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(originally published by Booz & Company)


Technology and Its Discontents

Many people who talk about invention and innovation actually want to keep the world very much as it is. These people argue for the importance of technical change in the future so as to avoid making any changes now. An example of that would be global warming. People talk about the necessity for new technology investment in technological solutions that will come into play in, five, 10, or 20 years’ time as a way of avoiding the kind of actions that we could take now.

Your new book includes a table listing the top corporate spenders in R&D, the point being that they’re mostly very old companies. Why is that?
The top five innovation spenders for 2003 were Ford Motor Company, Pfizer Inc., DaimlerChrysler AG, Siemens AG, and Toyota Motor Corporation. All but Toyota were in business before 1914. There’s extraordinary stability at the top of the list, and it’s certainly not the biotech and the IT companies that are up there, even though you’d expect that to be the case if you were listening to the hype of the futurists and innovation cheerleaders.

Why are several car companies at the top? Well, it costs a lot of money to develop a new car. Most people think that research expenditures are driven by the nature of the technologies themselves and their productivity. But that’s not the case. R&D levels are determined by what people want to pay for. And if people still want to pay for new cars — an invention running on an idea from 100 years ago — you’re going to have a lot of R&D in that area.

What does that tell us about innovation on a larger scale?
I’ve argued that there is no positive correlation between levels of research spending and levels of economic growth. Most discussion of science policy by serious people is predicated on the belief that there is such a positive correlation, that if countries spend more on innovation, they get back everything they spend and more in return. In fact, if anything, there is a negative correlation, at least for fast-growing countries.

That’s because most technology in newly developing countries comes from abroad. So countries that are quick to adopt technology can benefit a great deal in terms of growth. I can think of only one important exception to that rule: the U.S. in the middle of the 20th century. But that was a very exceptional case, and the U.S. accounted for something like 50 percent of world production and the same or more of world inventiveness. That’s no longer the case, of course.

What can that tell us about the role of corporate R&D in the innovation process?
There’s a lot of mythmaking about what R&D, even at universities, was like in the past. People exaggerate the extent to which blue-skies research dominated research. Now, that’s not to say that research with no particular object in mind has not been important. But thinking about actual uses of technology has always been much more important in research than people have made out.

That’s why it’s important to bear in mind that a lot of inventions emerge from use. The transistor didn’t come out of Bell Labs simply because they were doing blue-skies research. They had a long tradition of thinking about rectifiers and semiconductors. Yes, it involved a lot of creative thinking, but in a context in which people were immersed in a world of use of particular technologies.

We think we know what innovation means, but to study it, we use fiscal measures that don’t actually tell you much about innovation or invention. Consider patents. What are patents? They’re legal documents. They’re not in themselves a measure of inventiveness. Research and development spending is a measure of how much you spend on research and development. It doesn’t tell you anything about outputs.

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  1. “American Competitiveness Initiative,” Domestic Policy Council, Office of Science and Technology Policy, February 2006: The U.S. government’s most recent statement of the country’s technology policy. PDF download.
  2. David Edgerton, The Shock of the Old: Technology and Global History since 1900 (Oxford University Press, 2006): A contrarian history of technology in the 20th century. Click here.
  3. Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, “Smart Spenders: The Global Innovation 1000,” s+b, Winter 2006: Booz Allen Hamilton’s most recent take on the relationship between corporate R&D spending and growth. Click here.
  4. Art Kleiner, “Carlota Perez: The Thought Leader Interview,” s+b, Winter 2005: A long-wave theory of technological change, explaining how “use” gets translated into 50-year cycles of growth. Click here.
  5. Society for the History of Technology Web site: Includes a very good page of links to information on technology and society. Click here.
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