Tag Archives: Economist

Resolved: that big companies are better at innovation than small ones

Resolved: that big companies are better at innovation than small ones


Schumpeter in the Economist reports new research on innovation and the corporation, specifically the work of Michael Mandel of the Progressive Policy Institute

Mandel proposed three explanations for the big corporation as an engine of innovation:

1. The best path to economic growth is the creation of a new product category or operating system. Only big companies, like Apple and Google, can create these. (Plus, small companies may or may not be able to live in the shade of these giant oaks.)

2. Big companies do better in global marketplaces.

3. Only large companies have the scale to address big problems, and many of our our current problems are big problems (education, health care, environment).

Schumpeter adds three more:

4. Big companies have the resources to find and afford the best talent.

5. Big companies are learning to be more porous and more nimble.

6. Big companies now come scaling up out of small ones at a ferocious pace. Some of them remember their origins. They get large without growing out of their smallness.


As Schumpeter notes, conventional wisdom holds that large companies are too slow and clumsy to be creative, that small is beautiful.

Indeed this wisdom is so conventional we tend more to assume than prove it. I wish I could recite all the evidence that supports the CONTRA case.

The only thing I can report is that several people inside the corporate and consulting world have told me how deeply frustrated they are by the corporation’s inability to innovate.

Indeed, to judge from these unscientific results, this is now a critical moment in the history of the corporation. Some few years ago (less than a decade) the corporation decided that innovation was the thing and it devoted itself to centers, institutes, laboratories, skunk works and a range of strategies and tactics meant to deliver innovations out like a major leaguer firing sunflower shells round the dugout.

Many corporations are now on notice: innovation is much harder than it looks. Much, much harder despite vast amounts of money and managerial initiative.  

A truth is dawning:

that the corporation can sometimes act like a gravitation field from which new ideas and products cannot escape. Someone has great ideas. Entire teams can have great ideas. But the corporation itself acts like a dark star. It does not create alternatives to itself. It consumes them.

How we do innovation in the corporation must remain high on the todo list for 2012.