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Only 9% of America's companies are innovating

Michael Mandel summarizes the findings of a National Science Foundation report on innovation. They're not pretty:

-Only 9% of companies engaged in product innovation in 2006-08. Only 9% of companies engaged in process innovation over the same period.

- Some industries were surprising low. Only 10% of healthcare services firms reported a process innovation from 2006-08.

- Only 8% of finance/insurance firm reported a product or process innovation in 2006-2008
“Companies with R&D (either performing R&D or funding others to perform R&D) exhibit far higher rates of innovation than do non-R&D companies.”

There's an interesting takeaway in that data: "The concentration of R&D is in fact a good proxy for the concentration of innovation," writes Mandel. "According to the NSF survey, only 7% of the companies without R&D report a product innovation over the past 3 years. But 66% of the companies with R&D report a product innovation."

There's also a scary takeaway: "You can’t be an innovative economy if only 9% of your companies are innovating."

By Ezra Klein  | October 6, 2010; 10:10 AM ET
Categories:  Economy  
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This is not enough information to develop an opinion on. How was this measure calculated? More importantly, what is the trend of this particular measure.

It may be that this measure isn't an accurate portrayal of innovation, but no matter how bad it is, if it's the lowest it's been in 50 years then that would be something to worry about.

Also, it would be helpful to compare it to other countries.

Posted by: FroggyJ4 | October 6, 2010 11:00 AM | Report abuse

How much of this R&D is solely internal to the company. Does this include joint public private research.

Even if it leaves out a lot of the R&D that is done through the public sector it still seems odd that these companies wouldn't want to invest in developing new products.

Posted by: grael55 | October 6, 2010 11:31 AM | Report abuse

Do we all innovate in equal amounts all the time? I don't think so. And innovation is fraught with danger. The Internet revolution was accompanied by the dot-com bubble. Innovation can be good, and bad.

We will innovate again.

Posted by: Kevin_Willis | October 6, 2010 12:11 PM | Report abuse

If you want more innovation, Klein, try saddling more businesses with mandates, regulations, oversight, and higher taxes. If people like you care enough, we could be innovating at Soviet Union circa 1970 rates.

Posted by: msoja | October 6, 2010 12:54 PM | Report abuse

Course not. With income and capital gains taxes at historic lows, the only logical thing to do with excess profits is to give the people at the top a raise. If income taxes for the wealthiest folks were substantially higher, a corporate board would be faced with the decision of giving a large percentage of their excess profit to Uncle Sam or to re-invest in their own company through R&D, worker training, new equipment, or (heaven forbid) higher wages for lower-level employees. Because Obama's a Socialist 'n' all, I think most of the corporate boards would decide to reinvest in their own company.

Posted by: klautsack | October 6, 2010 1:41 PM | Report abuse

Oh snap! Msoja really got you, Ezra! See, if it were up to him, we'd be busting out new Googles left and right, like Somalia is!

Posted by: MosBen | October 6, 2010 2:02 PM | Report abuse

I've always wondered what the definition of innovation is, or more so, how do you quantify it. Seems like a great MBAspeak word for motivational speakers to get speaking fees. But using R&D expenditures as a proxy for innovation here's what I got for two presumably innovative companies: 2009 numbers R&D/(OperatingCosts+Taxes)
IBM=5,820/82,333= 7.1%

So 9% seems like a reasonable number for these companies. And they're hi-tech companies. 9% over all industries seems pretty good, not depressing, number to me.

Posted by: gaaallen | October 6, 2010 3:12 PM | Report abuse

--*If income taxes for the wealthiest folks were substantially higher [...]*--

Ah, the beatings-will-continue-until-morale-improves theory.

I think innovation is best likely to happen when people are free to pursue whatever it is that they value. Government kills innovation. It's killed it in education. It's killing it in health care. It's going to kill it across the economy, pushed along by dim bulbs like Klein who think that innovation is a matter of arranging the proper components, akin to positioning a sofa according to the sentiments of Feng Shui. It's nonsense.

Posted by: msoja | October 6, 2010 5:10 PM | Report abuse


"innovation is best likely to happen when people are free to pursue whatever it is that they value"

But innovation takes time, capital, patience, a hell of a lot of mistakes, and a long period of zero return. That doesn't fit into the current corporate culture of quarterly earnings reports. I have a hard time thinking that less regulation would help that.

Posted by: klautsack | October 7, 2010 10:33 AM | Report abuse

Yes, you have a hard time thinking, but that doesn't mean you can't understand that innovation and entrepreneurial endeavor flourished in the United States when government imposed regulations were low to nonexistent, while the farther one goes into the collectivist swamp, the harder those things are to find, until one arrives at the likes of Cuba, North Korea, China, and the old Soviet Union where the only innovations were in weaseling small amounts of political favor that one hoped wouldn't leak to the wrong people, just so that one could get a fresh loaf of bread or shoes that fit.

Posted by: msoja | October 7, 2010 10:53 AM | Report abuse

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