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Ideas Roundtable: Advancing the Conversation Around Topics that Shape Our Lives
 
Content provided by GE
Ideas Roundtable: Advancing the Conversation Around Topics that Shape Our Lives

How About We Innovate Our Thinking About Innovation?

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Thirty years ago John Kenneth Galbraith, then our reigning Keynesian economist, declared that the role of the entrepreneur in America's future was over. Instead all innovation would come from the industrial laboratories of our biggest conglomerates. Since then Bell Labs, the archetype of company-initiated research disappeared. The laboratories supported by America's biggest drug companies have shriveled. The consensus among experts is that we have invented a more efficient way of innovating - we outsource it to start-up companies and government-supported university laboratories.  

But this new consensus brings about three troubling issues.

First, we don't know how to measure innovation. A few years ago I led a group to establish a method for determining if America was better at inventing than other countries. Perhaps the most honest finding to ever come from a government panel that included the chairman of IBM and a Harvard economics professor was that we can't measure innovation! You can't gauge what cannot be defined!  

Second, big companies fall by the wayside much faster than they did 50 years ago, at least judging by the population in the Fortune 500. Big companies, under the gun from capital markets for short-term performance can no longer innovate, at least not at the rate they used to. What else explains the proliferation of company-owned venture capital funds? They search for technologies that the company can buy and, then, notoriously kill off to protect their current products. Business schools have taught that protecting market share is everything, certainly more important than inventing new product.

Finally, it's not clear that the myth that our universities are better at innovation than companies is true. If the National Institutes of Health's record is any indication, the marginal rate of new discoveries per dollar spent has been dropping for 20 years! University research overhead, much of it driven by government regulations, continues to eat into the dollars really spent on science.  

Maybe America needs to return to the garage where entrepreneurs tinker and eventually build great companies. We have an unlimited supply of bright people ready to discover new things. We should develop an innovation system that encourages more individuals working outside the conventions of big companies or big universities.

To learn more about who's been working in America since 1960, explore the above Working in America data visualization »

Carl J. Schramm - Carl J. Schramm is University Professor at Syracuse University. For ten years he was president of the Ewing Marion Kauffman Foundation. He is co-author with Robert E. Litan of Better Capitalism: Renewing the Entrepreneurial Strength of the American Economy (September 2012, Yale University Press).

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