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This chapter discusses challenges faced by the capital system. It begins with a description of the unprecedented boom of the economies of the most developed capitalist countries (North America, Western Europe, Japan, and Australasia) in the 1950s and 1960s, dubbed as the ‘Golden Age’, characterized by low unemployment, low inflation, and rapidly growing living standards. This was followed by the apparent decline of the capitalist system during the second half of the 1960s and through the 1970s, characterized by the emergence of organized labour, international disorganization, and productivity slowdown.

This chapter reviews several fundamental concepts to set the stage for later chapters. Emphasis here is more on the concepts per se rather than on their relationship to government as entrepreneur. That integration occurs in each of the subsequent chapters. These interrelated concepts are: the innovation and the innovation process, public/private partnerships, research partnerships, and the productivity slowdown.

This chapter exploits aggregate data on French firms’ environment (labour market, financing, etc.), as well as microeconomic data on firms, to identify several factors that may have contributed to the sharp productivity slowdown in France. Major changes in the French labour market, such as the rise in high-skilled employment and the development of very short-term contracts and self-employment, appear to be good candidates for explaining the observed productivity slowdown since 2008, while financial constraints seem to play a minor role. In addition, work organizations based on workers’ involvement and commitment seem to have become less prone to an improvement in productivity in recent years. Their entangled impact on labour productivity may account for a two to five percentage point decline over the recent period. The losses in apparent productivity working through these mechanisms may be expected to be transitory.

This chapter motivates the book’s examination in later chapters of the Bayh-Dole Act of 1980, the Stevenson-Wydler Act of 1980, the R&E Tax Credit of 1981, the Small Business Innovation Development Act of 1982, the National Cooperative Research Act of 1984, and the Omnibus Trade and Competitiveness Act of 1988. The primary reason for the adoption of those policies were the two productivity slowdowns in the United States in the mid-1970s and the late 1970s/early 1980s, and the recognition of the fundamental role of uncertainty in the entrepreneurial process that is associated with technology and innovation development. Because these policies are based on the recognition of the role of uncertainty and innovation in the entrepreneurial process, they are excellent examples of public sector entrepreneurship.