Download PDF by William J. Baumol: The free-market innovation machine : analyzing the growth

By William J. Baumol

ISBN-10: 0691096155

ISBN-13: 9780691096155

ISBN-10: 069111630X

ISBN-13: 9780691116303

ISBN-10: 1400851637

ISBN-13: 9781400851638

Why has capitalism produced fiscal development that so greatly dwarfs the expansion checklist of alternative monetary structures, prior and current? Why have residing criteria in nations from the USA to Germany to Japan risen exponentially over the last century? William Baumol rejects the traditional view that capitalism advantages society via rate competition--that is, services develop into more cost-effective as agencies vie for shoppers. the place so much others have obvious this because the driver in the back of progress, he sees anything different--a compound of systematic innovation job in the enterprise, an fingers race within which no enterprise in an innovating dares to fall in the back of the others in new items and strategies, and inter-firm collaboration within the production and use of innovations.

While giving price battle due credits, Baumol stresses that enormous organisations use innovation as a primary aggressive weapon. notwithstanding, as he explains it, organisations don't desire to probability an excessive amount of innovation, since it is expensive, and will be made out of date by way of rival innovation. So companies have break up the variation during the sale of know-how licenses and participation in technology-sharing compacts that pay large dividends to the financial system as a whole--and thereby made innovation a regimen function of financial lifestyles. This strategy, in Baumol's view, bills for the unheard of development of recent capitalist economies. Drawing on wide examine and years of consulting paintings for plenty of huge international organizations, Baumol exhibits during this unique paintings that the capitalist development technique, at the very least in societies the place the guideline of legislations prevails, comes a ways toward the necessities of financial potency than is sometimes understood.

Resounding with infrequent highbrow strength, this e-book marks a milestone within the comprehension of the accomplishments of our free-market fiscal system--a new knowing that, indicates the writer, grants to learn many nations that lack the benefits of this colossal innovation machine.

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The obvious connection is that the demonstrated profit opportunity is sure to attract other inventors, other investors, and other entrepreneurs whose task it is to ensure that invention is put to effective and remunerative use. 36 But successful innovation encourages more of this activity in other ways, as well as helping to ensure the success of this further effort. As is well recognized, new products have often given others the idea for related new products that either serve as superior substitutes (for example, the jet airplane as substitute for propeller planes) or serve as supplements to the preceding new products or service (for example, the electric refrigerator as something that followed the creation of the electricity network).

Finally, the innovation process itself leads to improvements in the way R&D is carried out, thereby providing another stimulus to further innovation. In sum, innovative activity can be considered a cumulative process, in which there is feedback from one innovation to the next; once the free market has launched its innovation machine, the inherent structure of the mechanism leads the machine to grow more powerful and productive with the passage of time. MARKET INCENTIVES DISSEMINATION FOR RAPID Depending on prices, it is often most profitable for the monopoly owner of an innovation to specialize in the business of renting the input to others rather than using it itself as an input to its own final product.

Competition makes it too risky for firms to depend primarily for their new products and processes on the unpredictable efforts of independent inventors. Instead they have changed much of the economy’s R&D into an internal, bureaucratically controlled process, as, for example, in pharmaceuticals, computers, and even photography. They have routinized it. FEEDBACK: INNOVATION FURTHER INNOVATION STIMULATES Once innovation takes off, including in this not only the inventions themselves but also their successful marketing and profitable utilization, this facilitates and stimulates further innovative effort.

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The free-market innovation machine : analyzing the growth miracle of capitalism by William J. Baumol


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