The Perils of Centralized Innovation

by Stephan Kinsella on November 25, 2010

Nice post from Geoffrey Allan Plauché from The Libertarian Standard. As I noted in a comment there, this interesting insight seems to complement the Austrian argument that the calculation problem places an upper limit on the size of the firm (see, e.g., Peter Klein, “Economic Calculation and the Limits of Organization,” in The Capitalist and the Entrepreneur).

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The Perils of Centralized Innovation

by Geoffrey Allan Plauché on November 25, 2010 @ 4:34 pm · 3 comments[edit]

in (Austrian) Economics,Business,Corporatism,Technology

Gizmodo has an interesting post about How Ma Bell Shelved the Future for 60 Years. It is an excerpt from The Master Switch by Tim Wu.

Here is the money quote:

This is the essential weakness of a centralized approach to innovation: the notion that it can be a planned and systematic process, best directed by a kind of central intelligence; that it is simply of matter of assembling all the best minds and putting them to work in unison. Were it so, the future could be planned and executed in a scientific manner.

Yes, Bell Labs was great. But AT&T, as an innovator, bore a serious genetic flaw: it could not originate technologies that might, by the remotest possibility, threaten the Bell system. In the language of innovation theory, the output of the Bell Labs was practically restricted to sustaining inventions; disruptive technologies, those that might even cast a shadow of uncertainty over the business model, were simply out of the question.

~*~

Cross-posted at Prometheus Unbound.

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