Under a “retain-and-reinvest” allocation regime, a company reinvested profits in your capabilities and worked to keep your valuable human assets. WL: If you were an employee in the “Old Economy” business model that was dominant in high-tech companies coming into the 1980s, you got to share in the success of innovation through a stable job, salary increases, and retirement security. Who is reaping the rewards of high-tech innovation in today’s economy? LP: Your work shows how the process of developing high-tech products has changed in recent decades and how the fruits of success are distributed. Instead, the company runs an entire division devoted to finding ways to avoid taxation. That’s why a company like Apple should be using a substantial portion of its super-profits to support government investment in the next generation of innovation. Öner Tulum, a researcher at The Academic-Industry Research Network (theAIRnet), has shown how all of the technologies in the iPhone – things like touch-screen technology, GPS, and so on - originated with government spending, funded by taxpayer money. Whenever a company produces a technology product, it benefits from an accumulation of knowledge created by huge numbers of people outside the company, many of whom have worked in government-funded projects over the previous decades. William Lazonick: The iPhone didn’t just magically appear out of the Apple Campus in Cupertino. Who pays for the research that goes into creating a product like the iPhone? Lynn Parramore: Let’s talk about where high-quality, low-cost technology products actually come from. ” He explains why successful companies like Apple need to make fundamental changes to the way they allocate resources and stop throwing away America’s most valuable asset for future innovation - you. In the interview that follows, Lazonick shares findings from two recent papers that are part of the Institute for New Economic Thinking’s project on the “ Political Economy of Distribution. William Lazonick, professor of economics at the University of Massachusetts Lowell, and Matt Hopkins, research associate at the Academic-Industry Research Network, have investigated how the technology knowledge base gets created, what has gone wrong in America’s approach to innovation, and why the truth about who invests in the process is poorly understood. Originally published at INETįew would argue that America’s fortunes rise and fall on its ability to generate technological innovations - to put bold ideas to work and then bring them to market. By Lynn Parramore, Senior Research Analyst, Institute for New Economic Thinking.
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