How innovation really works with Anne Marie Knott

Anne Marie Knott joined me on the Acquisition Talk podcast to discuss her book How Innovation Really Works. She is a professor of strategy and innovation at Washington University at St. Louis, and is a former researcher at Hughes. Anne Marie tackles a lot of innovation dogma, including whether: - Smaller companies more effective at R&D than large - US federal research has actually declined - Decentralized R&D beats out central labs - We've picked the low hanging fruit and science is slowing down - Firms are not spending enough on R&D In the episode, Anne Marie discusses her measure for R&D productivity called the research quotient (RQ). You can think of it as the relationship between R&D spending and revenues for a given firm, controlling for other factors including capital (from the balance sheet), labor (from the number of employees), and a couple other variables. The more responsive revenues are to changes in R&D spending, the more productive a firm's R&D is relative to other firms. Anne Marie draws a number of conclusions from looking at firm RQs across sector and time. She finds a 65% decline in average R&D productivity over the past five or so decades. Two-thirds of firms are actually spending too much on R&D, and could increase revenues by cutting R&D. But she's also seen maximum RQs increasing over time particularly in newly formed industries, so there seems to be this divergence in outcomes. Anne Marie takes an optimistic view. There are ways firms can improve their R&D productivity, lessons that can benefit defense policy makers. This podcast was produced by Eric Lofgren. Soundtrack by urmymuse: "reflections of u". You can follow us on Twitter @AcqTalk and find more information at AcquisitionTalk.com.