The Sad State of Innovation

New ideas are stifled by red tape and corporate timidity

Candles and kerosene lamps flickered that Sunday night as the lab assistant connected two wires leading from the bottom of a glass bulb to a set of storage batteries. The piece of carbonized cotton sewing thread inside the bulb suddenly lighted up. In dozens of earlier experiments, the filament had blazed a few minutes before breaking, but this time it continued to glow. Forty hours later the bulb was still alight, and Thomas Alva Edison boasted to his staff: "If it will burn that number of hours now, I know I can make it burn a hundred." Man had entered the age of electricity.

On Oct. 21 a crowd of scientists, industrialists and other celebrities will gather amid the historic buildings at Greenfield Village in Dearborn, Mich., to commemorate the hundredth anniversary of Edison's banishment of darkness. In Edison's laboratory--disassembled in Menlo Park, N.J., by his good friend Henry Ford, then crated and shipped to Dearborn along with seven railroad cars full of the clay soil on which it sat--the audience will watch a re-enactment of the scene. Madeline Edison Sloane, the inventor's great-granddaughter, will throw the switch that opened a new era. As the German historian Emil Ludwig described the original event, "When Edison snatched up the spark of Prometheus in his little pear-shaped glass bulb, it meant that fire had been discovered for the second time, that mankind had been delivered again from the curse of night."

The centennial of Edison's great achievement comes at a time when American innovative genius, so well personified by Edison, has begun to fade. The nation that produced Robert Fulton, Robert Goddard, Edmund Land and many others now has far fewer folk-hero tinkerers. Laments James G. Cook, president of the Thomas Alva Edison Foundation: "Over the past decade, America has been losing its traditional leadership in technological innovation. Our Edison-like spirit of inventiveness seems to be going the way of the gas lamp."

Most of the important indicators are pointing down. The number of patents granted to U.S. citizens dropped from 56,000 in 1971 to 44,482 last year. Spending on research and development, which peaked at 3% of G.N.P. in 1964, was only 2.2% last year. While the U.S. percentage has been decreasing, West Germany's has averaged 3% annually since 1971, and last year increased to 3.2%. Japan's has risen from 1.3% in 1965 to 1.9% in 1977. Says Paul E. Gray, president-elect of the Massachusetts Institute of Technology: "We have lost a certain edge in technological innovation."

Innovation means more than just new air-blown popcorn poppers or home computer games for a society already overrun with gadgets. America's dismal economic record over the past decade largely reflects the decline of research and new product development. Growth in productivity, which measures a worker's output per hour, depends upon new machines and industrial processes that help the worker produce more. While U.S. productivity increased at a rate of 3.1% annually from 1955 to 1965, it increased at only 2.3% from 1965 to 1973. So far this year, productivity has been declining at an annual rate of more than 3%. As the congressional Joint Economic Committee warns, without productivity growth, the American standard of living will decline in the 1980s.

The Yankee dollar's weakness on money markets also reflects decreased innovation. For years high-technology exports such as computers and telecommunications equipment provided a comfortable trade surplus. But since the early '70s foreign manufacturers have strongly challenged American industrial products, and the U.S. has been suffering increasingly severe trade deficits, thus weakening the dollar. It is all too easy to blame the trade deficit on skyrocketing oil prices, though they are a major cause; Japan, which must import all its oil, has maintained a trade surplus by developing high-technology products and aggressively selling them abroad. A prime example: every one of the million video tape recorders sold in the U.S.--including those marketed under American labels--was developed and made in Japan.

Many scientists and businessmen blame the Government for the innovation recession. M.I.T.'s Gray complains that high taxes on capital gains and excessive Government regulation have discouraged new entrepreneurs. The 1969 increase in capital gains taxes from 25% to 49% dried up venture money, especially for small companies. From 1969 to 1975 the amount of new capital acquired annually by small firms sank from $1.5 billion to $15 million.

The labyrinth of Government regulation has not only shifted research from new products to the "defensive research" necessary to comply with burgeoning environmental and safety rules, but has also increased the cost of bringing out new developments. Says Chrysler Chairman Lee lacocca: "I never invent anything any more. Everything I do is to meet a law." In the early '60s it cost $1 million and took up to five years to bring a drug through the Federal Drug Administration's regulatory maze. It now costs $18 million and can take ten years. As a result, the number of new drugs introduced by U.S. pharmaceutical firms has fallen off 50%. Writes British Essayist Henry Fairlie: "The once rambunctious American spirit of innovation and adventurousness is today being paralyzed by the desire to build a risk-free society."

Businessmen must share the opprobrium for stifling innovation. Says Donald Frey, chairman of Bell & Howell: "The biggest problem in the U.S. is not the lack of inventive capacity but the lack of businessmen willing to take the risk investments." The bottom-line obsession of many managers results in quick payoff investments to retool old products rather than expensive long-term spending to develop new ones. Though Texas Instruments this year will spend $155 million on research, Vice President George Heilmeier admits: "We have become conservative and spend less on basic research."

Some entrepreneurs also complain that corporate giants are indifferent to small projects. Harris J. Bixler, president of Boston's Avco Everett Research Laboratory, contends that new products that promise tidy but unextravagant revenues go unsupported by Big Business even though the initial investment might be low. Says he: "Large companies could care less about the guy who has a $100,000 idea. They'd lose that in the paper-clip account." Such technological triumphs as Xerography and Polaroid film were developed by small innovator-entrepreneurs only after larger firms turned down the ideas.

There are a few bright spots in the otherwise gloomy innovation picture. Last year's reduction in the capital gains tax from 49% to 28% resulted in a flood of new money looking for risky but promising investments. Boston's Route 128 complex of small, high-technology firms and California's Silicon Valley are awash with funds.

Large technology-based firms like IBM and Bell Labs are also sinking megabucks into research. Bell Labs will spend $1 billion on research this year, with large amounts going to develop fiber optics --systems that carry information in rays of light traveling through slender glass fibers rather than in electric currents moving through bulky cables. IBM's research budget this year will be $1.25 billion, and the company has become the first to master the mass production of a silicon memory chip small enough to pass through the eye of a needle yet able to store 64,000 bits of information. Bell & Howell's Frey maintains it is a myth that only small firms can be innovative, adding that only large corporations have the capital and the distribution network to take new products from lab to market.

Even some of the "defensive research" is starting to pay off. Last week the 3M Co. introduced a lithograph printing plate that uses nonpolluting tap water instead of chemical developers to produce an image. General Motors' new zinc-nickel oxide battery pack--which can be completely recharged 300 times and will power a car for 100 miles--cost $33 million and took ten years to develop, but it has now opened up for the first time the possibility of a practical, mass-produced electric car.

The Government has also begun to recognize its responsibility for the low level of innovation. "Whether intended or not, the Government is inevitably involved in today's innovative process," concedes Richard A. Meserve, policy analyst for the White House Office of Science and Technology Policy. In the past three years President Carter has shifted the balance of federal R. and D. spending, which this year will total $30 billion, toward basic research. Carter this month will also present the results of a 20-month Commerce Department study on innovation. Presidential recommendations are expected to include modifications of patent and antitrust laws to protect inventors and encourage joint developments, tax breaks for small innovative businesses, and the creation of cooperative technology centers to get technical information flowing among business, Government and academe.

No one has yet precisely defined the ingredients necessary for a society to generate innovation. Historian Barbara Tuchman notes that the 12th and 13th centuries enjoyed "one of civilization's great bursts of development," with the introduction of the compass, the spinning wheel and the windmill. Mid-19th century Europe and the U.S. enjoyed similar explosions. But why? Perhaps necessity is indeed the mother of invention, and the demands of the current energy and environmental crises may yet revive the spirit of the Yankee tinkerer.

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