Competition from imports pushes domestic laggards to adopt more efficient practices and technologies
Whether a multinational corporation or a garage-dwelling loner, inventors don’t typically capture the full value of their invention.
To take a timely example: When Moderna unveiled its Covid-19 vaccine, its stock price rose and its shareholders made money, but nothing in accord with the trillions of dollars of social value that the vaccine will ultimately deliver.
Economists tend to agree that this mismatch in compensation provides diminished incentives for inventors and thus creates a second mismatch: between the amount of potential innovation that would benefit the world and the amount the world actually gets.
This piece originally appeared in Stanford Business Insights from Stanford Graduate School of Business. To receive business ideas and insights from Stanford GSB click here: (To sign up: https://www.gsb.stanford.edu/insights/about/emails)