Sunday, June 9, 2019

University research has required additional integration & transformation to become economically useful; no denying of contributions, but large corporate labs may have distinct capabilities which have proved to be difficult to replace

The changing structure of American innovation: Some cautionary remarks for economic growth. Ashish Arora, Sharon Belenzon, Andrea Patacconi, Jungkyu Suh. NBER Working Paper No. 25893, May 22, 2019.

Abstract: A defining feature of modern economic growth is the systematic application of science to advancetechnology. However, despite sustained progress in scientific knowledge, recent productivity growth in the U.S. has been disappointing. We review major changes in the American innovation ecosystem over the past century. The past three decades have been marked by a growing division of labor between universities focusing on research and large corporations focusing ondevelopment. Knowledge produced by universities is not often in a form that can be readily digested and turned into new goods and services. Small firms and university technology transfer offices cannot fully substitute for corporate research, which had integrated multiple disciplinesat the scale required to solve significant technical problems. Therefore, whereas the division ofinnovative labor may have raised the volume of science by universities, it has also slowed, at leastfor a period of time, the transformation of that knowledge into novel products and processes.

In this chapter, we suggest that this division of innovative labor has not, perhaps, lived up to its promise. The translation of scientific knowledge generated in universities to productivity enhancing technical progress has proved to be more difficult to accomplish in practice than expected. Spinoffs, startups, and university licensing offices have not fully filled the gap left by the decline of the corporate lab. Corporate research has a number of characteristics that make it very valuable for science-based innovation and growth. Large corporations have access to significant resources, can more easily integrate multiple knowledge streams, and direct their research toward solving specific practical problems, which makes it more likely for them to produce commercial applications. University research has tended to be curiosity-driven rather than mission-focused. It has favored insight rather than solutions to specific problems, and partly as a consequence, university research has required additional integration and transformation to become economically useful. This is not to deny the important contributions that universities and small firms make to American innovation. Rather, our point is that large corporate labs may have distinct capabilities which have proved to be difficult to replace.

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