Good News for Small Firms

Thanks to Arnold Kling at EconBlog, I found this paper from William J. Baumol that explores why independent inventors and entrepreneurs contribute disproportionately to breakthrough inventions. This is good news for small firms and solo lawyers. Pull out the study whenever you are competing against a large firm for business:

The evidence shows that there is a rather sharp differentiation between the contributions to the economy’s technological innovation that are provided by entrepreneurs and those that are offered by the large internal R&D laboratories of established businesses. Large business firms, which account for nearly three-quarters of U.S. expenditure on R&D, have tended to follow relatively routine goals, slanted toward incremental improvements rather than revolutionary ideas. Greater user-friendliness, increased reliability, marginal additions to application, expansions of capacity, flexibility in design—these and many other types of improvement have come out of the industrial R&D facilities, with impressive consistency, year after year, and often pre-announced and pre-advertised. In contrast, the independent innovator and the independent entrepreneur have tended to account for most of the true, fundamentally novel innovations. . . . It is a plausible observation, then, that perhaps most of the revolutionary new ideas of the past two centuries have been, and are likely to continue to be, provided more often by these independent innovators who, essentially, operate small business enterprises.

What are your revolutionary ideas? Come on, small firm lawyers, we've clearly got the advantage here, so use it!