Innovation Failure

The NSF has just come out with its latest report on innovation, and it’s a doozy. Basically, the NSF asked companies whether they engaged in product and/or process innovation, and here’s what they found out.

  • 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.”

The last result is extremely interesting. It means that the concentration of R&D is in fact a good proxy for the concentration of innovation. 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. The gap for process innovations is almost as big.

You can’t be an innovative economy if only 9% of your companies are innovating.

About Michael Mandel 127 Articles

Michael Mandel was BusinessWeek's chief economist from 1989-2009, where he helped direct the magazine's coverage of the domestic and global economies.

Since joining BusinessWeek in 1989, he has received multiple awards for his work, including being honored as one of the 100 top U.S. business journalists of the 20th century for his coverage of the New Economy. In 2006 Mandel was named "Best Economic Journalist" by the World Leadership Forum.

Mandel is the author of several books, including Rational Exuberance, The Coming Internet Depression, and The High Risk Society.

Mandel holds a Ph.D. in economics from Harvard University.

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