From an economic point of view an evaluation of the influence of government measures on innovation activities in historic comparison has to consider different points of departure. On the one hand, the state directly influences the innovation activities of a society via educational and research politics. On the other hand, government measures affect innovation incentives for private players. The project deals with selected aspects of the two roles that the state plays in the innovation system. The project investigates
to which extent the development of innovation activities depended on the dominance of the central government,the influence of fiscal policy on innovation activities and to which extent the structure of the financial system influenced innovation activities.
While the importance of the state for research policy is hardly ever contested, it is difficult to determine which government sector in the federal state, i.e. the German Empire / federal state, the Länder or municipalities is competent in this area. In the decades after the foundation of the German Empire, milestones were set in research policy, such as the establishment of the Kaiser-Wilhelm-Institutes. This chronology suggests a dominance at the level of the central government. At the same time, however, the Länder´s autonomy in higher education has been largely maintained up through the present. In the light of this dichotomy the project intends to identify the contributions that each of the three government levels made to innovation and technical progress. Property rights are a decisive, regulatory factor for incentives. When restricting these rights by taxation the state influences these incentives. For this reason, especially the willingness to make risky investments is vital for innovations. This willingness also depends on taxation. Yet, the institutions of the financial sector that assume the risk are just as important. During the investigated period, the banking business was regulated to varying degrees by the state. As it can be assumed that this regulation will also affect bank lending practice, the state thus exerts an indirect influence on innovation inclination. The project portrays the development of legislation involving banks and the taxation system, in particular corporate taxation. Innovation activities will be compared with these facts in order to evaluate to which extent the state influenced innovation activities by altering entrepreneurial incentives.