Technological Innovations & Transferance, Capitalism, Economic & Industrial Aspects of Technology, Economic Development
Log in to track your reading progress.
Overview
Why has capitalism produced economic growth that so vastly dwarfs the growth record of other economic systems, past and present? Why have living standards in countries from America to Germany to Japan risen exponentially over the past century? William Baumol rejects the conventional view that capitalism benefits society through price competition--that is, products and services become less costly as firms vie for consumers. Where most others have seen this as the driving force behind growth, he sees something different--a compound of systematic innovation activity within the firm, an arms race in which no firm in an innovating industry dares to fall behind the others in new products and processes, and inter-firm collaboration in the creation and use of innovations.While giving price competition due credit, Baumol stresses that large firms use innovation as a prime competitive weapon. However, as he explains it, firms do not wish to risk too much innovation, because it is costly, and can be made obsolete by rival innovation. So firms have split the difference through the sale of technology licenses and participation in technology-sharing compacts that pay huge dividends to the economy as a whole--and thereby made innovation a routine feature of economic life. This process, in Baumol's view, accounts for the unparalleled growth of modern capitalist economies. Drawing on extensive research and years of consulting work for many large global firms, Baumol shows in this original work that the capitalist growth process, at least in societies where the rule of law prevails, comes far closer to the requirements of economic efficiency than is typically understood.
Resounding with rareintellectual force, this book marks a milestone in the comprehension of the accomplishments of our free-market economic system--a new understanding that, suggests the author, promises to benefit many countries that lack the advantages of this immense innovation machine.
Editorials
Economist
Building on the insights of Schumpeter and even of Marx (though this is a devoutly pro-capitalist tome), he argues that it is, above all, the ability to produce a continuous stream of successful innovations that makes capitalism the best economic system yet for generating growth. This is for two main reasons. Under capitalism, "innovative activity--which in other types of economy is fortuitous and optional--becomes mandatory, a life-and-death matter for the firm." Second, new technology is spread much faster because, under capitalism, it can pay for innovators to share their knowledge and "time is money".Martin Wolf
The capitalist growth machine - Innovation, spurred by competitive markets, is the most important condition for sustained increases in prosperity….Yet economists have been unsuccessful in explaining this world-transforming revolution. This at last is changing. A brilliant book by William Baumol, an emeritus professor at Princeton University, sheds bright light on the sources of growth. He builds on the insights of Joseph Schumpeter, the Austrian economist, to expose the machine that drives capitalism. In so doing, he explains why, in the past century, the market economy buried socialism - the reverse of what Nikita Khrushchev, the Soviet leader, said would happen.— Financial Times
Peter Coy
Baumol probes innovation in a book published this month, The Free-Market Innovation Machine. He says companies don't like to compete on price alone. To preserve a bit of pricing power, top companies constantly tinker with their products and license ideas from others. He says that companies with valuable ideas have a financial incentive to share them--either for license fees or reciprocal access to a rival's patent.— Business Week
New York Times
Mr. Baumol's contribution is not to emphasize the impact of innovation but to pinpoint how competition forces companies to make innovation routine. . . . The traditional analysis . . . says that capitalism blunders at generating innovation over the long run. Mr. Baumol . . . reverses this presumption. . . . [He] tells a tale rich in details about the market's use of collaboration to overcome problems of innovation. Along the way he turns standard analysis upside down.— Michael M. Weinstein
Financial Times
A brilliant book. . . . What makes capitalism uniquely successful is the built-in pressure to generate new products and processes. Provided companies are forced to compete, the market will find a way to generate and diffuse an unending stream of innovations.— Martin Wolf
New York Law Journal
The book could not be more timely.— David Propson
BusinessWeek
Over the past 50 years, William Baumol has made groundbreaking contributions to a wide range of economic fields, including antitrust, the study of productivity, and the nature of growth. . . . At 80, and still going strong, he is among the last working members of the great generation of post-World War II economists.Choice
You cannot fault Baumol for being unambitious. In this fine volume he challenges readers to rethink entirely the conventional wisdom concerning the nature and benefits of the capitalist (or free market) system. . . . Readable, challenging, stimulating.Harvard Business Review
For managers looking for a big picture view, this is a useful account. And while it deflates the romantic view of the maverick innovative company, the book justly celebrates the positive results of this routinized 'innovation machine'—the unprecedented growth rates we've had under capitalism.Toronto Star
An important new book.— David Crane
Journal of Technology Transfer
Professor Baumol is a giant in the field of economics. . . . This book displays both his prodigious intellect and the sweep of his scholarship. . . . [T]his is an important book.— Ashish Arora
Business Week
Over the past 50 years, William Baumol has made groundbreaking contributions to a wide range of economic fields, including antitrust, the study of productivity, and the nature of growth. . . . At 80, and still going strong, he is among the last working members of the great generation of post-World War II economists.
New York Times -
Mr. Baumol's contribution is not to emphasize the impact of innovation but to pinpoint how competition forces companies to make innovation routine. . . . The traditional analysis . . . says that capitalism blunders at generating innovation over the long run. Mr. Baumol . . . reverses this presumption. . . . [He] tells a tale rich in details about the market's use of collaboration to overcome problems of innovation. Along the way he turns standard analysis upside down.Financial Times -
A brilliant book. . . . What makes capitalism uniquely successful is the built-in pressure to generate new products and processes. Provided companies are forced to compete, the market will find a way to generate and diffuse an unending stream of innovations.New York Law Journal -
The book could not be more timely.Toronto Star -
An important new book.Journal of Technology Transfer -
Baumol is a giant in the field of economics. . . . This book displays both his prodigious intellect and the sweep of his scholarship. . . . [T]his is an important book.Book Details
Published
May 8, 2002
Publisher
Princeton, N.J. ; Princeton University Press, c2002.
Pages
336
Format
Hardcover
ISBN
9780691096155