The Optimal Locus of Innovation
Citation
Subramanian, Krishnamurthy. (2017). The Optimal Locus of Innovation .
Copyright
2017
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Abstract
I develop a unified theory to study five different organizational modes for developing an idea: corporate research alliance, venture capital financing, angel financing, intrapreneurship, and spinoff. I model these choices as a combination of access as defined by Rajan and Zingales (1998) and ownership of the idea as defined by the property rights theory. The optimal choice encourages the entrepreneur and the collaborator---venture capitalist, corporation or angel investor---to invest in developing the idea while discouraging them from investing to extract rents. This effect manifests because ownership has an asymmetric effect on the collaborator's and entrepreneur's incentives while access has a symmetric effect. The theory explains some empirical regularities and generates several new predictions.

K. V. Subramanian is a Professor of Finance (currently on leave) at the Indian School of Business (ISB). He has served as an Executive Director at the International Monetary Fund and was the 17th Chief Economic Advisor to the Government of India from 2018 to 2021.

As Chief Economic Advisor, Professor Subramanian conceptualised India’s economic policy during the once-in-a-century COVID-19 pandemic. By correctly identifying COVID-19 as a huge supply-side shock, Professor Subramanian balanced supply- and demand-side measures, transformed fiscal policy to focus on public capital expenditure, and initiated path-breaking reforms to address structural problems. His foresight and vision enabled the Indian economy to emerge with high growth and strong macro fundamentals despite the Ukraine war following the pandemic.

His policy ideas drew on the path-breaking Economic Surveys. He authored Ethical Wealth Creation for a Prosperous India (2019-20), a Strategic Blueprint for India to Become a $5 Trillion Economy (2018-19), and the post-COVID-19 economy using public capital expenditures in infrastructure and healthcare to further counter-cyclical fiscal policy (2020-21). Acknowledging his contributions, the Hon’ble Prime Minister of India, Shri. Narendra Modi, praised his “academic brilliance, unique perspectives on economic and policy matters, and reformatory zeal.”

Professor Subramanian has been conferred the Distinguished Alumnus award by both his alma maters at IIT Kanpur and IIM Calcutta. He holds a PhD from the University of Chicago. His research spanning banking, law and finance, innovation and economic growth, and corporate governance has been published in the world's leading academic journals.

Krishnamurthy Subramanian
Krishnamurthy Subramanian