The implications are significant. Innovation, defined by the authors as a “new product, service, or business model,” is widely recognized as a key factor in U.S. economic success. Moreover, disruptive innovation — innovation that has the potential to change industry structure — has been instrumental in the spectacular economic growth in the U.S. over the past century.
Policymakers’ general lack of understanding about the market for innovation has led to a paradox. In many cases, decades of policies aimed at stimulating economic welfare have “actually stifled the development of the most dynamic form of innovation — disruptive innovation.” This is “the policymaker’s dilemma,” and it results from the fact that policymakers are bereft of a coherent theory of innovation that helps them understand how different policies promote or inhibit innovation. The shame of this is that, when one is armed with a theoretical framework, the effects of policy on the innovation process are largely predictable.
According to the authors, policy’s impact on the natural market for innovation has two primary forces. These are motivation, defined as market incentives (or “a pot of gold”), and the ability of individuals and firms to access resources to innovate. Successful innovation requires both motivation and ability. To be effective, therefore, public policies must recognize and influence these two levers.
The U.S. telecommunications industry highlights the issues. Legislation and regulation have had a big impact on the evolution of the telecommunications sector, which accounts for 3 percent of total U.S. GDP. But the authors claim there has been no significant disruptive innovation in the telecommunications industry since the telephone replaced the telegram at the start of the 20th century.
They observe: “In their sometimes-overzealous attempts to protect voters, policymakers have at times done more harm than good through policies that kept prices down but denied the public the disruptive innovations that would have created lower-cost business models.”
Almost a century of intervention in the telecommunications sector at the national, state, and local level has produced a “complex legal soup flavored by politicians, courtrooms, lawyers, and lobbyists.” This, the researchers say, has distorted the natural market for innovation and created an environment in which policymakers try to make sense of this barrage of conflicting information and advice from firms, consumers, and lobbyists.
To help policymakers cut through the noise, Professor Christensen and Messrs. Anthony and Roth offer the “motibility” (optimal combinations of motivation and ability) framework. Policymakers can use this tool to craft policies that have a positive impact on both motivation and ability, driving the innovation market toward “the panacea … a hotbed of successful and profitable innovation.”
Can Wealth Buy Happiness?
Alberto Alesina (firstname.lastname@example.org), Rafael Di Tella (email@example.com), and Robert MacCulloch (firstname.lastname@example.org), “Inequality and Happiness: Are Europeans and Americans Different?” Harvard Business School Working Paper Number 02-084, Revised June 2002. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=265293
On average, European countries redistribute more wealth and provide more generous welfare benefits than the United States. In 1996, for example, government spending as a percentage of GDP across Europe (excluding interest payments) was 44 percent. This compares to 30 percent in the U.S. Europe is known for its benevolent social welfare policies. But what is it about Europeans’ attitudes toward social inequality that makes them more inclined than Americans to favor government largesse?
This question is usually studied from the perspectives of history, culture, politics, and society. In this case, however, three academics — Alberto Alesina, professor of economics and government at Harvard University; Rafael Di Tella, associate professor of business, government, and international economy at Harvard Business School; and Robert MacCulloch, a postdoctoral fellow at the London School of Economics — analyzed the effect of inequality on people’s stated happiness in the U.S. and Europe. They did so by analyzing responses to the basic question: “Are you happy?” From this study they conclude that income inequality affects European and American sensibilities differently. Indeed, the researchers found that inequality — often associated with high poverty rates — had a significant negative effect on happiness in Europe, but was almost neutral in the United States.