Martin Fransman gave a good keynote on what causes innovation at today’s ITS conference. One question that arose from his discussion of Apple and a low-tech (low expenditure on R&D) company was how we could objectively measure innovation. Fransman answered by saying R&D expenditures were a bad indicator, being (a) an input measure, and (b) excluding a lot of service innovation expenditures (Apple was high here). No one would be misled into believing that Apple did not innovate. After the session I was chatting about this with Michael Latzer of U Zurich.
The man who introduced the concept of transaction costs, proposed a solution on dealing with problems of externalities and was one of the first to propose applying market solutions to spectrum allocation is no more. I first read his work on spectrum, since one of my teachers, Dallas Smythe, was a vociferous opponent. Then I read his classic piece on “The nature of the Firm.” That impressed me. Looking back I think that reducing transaction costs has become a governing principle of my life.
I’ve written about this earlier, but a more fleshed out argument is in my LBO column. The story was about an award. But what I noticed was the role of telephones in the story. The award winning innovation is not just one new thing; it is a collection of process improvements. Critical elements involve phones as easy ways of contacting mothers on the one hand and health workers on the other.