From dusty lab to market

: In the waning days of the second world war, Vannevar Bush, science adviser to President Franklin Roosevelt, penned a report that served as the blueprint for what would become America’s enormously successful information-technology industry in the second half of the 20th century. With the grandiose title “Science, The Endless Frontier”, Bush (no relation to the current president) laid out a vision for government-funded science and engineering that would unite academia, industry and (this being wartime) the armed forces. This it achieved by, in effect, keeping them apart.

Under Bush’s plan, universities researched basic science and then industry developed these findings to the point where they could get to market. The idea of R&D as two distinct activities was born. Firms soon organised themselves along similar lines, keeping white-coated scientists safely apart from scruffy engineers.

This approach was a stunning success. AT&T’s Bell Labs earned six Nobel prizes for inventions such as the laser and the transistor. IBM picked up three, two from its Zurich Research Laboratory alone. And Xerox’s Palo Alto Research Centre (PARC) devised the personal computer’s distinctive elements, including the mouse, the graphical user interface and the Ethernet protocol for computer networking (although it was criticised for failing to commercialise such leaps forward).

Now the big corporate laboratories are either gone or a shadow of what they were. Companies tinker with today’s products rather than pay researchers to think big thoughts. More often than not, firms hungry for innovation look to mergers and acquisitions with their peers, partnerships with universities and takeovers of venture-capital-backed start-ups. The traditional separation of research and development enshrined by Bush in 1945 is rapidly disappearing, especially in the information-technology industry. Does this mean the days when companies came up with big breakthroughs are over, too?

Not necessarily. The approach to R&D is changing because long-term research was a luxury only a monopoly could afford. In their heyday, the big firms dominated their markets. AT&T ran the telephone network, IBM dominated the mainframe-computer business and Xerox was a synonym for photocopying. The companies themselves saw the cost of basic scientific research as a small price to pay for such power.

Modern technology firms are much less vertically integrated. They use networks of outsourced suppliers and assemblers, which has led to the splintering of research divisions. Even though big American firms still spend billions of dollars on R&D, none has any intention of filling the shoes left...