Posts filed under ‘Innovation’
Texting Victorians
| Peter Klein |
I knew that the Victorians had their own Internet, that information goods and open innovation are old hat, and that S-curves go back a hundred years. But apparently the Victorians used texting language too! We instruct our students to avoid it, but apparently Victorian poets thought writing I “love U 2 X S” or “U R virtuous and Y’s” was exceedingly clever. LOL! (Discovery! via Gizmodo.)
Chris Freeman, 1921-2010
| Nicolai Foss |
Chris Freeman, author of The Economics of Industrial Innovation, co-founder of Research Policy, and founder and first director of the Science Policy Research Unit at the University of Sussex, died yesterday. Freeman was not only an academic entrepreneur, but also an important mentor for innovation scholars like Giovanni Dosi, Keith Pavitt, and Jan Fagerberg.
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
Does Knowledge Management Improve Performance?
| Peter Klein |
Yes, says Peter Cappelli:
The extensive literature on knowledge management spans several fields, but there are remarkably few studies that address the basic question as to whether knowledge management practices improve organizational performance. I examine that question using a national probability sample of establishments, clear measures of IT-driven knowledge management practices, and an experimental design that offers a unique approach for addressing concerns about endogeneity and omitted variables. The results indicate that the use of company intranets, data warehousing practices, performance support systems, and employee competency databases have significant and meaningful effects on a range of relevant business outcomes.
Cappelli relies on a national (US), establishment-level survey of knowledge-management practices to construct a panel in which (according to the practioner literature) none of the knowledge-management practices under consideration existed at the start of the sample period. Check it out.
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
WikiLeaks and Napster
| Peter Klein |
Apropos my WikiLeaks post, comparing the recent data dump to the data-sharing and data-mining practices increasingly common in academia, a Thursday New Yorker post by Raffi Khatchadourian takes the New Economy framing even further, comparing Wikileaks to Napster. “Shutting WikiLeaks down — assuming that this is even possible — would only lead to copycat sites devised by innovators who would make their services even more difficult to curtail.” The recording industry shut down Napster, spawning Bittorrent — a far more dangerous competitor. Khatchadourian says the Defense Department should “consider WikiLeaks a competitor rather than a threat, and to recognize that the spirit of transparency that motivates [Wikileaks founder Julian] Assange and his volunteers is shared by a far wider community of people who use the Internet.” Had the DoD had released the footage of the 2007 Apache helicopter attack itself, rather than waiting for WikiLeaks to publish it on YouTube, it could probably have contained the damage much more effectively. Naturally, I wouldn’t expect the DoD — or the RIAA — to be that smart. (HT to TechDirt via David Veksler.)
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
Tesla (the Car)
| Dick Langlois |
Speaking of Tesla: as I was waiting to cross Page Mill Road in Palo Alto the other day, I saw a real live Tesla drive by — the car, not the long-dead inventor. There are several dealerships along El Camino.
In their recent comment, Mari Sako and Susan Helper suggested that electric vehicles might be an example in which, because of the systemic nature of innovation, we might see considerable vertical integration à la Chandler. They talked about the complementary network of charging stations, etc. But it seems to me that what vertical integration the electric vehicle will bring about is more likely to be in the design and production of the car itself. For example, the Tesla website notes that the “Roadster is controlled by state-of-the-art vehicle software. Rooted in Silicon Valley tradition, the code is developed in-house with an intense focus on agile and constant innovation.” Presumably they mean that the code itself, not the vertical integration, is rooted in Silicon Valley tradition.
Apparently, Tesla (along with Toyota) is going to reopen the famed NUMMI plant in Fremont to make its new passenger-car model.
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
The History of Nikola Tesla
| Peter Klein |
Saturday was Nikola Tesla’s birthday. Here’s Jeremiah Warren’s video in Tesla’s honor:
Tesla was, of course, the great inventor whose technical achievements outshone those of his great rival, Thomas Edison, but who was unable to commercialize any of his discoveries. Tesla, unfortunately, put his faith in intellectual property-rights protection, while Edison emphasized management and marketing. As Danny Quah puts it, “Public relations and entrepreneurial savvy trump the raw intellectual idea.”
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
Isomorphism in Higher Education
| Peter Klein |
Amitai Etzioni is upset that new firms are entering the higher-education market and offering — gasp! — a differentiated product. Worst of all, they operate on a for-profit basis! (“For-profit,” as left-leaning intellectuals know, is synonymous for “evil.”) Consider:
The education students receive at for-profit colleges bears little resemblance to the kind they would get at a true liberal arts college. Neither does it resemble the collegial image the for-profit colleges love to project. Professors at these schools often work on short contracts. There is no tenure. The executives make staggering salaries. Most students are taught online, often by poorly qualified professors who have very limited contact with the students. . . .
The schools’ stripped-down curricula and poor instruction often make for nearly worthless degrees. When students graduate from these colleges, many cannot find jobs — or at least not the kinds they were promised — and eventually, many of them default on their loans.
Of course, this in no way resembles the situation at traditional colleges and universities, at which all instructors are highly qualified, administrators make minimum wage, instructors spend lots of time with their students, and all students get exactly the jobs they were promised and pay their loans back immediately. (more…)
Accounting Conference on Creativity
| Peter Klein |
Hold your accountant jokes, everybody, because the journal Accounting, Organizations, and Society, along with IESE Business School and Sda Bocconi School of Management, is sponsoring a workshop on creativity and it looks really interesting. The workshop, “Debating the Link Between Creativity and Control,” takes place 4–5 April 2011 in Barcelona. Here’s the blurb:
Creativity is more important today than ever before. In fact, in current hypercompetitive environments, where the comparative advantage is easily eroded by technological evolution and by imitative or innovative action of competitors, firms can only react by means of creative processes aimed at renewing market strategies and product lines. Different streams of research on creativity have been developed over time, evolving from different sources, focusing on somewhat different aspects and suggesting a rich set of managerial results.
The aim of the workshop is to start an interdisciplinary debate on creativity, calling together contributors from psychology, sociology, management, and accounting domains. The discussion will explore the link between creativity and control, seen as a promising stream of research not only because of its infancy but most important because of its relevance to the world of management. The event will contribute to unveiling how the dialog between different disciplinary perspectives may lead to a deeper understanding on how to control creativity processes, thanks to the potential synergies deriving from the study of this phenomenon from different theoretical angles.
Further details and submission info below the fold. (more…)
Interview with Josh Lerner
| Peter Klein |
Paul Kedrosky interviews Josh Lerner for Kauffman’s “Infectious Talk” series. Josh is one of the top researchers and teachers working at the intersection of entrepreneurship and finance, and is always worth reading (or listening to, if you prefer the podcast version).
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
Economics of Creativity
| Peter Klein |
David Galenson has written a series of papers on the creative arts, including songwriting, architecture, filmmaking, photography, and many kinds of visual art. A new paper, “Understanding Creativity,” summarizes and synthesizes much of this work. A central theme is the distinction between “experimental” and “conceptual” innovators. Experimental innovators focus on perception, proceed incrementally, and tend to make their most important contributions late in their careers. Conceptual innovators emphasize emotions, proceed in bold strokes, and tend to peak early. (A cinematic example: John Ford and Alfred Hitchcock fall in the former category, Orson Welles and Jean-Luc Godard in the latter.)
There are obvious parallels with the study of technological innovation, management, and entrepreneurship. Think of incremental versus systemic innovation, sustaining versus disruptive change, low-key management versus charismatic leadership, Kirznerian coordination versus Schumpeterian innovation. The analogies are inexact, but nonetheless intriguing (particularly the life-cycle aspects). What connections do you see?
The abstract of “Understanding Creativity” is below the fold. (The paper itself is gated, unfortunately). (more…)
The “Knowledge Filter” and the New Economy
| Dick Langlois |
I recently ran across a paper by Bo Carlsson, Zoltan Acs, David Audretsch, and Pontus Braunerhjelm called “The Knowledge Filter, Entrepreneurship, and Economic Growth.” It’s actually a 2007 paper, part of a series these authors in various combination have been writing about the idea of a “knowledge filter.” The standard story about knowledge (in the new growth theory, but long before that as well) is what I think of as the R&D sausage-machine: one pours inputs like capital and labor into the meat grinder of R&D and out comes knowledge, which shifts the production function. In a series of papers, Carlsson et al. have argued that there is a “filter” somewhere within the meat grinder that determines how effectively the inputs get turned into useful knowledge. Although I’m sympathetic to criticism of the sausage machine story, you can imagine why I don’t think the knowledge-filter idea helps much: it’s just another black box that can be sized to fit whichever facts (stylized or real) one has at hand. Why not do away with the model altogether and instead think hard about the structure of knowledge and how it has interacted with institutions and organizational forms?
In fact, of course, that is what the authors actually do to some extent in this paper: one can read it without having to buy into the “filter” part. What caught my attention, in fact, is that this paper is ultimately an argument about the causes of the New Economy, and I am a collector of such arguments. The authors seem completely innocent of the large Post-Chandlerian literature on this topic, and they try to explain the transition from the large Chandlerian firm to more specialized entrepreneurial units strictly in terms of trends in R&D and knowledge creation.
[T]he industrial revolution was based in part on turning knowledge into economically useful knowledge and … university education and research in the United States became practically and vocationally oriented (in comparison with European universities), partly through the land-grant universities established in the mid- to late 19th century. In the early part of the 20th century, corporate research and development labs began to emerge as major vehicles of basic industrial research. Virtually all of the funded research prior to World War II was conducted in corporate or federal labs. In conjunction with a rapidly increasing share of the population with a college education, this made for high absorptive capacity on the part of industry and, as a result, a “thin” knowledge filter. In subsequent sections we discuss the emergence of the research university, the dramatic increase in research and development spending, and the shift of basic research toward the universities, especially during and following World War II. During the 1960s and 1970s, this led to a thickening of the knowledge filter in the form of an increasing need to “translate” basic (academic) research into economic activity. New firms have increasingly become the vehicle to translate research into growth; this can be seen in the greater role of small business and entrepreneurship from the 1970s onward.
Interesting. But I see two serious problems with this. First off, it misunderstands and vastly oversells the research labs of the mid-twentieth century. In most cases these were not drivers of innovation but absorbers of ideas invented outside the company by networks of smaller inventors — much like today. And when they did perform genuinely basic research, as in the case of Bell Labs, they were not at all tightly coupled to application. These labs were good at systemic development, that is, developing technologies that required a lot of disparate pieces to be created and put together. Color TV at RCA is an example. But they were not good at generating genuinely new useful knowledge or at more modular kinds of innovation — or, at least, weren’t as good as diffuse networks of inventors. In fact, as I mentioned in my previous post, the concentration of research (and patents) in the labs of RCA arguably slowed innovation in radio and consumer electronics generally. This leads to my second point: it’s not clear that one can explain everything just by looking at knowledge and R&D. There is actually a lot similarity between the regime of government funding of research through Land Grant institutions and the post-War grant system of Vannevar Bush: it was always channeled through the universities. Changes in government funding thus can’t really explain why there were large R&D labs at one time and small entrepreneurial firms at another. For that one has to think about issues of organization that go beyond the R&D function.
Study this Summer with Klein
| Peter Klein |
I’m participating in a distance-learning experiment this summer — no, not Bootsy Collins’s Funk University, but the Mises Academy, a new Mises Institute service offering short, non-degree courses to university students, management professionals, and the general public. Everything’s online — lectures, readings, discussions, assignments. I’m teaching “Entrepreneurship in the Capitalist Economy,” a course based on my favorite book (as Mankiw would put it). The course runs for 9 weeks from 7 June to 7 August and costs a mere $255 — that’s less than one or two of Nicolai’s books!
The course is pitched at the undergraduate/MBA level, with no formal prerequisites except intellectual curiosity, a good work ethic, and a sense of humor. Perhaps I’ll offer special extra-credit assignments for O&M readers. . . .
Drop me a line if you have any questions. I’d love to have you join me on this journey!
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
Handbook of the Economics of Innovation
| Peter Klein |
Elsevier has just released the Handbook of the Economics of Innovation, edited by Bronwyn Hall and Nathan Rosenberg. At USD 250 for the two-volume set (a bit less at Amazon), it’s not exactly cheap, but I expect a high ratio of good ideas to pages. You can read the introduction here, and here’s a draft of one of the chapters.
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
Intellectual Steam
| Dick Langlois |
There’s nothing like a rousing academic argument, especially when it deals with an intriguing historical case. “The Fable of the Keys” by Liebowitz and Margolis is the paradigm here. I recently stumbled upon another example, the (apparently ongoing) dispute that pits George Selgin and John Turner against Michele Boldrin and David Levine on the question of to what extent James Watt’s steam-engine patents retarded innovation in steam technology and slowed the British industrial revolution.
The Newcomen steam engine was a low-pressure device that, by using steam to create a vacuum, actually used air pressure to drive the engine. Watt invented and patented an improvement to the vacuum engine that involved a separate condenser to cool the steam, thus increasing efficiency. On the strength of his patent, Watt was bankrolled by the industrialist Matthew Boulton, and together they licensed the technology to others and did their best to block competing technology. Boldrin and Levine claim that the Watt patent constituted a wide-scope blocking patent, of the kind described by Merges and Nelson, which slowed development of rival technologies, including the high-pressure steam engine that was to be crucial in textiles and elsewhere. As a result, the Boulton-Watt patents and legal stratagems “delayed the industrial revolution by a couple of decades.” Selgin and Turner take issue with both facts and conclusions, arguing that patent law at the time, which derived from the 1625 Statute of Monopolies, actually forbade the patenting of a general idea and insisted that an innovation be instantiated in specific technology, in this case in the form of the condenser. In other words, they argue that patent scope was kept sensibly low in eighteenth-century Britain, something of which Merges and Nelson would approve. Thus Boulton and Watt could not, and in fact did not, slow the development of high-pressure steam through intellectual property, though they may have had an effect on the culture of contemporary inventors, who doubted the economies and feared the dangers of high-pressure steam at a time when complementary metallurgical technology was not yet up to the task. (Note to Selgin and Turner: here is a better reference on the dangers of high-pressure boilers in American steamboats.) (more…)
The Invention of Enterprise: Reviews
| Peter Klein |
If you haven’t yet had a chance to read Landes, Mokyr, and Baumol’s 600-page baby, The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times, here are reviews by Mansel Blackford and Reuven Brenner. Blackford is impressed; Brenner, not so much. Brenner is worth quoting at length:
[L]arge chunks of the book are more about the topic of inhibitions to enterprise and both the variety of ideas people came up with to rationalize them and the institutions rulers and governments put in place to enforce these ideologies. . . .
Unfortunately most of the chapters dealing with the topic of inhibitions miss the forest from the trees, as not one addresses what is to me the basic issue when examining “the invention of enterprise.” There is nothing more threatening to an established order — any order — than opening up, deepening, democratizing capital markets — accountably, allowing people to leverage their inventive, enterprising spirit. True, this would also disperse power — political power in particular. The deeper capital markets would also threaten established industries and commerce. Entrepreneurs, brilliant and ambitious as they might be, are not a threat. They can be sent to Siberia, forced into complacency by the Maos of this world, and the opportunistic ones will channel their ambition through the established powers.
But entrepreneurs with access to different, independent sources of risk capital — now that’s threatening, be they Brin and Page, Jobs or Milken at the time (quickly taking away much of the banks’ bread and butter of providing loans). Understanding this, even if not wanting to articulate it, provides enough incentives for those in power to subsidize, spread, and promote ideas and institutions inhibiting the deepening of capital markets under a wide variety of jargons, and thus inhibiting the invention and reinvention of enterprises. With time, people get accustomed to these institutions, their origins lost in the mist of time, inhibiting entrepreneurship and business for centuries. Today this may be happening a bit before our eyes. Suddenly, everything becomes a “bubble” — Internet, oil, houses, gold, bonds. Guess what: if everything is — why have capital markets to start with? If pricing no longer offers guidance to allocate capital; if stock and bond markets are not there to help correct mistakes faster — why should they continue to exist? And if they do not exist, who else remains but politicians, bureaucrats and the academics surrounding them — none of whom ever worked in a business even one day in their lives — who would then tax and borrow and subsequently allocate capital and “invent enterprises” based on — well — whatever.
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
Greenstein on Innovation
| Peter Klein |
One of my regular lectures at the Mises University deals with the economics of networks and information technology, with a particular focus on the history of the internet. A few years ago I wrote up my notes for a Mises.org daily article, which appeared as “Government Did Invent the Internet, But the Market Made It Glorious.” Shane Greensteinn’s new NBER paper could used the same title, though he chose something meatier: “Nurturing the Accumulation of Innovations: Lessons from the Internet.” Okay, the paper is a bit meatier too. Check it out:
The innovations that became the foundation for the Internet originate from two eras that illustrate two distinct models for accumulating innovations over the long haul. The pre-commercial era illustrates the operation of several useful non-market institutional arrangements. It also illustrates a potential drawback to government sponsorship — in this instance, truncation of exploratory activity. The commercial era illustrates a rather different set of lessons. It highlights the extraordinary power of market-oriented and widely distributed investment and adoption, which illustrates the power of market experimentation to foster innovative activity. It also illustrates a few of the conditions necessary to unleash value creation from such accumulated lessons, such as standards development and competition, and nurturing legal and regulatory policies.
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
Miscellaneous Conference and Paper Links
| Peter Klein |
SSRN has a new Philosophy and Methodology of Economics working-paper series, sponsored by the International Network for Economic Method.
Here’s a CFP for a Special Issue of the E-conomics e-Journal on the Social Returns to Higher Education, R&D and Innovation.
You can watch a live stream of this weekend’s SEJ Special Issue Conference on Knowledge Spillovers & Strategic Entrepreneurship.
The registration and accommodations section of the ISNIE 2010 website is now open.
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
Edgerati
| Dick Langlois |
I just received an email from John Hagel informing me that I am among the inaugural class of what he and John Seeley Brown call the Edgerati. According the website, “Edgerati are people who venture out onto various edges, engage with participants on those edges, develop deep insight from their involvement on the edge and report back to the rest of the world what they have learned.” I’m glad to learn that what I had always thought to be the fringe or the margin is actually the edge. (Actually, I’m genuinely flattered.) Among the other Edgerati is one Nicolai Foss.
Add to: Facebook | Digg | Del.icio.us | Stumbleupon | Reddit | Blinklist | Twitter | Technorati
The Chris Dodd Strangle Entrepreneurship Act, or, Where’s Creative Destruction When You Need It?
| Craig Pirrong |
Back in January, Tool Time star Tom Friedman lamented that Mr. Cool had turned his back on the “amazing, young, Internet-enabled, grass-roots movement he mobilized to get elected.” Friedman all but begged Obama to spur entrepreneurship and innovation:
Obama should launch his own moon shot. What the country needs most now is not more government stimulus, but more stimulation. We need to get millions of American kids, not just the geniuses, excited about innovation and entrepreneurship again. We need to make 2010 what Obama should have made 2009: the year of innovation, the year of making our pie bigger, the year of “Start-Up America.”
How’s that working out for you, Tom? With all the taxes on capital in the health care law, and the implicit tax on business expansion in the law (e.g., insurance mandates on companies with more than 50 employees), and all the taxes to come (there are murmurs of a VAT), it is becoming the year of Shut-Down America. The whole Obama program is poison to entrepreneurship.
And that’s just the start. Dodd’s banking bill explicitly targets startups:
Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the S.E.C. to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.
And just what are the apparatchiks in the SEC going to do in that 120 days? Just what knowledge and expertise can they bring to bear in evaluating the funding plans? The question answers itself; this adds costs and delay, for no perceivable benefit. And what reason is there to restrict the free flow of capital from consenting adults with over $1mm to startups? (more…)
Mundaneum: The Google of 1910
| Peter Klein |
Fascinating article by Molly Springfield in Triple Canopy on the Mundaneum, an effort by two Belgian lawyers to collect and classify all the world’s information, using notecards and an innovative filing system. Information scientist Paul Otlet “was the first to imagine all the world’s knowledge as one vast ‘web,’ connected by ‘links’ and accessed remotely through desktop screens, and because of this he can be seen as the kooky grandfather of the Internet.” Unfortunately, the analog technology of the early twentieth century was not up to the task. (Here’s the wiki on the Mundaneum, which incidentally might make a good title for my next book.)
See also: The Victorian Internet by Tom Standage.
Organizations and Markets 
Recent Comments