Economics bloggers don't think much of R&D as a catalyst for innovation

Last month, the Kauffman Foundation held a seminar bringing together some 40 economics bloggers from across the political and economic spectrum. Their goal: to discuss the state of the nation. Their findings, just released: contradictory. (According to this group, TARP will either “help prevent a depression” or cause “long-term structural damage”. Which I guess accurately reflects the conflicting opinions that seem to have paralyzed the powers-that-be but remains somewhat less than entirely useful.)

One thing they did agree upon, however, is that innovation is critical to the health of the American economy. Of course, you’re unlikely to find someone arguing against the discipline, but here’s the interesting part: when it comes to generating innovation, the group didn’t really rate the importance of R&D activities from any source, be that university, corporation or government. Given that R&D is widely held to be a common catalyst for innovation, I found that pretty surprising. So I called up event co-host and report co-author Bob Litan, VP of Research and Policy at the Kauffman Foundation, to ask him why.

"Regardless of their individual political complexions, they were a cynical bunch," Litan said. "And they were skeptical that innovation could come from either government or big institutions." Instead, Litan said, this group, which included BusinessWeek's own economics guru, Mike Mandel along with Economic Principles' David Warsh, University of Michigan professor and Carpe Diem blogger, Mark Perry and Infectious Greed editor Paul Kedrosky were putting their faith in brand new business and entrepreneurs. Now, Litan did admit that this could have been more a reflection of the venue (Kauffman is all about fostering entrepreneurship, after all) but he said that one lesson for government came through loud and clear: stay out of the way. "Make it easy to be in business and remove the red tape," said Litan.

For big business, there was a sobering analysis: that while large corporations may be good at driving incremental innovation, they're unlikely to foster the radical innovation called for in these uncertain times. Essentially, concluded Litan: "The group was saying it's the next generation Microsoft or Intel that will drive the economy, not the current Microsoft or Intel."

What do you think? Is it really nigh on impossible for large corporations to drive radical innovation? Yet how can individual entrepreneurs or small businesses drive the scale of innovation that's necessary for a country's full-scale reinvention?

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