Why are the benefits of innovation distributed in such a polarized fashion? It’s a fact that there are huge inequalities in the enjoyment of the fruits of innovation. At the macroeconomic level, poverty and inequality in income distribution adversely affect countless people. At the industry level, there are huge differences in levels of penetration of new technologies and business models. At the level of the firm, there are great difference in terms of research and innovation performed within the same sector. In scientific research, we observe great disparities in the progress of various areas and disciplines. Notable advances in, say, anti-cancer therapies can be juxtaposed next to other areas, such as vaccines, where progress is extraordinarily slow. Why are certain problems solved more rapidly than others?
Traditionally, this has been seen as a problem of market failure. In some areas, market incentives to firms are just too low. As a consequence, investment in those areas will be limited, crippling innovative efforts. The typical example is vaccines, which are goods that a private firm would be disinclined to produce: once the disease is defeated, the vaccine is no longer needed and market demand drops to zero. Furthermore, pharmaceutical companies based in Europe, the United States, and Japan tend to focus on ailments affecting rich countries, rather than on diseases typical of poor countries, such as malaria and dysentery. The market-failure approach suggests two ways to intervene in the process: enhancing public funding for the development of vaccines, also by enlarging the role of public research agencies; introducing incentive mechanisms to prod private organizations into investing in certain areas.
More recently, some studies have taken a different approach. The problem is not only about manipulating incentives, but also about understanding how to organize research in non-traditional ways. Enormous attention is today focused on the functioning of mixed-type organizations, called PPS, Private-Public
Partnerships, and on international charities such as IAVI (International AIDS Vaccine Initiative). The aims of these organizations are radically different from big pharma: they do not seek to develop any anti-AIDS vaccine, but one than can be effectively distributed in Africa. This novel approach has increased the diversity of scientific trajectories being pursued.
Acting on incentives can generate an increase in investment, but it does not directly affect the direction of research, the questions a researcher is asking herself. In scientific areas where radical uncertainty is the norm, the diversity of scientific trajectories becomes a key factor. A fundamental question that has yet to find an answer is why certain scientific and technological areas proceed faster than others. Is it due to a difference in incentives? Or is it a cognitive problem, because certain subjects are just tougher than others? Or is it an organizational problem, because existing structures and processes limit the variety of research trajectories being explored? We know a lot about incentives, but very little on the other two issues.
by Stefano Brusoni,
Associate Professor of Applied Economics and Vice Director of CESPRI, the Bocconi Research Center on Innovation and Internationalization