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How Best to Promote Research and Development

Clearly, there is something appealing about a start-up-based innovation strategy: it feels democratic, accessible, and so California. But it is definitely not the only way to boost research and development, or even the main way, and it is certainly not the way most major innovations in the US came about during the twentieth century.

CAMBRIDGE – Start-ups, incubators, accelerators, angel capital, venture capital, mergers and acquisitions, initial public offerings, a liquid stock market, techno-parks, a major university or two, and a group of specialized law firms. Many believe that once you have built up this ecosystem, à la Silicon Valley, you can become the next Route 128 in Massachusetts, the next Research Triangle in North Carolina, or the next Start-Up Israel.

But, while success breeds imitation, the opposite is often not the case. Complex structures with many interdependent pieces are not created out of whole cloth. They emerge from idiosyncratic path-dependent processes, whereby each organizational innovation changes the ecosystem, making other changes feasible. Trying to copy the resulting ecosystem is like trying to build a bridge with no scaffolding: it cannot be done, because the structure cannot bear its own weight while it is being built.

Clearly, there is something appealing about a start-up-based innovation strategy. It feels democratic, accessible, and so California. But it is definitely not the only way to boost R&D, or even the main way, and it is certainly not the way most major innovations in the US came about during the twentieth century. The alternative strategy lies at the opposite end of the distribution of firm size – with big business.

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