The Changing Structure of American Innovation: Some Cautionary Remarks for Economic Growth
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A defining feature of modern economic growth is the systematic application of science to advance technology. However, despite sustained progress in scientific knowledge, recent productivity growth in the US has been disappointing. We review major changes in the American innovation ecosystem over the past century. The past three decades have been marked by a growing division of labor between universities focusing on research and large corporations focusing on development. Knowledge produced by universities is not often in a form that can be readily digested and turned into new goods and services. Small firms and university technology transfer offices cannot fully substitute for corporate research, which had integrated multiple disciplines at the scale required to solve significant technical problems. Therefore, whereas the division of innovative labor may have raised the volume of science by universities, it has also slowed, at least for a period of time, the transformation of that knowledge into novel products and processes.
We thank Victor Bennett, Aaron Chatterji, Wesley Cohen, Edward Glaeser, Sharique Hasan, Josh Lerner, Elizabeth Perlman, Scott Stern, and seminar participants at the NBER IPE Conference for their helpful comments and feedback. We also thank Honggi Lee and Lia Sheer for their excellent research assistance. All remaining errors are ours. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.