Capital and labor are the blood and body of the U.S. economy, and their value rests substantially on continuing innovation. Since the 1950s, economists have measured the impact of innovations and other factors on gains in U.S. growth and productivity. A recent analysis found that one to two-thirds of those gains can be properly attributed to innovations, a far larger share than from increases in the capital stock and improvements in the skills and education of workers.
Today, however, the nation’s economic progress is at risk. Giant corporations that dominate their respective markets have come up with ways to appropriate valuable innovations created by startups and small companies. This new process of capturing the innovations of others erodes the incentives for creative, entrepreneurial people to figure out how to turn their new ideas into new products and technologies—and degrades the economic conditions and ecosystem that support and promote innovation.
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