The changing structure of American Innovation - some cautionary remarks for economic growth

  • There was a transition from ‘inventors’ to corporate labs in the 1920’s
    • First bundling step
    • Why? Capital and manufacturing costs?
  • Since the 1970’s there are less publications in general form companies, most of the loss coming from less use-oriented research
  • 1980’s - corporations get new products and ideas from universities and startups
  • Value of scientific capacity went down
  • 1850-1900: Inventors sold technology into a market
    • 1870 - patents assigned to patents granted ratio = 0.83
    • 1890/1911 - ratio = 0.71
      • Doesn’t a decreasing assigned to granted ratio mean fewer patents being assigned? ::question for authors::
    • Patents assigned at issue (ie. Used by the people who created them) goes from 18.4% -> 31.1%
    • People become specialized inventors.
    • Industrial labs set up to evaluate external inventions
  • 1900-1940: Transision

    • German industrial research precedent
    • Acquiring patents became harder because of rising tech complexity
    • Stronger antitrust enforcement also convinced managers that buying other firms would be a costlier way to grow than by introducing new products derived from in-house research
    • Universities relied on state/industry funding before WWII
    • Alexander von Humbolt started Humbolt university as an institution driven by intellectual curiosity and this idea spread ::assumedly before in us universities it was much more practical - see land grant universities which happened before the spread of the curiosity driven piece::
    • Hatch and Adams act enabled federal funds for non-immediately applied research
    • Universities experienced conflicting norms between mission-orientation and discipline-orientation
      • Arthur Noyes left MIT for Caltech over this
      • GN Lewis left MIT for Berkeley over this
      • Caltech was founded to ‘correct’ this
    • Industrial labs pulled people away from universities by offering better equipment for researchers
  • 1950-1980

    • WWII pumped massive federal $$ into universities (2 orders of magnitude)
      • ::Is this basically like Bane::
    • Cold War added to this effect
    • ::What is the connection of massive federal funding of university labs with corporate labs?::
    • Increased importance of scientific knowledge for product development -
      • Drugs
    • Maser paper - Bell Labs + Columbia
      • Quickly followed up on by private sector
    • Corporate labs enabled the preserving and passing on of complementary engineering skills with a lot of tacit knowledge
  • 1980 ->

    • Division of labor between corporations and universities
    • Academics had no forcing function and so they specialized in sub problems that are more amenable to scientific investigation
    • This academic specialization made it harder to translate
      • ::What is the effect of specialization on transaction costs?::
    • Bayh-Dole was intended to get more federally funded research into the market by reducing uncertainty about licensing
      • ::Were things being used unpatented? Seen vs Unseen?::
    • Bayh dole incentivized universities to patent more
    • Incentives have pushed university scientists to start their own companies
      • Legal
      • Companies are more bureaucratic
      • VC + SBIR financing

- Licensing income is basically flat since 2005, but patents keep going up
- Culturally universities were pushed away from mission-oriented research by protests in 1968 [[WTF happened in 1971? - Article]]             
- Small research orgs trade ex ante and ex post knowledge products
	- ::How is this difference than defense contractors in the 1950’s?::
	- Knowledge products can be more disembodied
- ::Doesn’t talk about how the capital structure of bio/software plays well with VC::
- Antitrust made it hard for corporations to enter downstream markets with general purpose tech
	- ::Doesn’t this argue against ‘internal research as a way to create new markets’?::
- ::Why did DuPont close it’s R&D division?::
- Scientific publications/sales for IT firms is low
	- ::Is it possible that the equivalent would be open source software?::
- Bio publications went up
	- More bio research projects suggest new products than in other industries
		- ::Why is this?::
	- Possibility that NIH funding led to 
- ::Didn’t really address startups role::

Why did corporate science decline?

  • Increasingly harder to profit from in-house research
    • Larger gap between invention and commercialization allows you to patent an ecosystem around a thing (Xerography example) vs. lots of firms discovering high temp superconductivity at the same time 🤔
      • ::This argument feels like it’s missing something::
    • Narrowing firm scope - investors pushed public companies to focus
      • Diversified firms may be best suited to taking advantage of research
  • Easier to acquire external knowledge
    • Less antitrust
    • More applied university research
    • External progress is faster
    • More intellectual property right enforcement

Why are corporate research labs important

  • Corporate labs are structured for systemic innovations (which require extensive coordination and communication across different stages of production and actors)
  • Corporate labs force people to work on practical problems but have different timescales than startups
  • Corporate labs have a bunch of different skillsets
    • Transistor
      • Metalurgy, physics, chemistry
    • Planar process
    • Integrated circuit
      • Arguably fabless firms couldn’t come up with these
  • AI for example needs scale
  • Many industries started as spin offs from corporate labs
  • ::Aren’t external benefits to corporate labs an argument for corporations not to have them?::

  • Antitrust leads to diffusion

    • 1956 consent decree against bell system - licensing royalty free
    • ::If this was common why would companies do research::
  • Bayh-Dole
    • Increasing inventor share of licensing fees doesn’t increase patenting but going from totally professor owned to partially university owned does reduce them ::Doesn’tthis make sense in light of what a pain universities are to deal with them?::

Random tidbits

  • Fortune 500 firms won 41% of R&D 100 awards in 1971 and 6% in 2006 WTF happened in 1971? - Article
  • Research division of labor hasn’t lived up to its promise - Transaction costs!
  • large corporate labs may have distinct capabilities which have proved to be difficult to replace.
    • University research is more curiosity driven - insight over solutions
    • 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.
  • Research projects have long horizons and few intermediate milestones that are meaningful to non-experts.
  • Managers fear creating research organizations disconnected from the business
  • Corporate attitude towards the organization of science in for-profit corporations was well ex- pressed in 1885 by T. D. Lockwood, head of American Bell Telephone Company’s patent department: “I am fully convinced that it has never, is not now, and never will pay commercially, to keep an es- tablishment of professional inventors, or of men whose chief business it is to invent” ::Was this correct?::
  • Plea for Pure Science in 1883 for the AAAS address that year, in which he demanded “what must be done to create a science of physics in this country, rather than to call telegraphs, electric lights, and such conveniences by the name of science?” (Rowland, 1883)

    Published

    6/2019

    Questions

  • What happened with DuPont’s “Purity hall?” Cited as a reason managers fear disconnecting research from business
  • Bayh-Dole?

    Thoughts

  • Onus seems to be on research labs to conform to the business, but what if the business worked to incorporate research more
  • Measuring research is tricky
    • R&D $$ can be R or D. Shift might be towards D.
    • Publications as a measure have a bunch of issues

      Related

  • WTF happened in 1971? - Article
  • Cites science and business at GE and Bell 1876-1926
    For how the ecosystem worked in 1850-1940
  • Mowery, D. and Rosenberg, N. (1998). Paths of innovation : technological change in 20th-century America. Cambridge ; New York : Cambridge University Press, 1998.
  • Mowery, D. C. (2009). Plus ca change: Industrial R&D in the third industrial revolution. Industrial and corporate change, 18(1):1–50.

  • Mowery, D. C. and Sampat, B. N. (2004). The Bayh-Dole Act of 1980 and universityindustry technology transfer: a model for other OECD governments? The Journal of Technology Transfer, 30(1-2):115–127.

  • Mowery, D. C. and Rosenberg, N. (1999). Paths of innovation: Technological change in 20th-century America. Cambridge University Press.
  • Rosenberg, N. (1994). Exploring the black box: Technology, economics, and history. Cambridge University Press.

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