William Baumol compares the innovation strategies and results of large firms with those of small entrepreneurial firms.

most private sector expenditure on research and development is attributable to very large corporations. These corporations are prime employers of scientists and engineers, personnel characteristically highly educated and technically erudite. But, despite this concentration of knowledge, talent, and expenditure in these major enterprises, an examination of the list of revolutionary technological breakthroughs since the onset of the Industrial Revolution suggests that they were contributed in overwhelming proportion by independent inventors and small, newly founded enterprises, not by major firms. Finally, and intriguingly, a review of the biographies of the most celebrated of these innovators shows, in a surprising share of these cases, a most remarkable absence of rigorous technical training and, in many cases, little education at all.

He goes on to suggest that education and organization support incremental innovation but inhibit radical innovation. Both types of innovation are needed. Thus, the economy benefits both from small firms founded by entrepreneurs lacking training in conventional approaches as well as from large firms that focus on education and training.

I find this topic fascinating, so that if you’re like me you will want to read the entire article.

For Discussion. What factors inhibit large firms from developing and implementing radical innovations?