The Innovation Paradox
URL
https://www.imf.org/en/Publications/fandd/issues/2024/09/the-innovation-paradox-ufuk-akcigit
Key Takeaway
Increased R&D spending in the US has not led to expected productivity gains, as large companies focus on defending market positions rather than true innovation, suggesting a need to rethink innovation policies.
Author and Publication
Author: Ufuk Akcigit
Publication date: September 2024
Summary
- US R&D spending increased from 2.2% of GDP in the 1980s to 3.4% today, but productivity growth has declined.
- Large established companies now employ 58% of American inventors, up from 48% in 2000.
- Inventors moving to large firms become less innovative compared to those joining younger companies.
- Large companies engage in “innovation-stifling hiring” by recruiting talent from smaller competitors but not fully utilizing their skills.
- The R&D tax credit introduced in 1981 has inadvertently favored large companies over smaller ones.
- Companies claiming R&D tax credits are more likely to engage in practices that reduce overall innovation.
- The concentration of R&D resources in large businesses has led to diminishing returns in productivity growth.
- Policies need to support not just large incumbents but also smaller businesses and startups to foster disruptive innovation.
- A more inclusive innovation ecosystem is needed to better utilize innovative talent and boost economic growth.
Link Analysis
The most important URL from this article is the one provided, as it is the source of the content:
https://www.imf.org/en/Publications/fandd/issues/2024/09/the-innovation-paradox-ufuk-akcigit