Let a Hundred Flowers Bloom! Decentralization and Innovation

By Nakamura, Leonard | Business Review (Federal Reserve Bank of Philadelphia), Spring 2003 | Go to article overview

Let a Hundred Flowers Bloom! Decentralization and Innovation


Nakamura, Leonard, Business Review (Federal Reserve Bank of Philadelphia)


Which is more likely to encourage creativity and innovation: a centralized or a decentralized system of support? Should large organizations and recognized experts determine which parties get funding for their ideas? Or should small businesses, patrons, and foundations provide the primary support for innovation? Leonard Nakamura looks at the case for both sides using economic analysis, empirical studies, and anecdotal evidence. He also describes the role rivalry plays in innovation.

Michael Tomasello, co-director of the Max Planck Institute for Evolutionary Anthropology, has argued that what separates humans from chimpanzees and other nonhuman primates is their ability to maintain and build upon innovations--teaching children and peers the best ways to act and think. It can be argued that the cumulation of knowledge is not just the most important source of economic growth but also the most important factor in the flowering of human civilization and the dominance of our species on the planet.

Given the importance of knowledge, how should we organize its advance? Should innovation be centralized, with recognized experts determining which parties get funding to develop their ideas? (1) Or should innovation be decentralized, with small groups and individuals--small businesses, patrons, incubators, and foundations--supporting a lot of innovation? And to what extent can we rely on the market system to facilitate developing and disseminating new ideas and cultural products?

Of course, scientific, intellectual, and cultural genius does not appear simply because institutions are favorable. Innovation can occur when existing institutions are neglectful of it and even when they actively oppose it. But creativity is more likely to flourish and have its fruits more widely disseminated when it is recognized and supported. After all, artists, scientists, and scholars need offices, laboratories, and studios; they need time for their creative activities; and if their products are to matter, they need to find audiences--art dealers, students, talent scouts, journal editors, and the buying public.

The market system is often viewed as nearly synonymous with decentralization. But modern capitalism rewards innovation with monopoly rights. Copyrights and patents that protect intellectual and cultural property give innovators exclusive right to reproduce cultural, scientific, design, and engineering innovations. Thus, innovators gain property rights that may enable them to monopolize their markets and thereby possibly to control future access to innovation and distribution. Capitalism, by distributing resources to those successful at innovation, may encourage or discourage decentralization. This is currently an important policy issue, one aspect of which has been raised by the antitrust suit against Microsoft. Our question, in this context, becomes: Does market power, such as Microsoft's market power in software, encourage or discourage innovation? Parallel issues may arise, for example, in media mergers or in government research policy.

Similarly, government support for research need not imply centralization. Rather, research may also find support from large and small profit-making firms and nonprofit organizations such as foundations and universities. So government research agencies may well be important players within an efficient and decentralized innovation network.

THE CASE FOR CENTRALIZATION

In recent decades, economic analysis has made important strides in understanding the advance of knowledge. An earlier strand of economic studies focused on the potential advantages of centralized innovation.

Barriers to Entry Support Innovation. Harvard professor Joseph Schumpeter was the seminal economic thinker on innovation and its role in the economy. He argued that developing and marketing new products was the key to economic development and that innovative firms needed to be repaid for this expensive process. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Let a Hundred Flowers Bloom! Decentralization and Innovation
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.