TRANSFORMATION OF THE STATE ECONOMIC POLICY PARADIGM: FROM FISCAL STIMULATION TO INNOVATION-DRIVEN DEVELOPMENT

Abstract

The contemporary global economic landscape is undergoing a
fundamental shift driven by rapid digitalization, the «green» transition, and escalating
geopolitical volatility. This article explores the imperative transformation of the state economic policy paradigm, moving away from traditional fiscal stimulation toward a
robust model of innovation-driven development. Historically, Ukraineʼs economic
strategy has heavily relied on fiscal instruments-such as tax exemptions, direct subsidies,
and budgetary interventions-to maintain macroeconomic stability. However, this study
argues that such mechanisms have reached a point of diminishing returns, failing to foster
long-term structural changes or high-value-added production.
The research utilizes a systemic-structural analysis to evaluate the efficiency of
current fiscal policies versus innovation-oriented incentives. The author posits that the
«fiscal-only» approach often leads to resource misallocation and rent-seeking behavior
rather than genuine technological advancement. In contrast, an innovation-driven
paradigm treats the state not merely as a regulator or a source of capital, but as an
architect of an innovation ecosystem. This involves the transition toward «smart
regulation,» the development of R&D infrastructure, and the strategic support of «dualuse» technologies, which are particularly relevant in the context of Ukraineʼs post-war
recovery and security needs.
Key findings of the study highlight the necessity of integrating institutional
reforms with technological priorities. The article identifies industrial parks, technology
clusters, and venture capital co-investment funds as the primary tools for this new policy
paradigm. Furthermore, the author emphasizes the role of human capital as a central
pillar of economic transformation. The shift toward an innovation-driven model requires
a fundamental restructuring of the relationship between the state, academia, and the
private sector, moving toward a «Triple Helix» model of cooperation.
Ultimately, the paper concludes that for Ukraine to achieve sustainable economic
growth and successful European integration, it must modernize its policy toolkit. The
proposed transition from passive fiscal support to active innovation orchestration will
allow the national economy to move up the global value chain, ensuring resilience against
external shocks and enhancing international competitiveness. This research provides a
strategic roadmap for policymakers to balance short-term fiscal stability with the longterm goal of technological leadership.

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