Where do innovations really come from?

There’s a document around by Block & Keller (2011) (“Where do innovations come from?”) doing some very weird definitions.

Mariana Mazzucato:

Given the leading developmental role the US government plays in a vast number of sectors, it is no surprise that at a more micro level, Block and Keller (2011b) found that between 1971 and 2006, 77 out of the most important 88 innovations (rated by R&D Magazine’s annual awards) – or 88 per cent – have been fully dependent on federal research support, especially, but not only, in their early phases – and the R&D Magazine’s award excludes ICT innovations.

Mazzucato says that Block & Keller say that 77 out of 88 inventions were fully dependent on federal research support, just that they received some federal funding.

Note that Mazzucato goes far (“fully dependent”) beyond what Block & Keller say. The level of misinterpretation is even higher here, and the findings are used to support not an entrepreneurial state but outright central economic planning.

Block & Keller have a peculiar way of calling something private or public:

  • Private: Fortune 500 firms, other firms, and inter-firm collaboration
  • Public or mixed: Recent spinoffs supported by government, universities, federal labs, and nonprofit agencies
  • Foreign firms

Then, they also do this:

In the case of collaborations, we have chosen to attribute them to a single organization to avoid double counting. If a university is a participant in a collaboration, the innovation will be attributed to the university regardless of other participants. If no university is present, but a government lab is involved, then the innovation is attributed to the lab. If there is another public or nonprofit participant, the innovation will be attributed to that participant. If all participants are private, then it will be coded in category 3.

This way, they get this chart

Captura de pantalla de 2016-02-03 09-51-47

Captura2

Let’s go to the R&D Magazine awards for 2006 and do the count ourselves:

My methodology is: Private firms (including foreign), plus private firms collaborations, plus nonprofits will be called Private. National Labs, and national labs collaborations will be called Labs. Universities and university collaborations will be called Universities. The sum of Labs and Universities will be called Public (Altough some of the universities are not public).

Doing this, for the year 2006, we get that 53 of the awards went to the private sector, 27 to the public sector, and 27 went to mixes between the two. (There are 2 more items than there should be, but +/2 does not change the results).

What is driving the results here is their peculiar attribution policy, plus considering SBIR firms as ‘Mixed or Public’.

SBIR firms received money from the government, but the decision of the projects to pursue, and the work done, was done by those companies. I could impute these innovations to Public/Mixed if we had evidence that they would not have taken place without the SBIR funding, which would lead us to an analysis of SBIR itself. (I haven’t done a full review yet, but see Wallsten 2000)

Let’s repeat the analysis for 2015: there we get 61 innovations for the private sector, 26 for the public sector, and 11 mixed innovations.

The correct conclusion is that, after all, common sense is right, and most of the innovations as measured by the R&D Magazine come from the private sector. This should not come as a susprise: the private sector in the US accounts for 70% of R&D spending, and roughly half of basic science spending.

The interesting questions here would be to see a) How much does SBIR help foster innovation? b) Are these innovations productive, beyond being interesting from an engineering point of view?

The take-home point from Block-Keller is not that the public sector dominates the innovative production in the US, as Mazzucato mistakenly reads, but that collaborations are becoming more important. The case for State-led innovation cannot hinge upon SBIR, as this programme is not dirigisme, but attempting to identify what the private sector is already doing, and nourishing it.

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4 Responses to Where do innovations really come from?

  1. Researcher degrees of freedom in action.

    • Artir says:

      What I see here as more problematic is how some claims get amplified over time. Definitions are definitions, and altough Block-Keller don’t disclose their full data (Which firm and invention was assigned to which category, I have no problem with one defining categories as one sees fit, but then this lends itself to being misused in the future. So scientifically, ‘per se’ it’s not a problem, but using certain categories, empirically, lead to a corruption in the scientific process.

      Similar to how emotions, ‘per se’ need not affect one’s reasoning, but in practise they end up doing so.

      As a funny note, in the Handbook of the Economics of Innovation, they actually say that innovation policy moves far faster than the evidence that backs it (!). I’ll do a lit review soon, if I can get myself to finally read my folder of pdfs and write it down.

  2. Pingback: The Non-Non Libertarian FAQ | Nintil

  3. ohwilleke says:

    A critical question in attributing the source of innovation is how to count the role of unpatented basic research and technological infrastructure that was not involved in the research collaboration itself.

    For example, the Internet started out as a tool for government scientists. So, in one kind of analysis, every innovation involving the Internet made by Google or Microsoft or Yahoo or Airbnb or Uber ought to be considered fundamentally dependent upon government research support. Ditto just about any product that uses GPS which was originally developed for military applications on the government’s dime (and continues to be available only in a deliberately inferior form for the general public as oppose to the military).

    On the other hand, if only the incremental improvement that an innovation makes relative to the existing status quo of science and technology and infrastructure in existence when the research is begun should count as involved in producing that innovation, the extent of private dependence upon government innovation is much smaller.

    A wide range of ways to define who counts as an innovator are possible, and ultimately the only determinant of which definition is right or wrong depends upon the purpose for which you want to use the results obtained with the information, which isn’t at all obvious in this context.

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