Red Innovation
"The technolgical dynamism of capitalism has always been a powerful argument in its defense. But one of its secrets is that at the heart of this change we find neither bold entrepreneurs, venture capitalists, nor established firms.
Investments pushing the frontiers of scientific knowledge are just too risky. The advances sought may not be forthcoming. Those that do occur may not ever be commercially viable. Any potentially profitable results that do arise may take decades to make any money. And when they finally do, there are no guarantees initial investors will appropriate most of the resulting windfall.
There is, accordingly, a powerful tendency for private capital to systematically underinvest in long-term research and development. Despite popular perceptions that private entrepreneurs drive technological innovation, the leading regions of the global economy do not leave the most important stages of technological change to private investors. These costs are socialized.
In the quarter-century after World War II, the high profits garnered by American corporations due to their exceptional place in the world market allowed corporate labs to engage in “blue-skies research” projects. But even then, public funding accounted for roughly two-thirds of all research and development expenditures in the United States, creating the foundations for the high-tech sectors of today.
With the rise of competition from Japanese and European capital in the 1970s, private-sector funding of research and development increased. However, long-term projects were almost entirely abandoned in favor of product development and applied-research projects promising commercial advantages in the short-to-medium term. . ."
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