Nurturing the Accumulation of Innovations: Lessons from the Internet

Posted by D. Daniel Sokol

Shane Greenstein (Northwestern - Kellogg) explains Nurturing the Accumulation of Innovations: Lessons from the Internet.

ABSTRACT: The innovations that became the foundation for the Internet originate from two eras that illustrate two distinct models for accumulating innovations over the long haul. The pre-commercial era illustrates the operation of several useful non-market institutional arrangements. It also illustrates a potential drawback to government sponsorship – in this instance, truncation of exploratory activity. The commercial era illustrates a rather different set of lessons. It highlights the extraordinary power of market-oriented and widely distributed investment and adoption, which illustrates the power of market experimentation to foster innovative activity. It also illustrates a few of the conditions necessary to unleash value creation from such accumulated lessons, such as standards development and competition, and nurturing legal and regulatory policies.