rickne thought Philippe Aghion should think further on these questions.

Panel Global AwardPontus Braunerhjelm, Anna Breman, Magnus Henrekson, Philippe Aghion, Göran Marklund and Annika Rickne

Philippe Aghion retorted that he assumes an active optimism. The digital revolution will for example create new jobs, if we act. We cannot sit back and wait for everything to work out for the best as Voltaire’s character Pangloss, said Philippe Aghion and finished with his main drivers for innovation: A proactive approach with focus on education, market competition and labor market flexibility.


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