The state of innovation and its importance in entrepreneurship
In our recent Look Into Business blog post on entrepreneurship, we looked at the Kaufmann Foundation report, which showed significant start-up activity in St. Louis and Kansas City.
Start-up activity and entrepreneurship have traditionally been closely associated with innovation, particularly when it comes to high-growth start-ups. Such companies introduce new ideas that drive fast growth and are often characterized as having significant job creation impact.
Take for example, Root Insurance, America’s first mobile-only insurance company that tracks driving data via phone app to determine insurance rates based on each driver’s behavior. Root Insurance has been growing at a rate of 60 percent a year since its founding in 2010.
As innovation is central to entrepreneurship and the economy, one wonders: What is the current state of innovation in the U.S. and how has it changed over the years?
A recent Economist article points to interesting research that shines some light on this question.
It turns out that the cost of innovation has risen over the years according to a recent paper by Nicholas Bloom, Charles Jones and Michael Webb of Stanford University and John Van Reenen of the Massachusetts Institute of Technology.
The researchers examined four different case studies to evaluate the costs associated with innovative breakthroughs. One example they give is Moore’s Law — a phenomenon describing the increasing number of transistors that can fit on a microchip, which has doubled every two years for a half century. While the productivity of the scientists contributing to this effort remained consistent, there is clear evidence that the resources and investments used to achieve this result have increased considerably over time.
“The research productivity of each scientist participating in the battle to cram in transistors has correspondingly tumbled,” according to the article.
Similar trends were observed in other case studies such as the effort to increase crop yields or extend life. Part of the problem may have to do with the accumulation of existing knowledge.
“The more that is known, the more researchers must absorb before they can add to the stock of human knowledge — or the more they must collaborate with other researchers to combine their areas of expertise.”
At William Woods University, one of the courses that MBA in Entrepreneurial Leadership students take is BMT 569 Entrepreneurial Planning and Design. This course examines the role of today’s marketing professional and their need to find innovative ways to market products and services in a time of extraordinary change.