Anne Marie Knott, the Robert and Barbara Frick Professor of Business
Acquiring your way to innovation doesn’t work — the only way to stay innovative as a big company is to invest in R&D. Luckily for big companies, investing in R&D is a good strategy. Your inventors will seldom walk out the door with your ideas. And recognizing that you can’t buy the technology downstream will force you to be more productive with your R&D investment. Higher R&D productivity yields higher profits, growth, and market value per dollar of R&D.
But these conclusions make big companies’ reluctance to invest in R&D all the more concerning. If the large companies currently responsible for the innovation engines in this country shut down those engines in anticipation of acquiring technology startups downstream, they won’t just hurt themselves. With less big-company R&D to exploit, there will be fewer or less innovative startups. Most important, the entire nation will experience lower growth.
Read the full piece in the Harvard Business Review.