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December 8, 2011

PRESS CONTACT: Steven Chlapecka - schlapecka@ppionline.org, T: 202.525.3931


Economist Michael Mandel’s Analysis Cites Scale as Catalyst for Innovation

WASHINGTON, D.C.—Is scale the enemy of American prosperity? Are smaller companies always better than larger ones? “Scale and Innovation in Today’s Economy,” a new report released today by the Progressive Policy Institute (PPI) and written by PPI Chief Economic Strategist Michael Mandel, explains that the current economic conditions can make scale a positive influence on growth, investment and innovation.

“After 20 years where startups dominated the innovation headlines, we will show that the pendulum may be swinging back, so that scale may be a plus for innovation in today’s economy, not a minus,” writes Mandel.

Mandel argues that successful innovation ecosystems are anchored by large core firms, such as Google, Apple and AT&T. Policymakers need to take into account the current environment, which is one of intense technological competition between such innovative ecosystems, new global rivalries, and the need to reform large-scale integrated systems, such as healthcare and education.

“In this perceptive analysis, Michael Mandel confounds the conventional notion that only small is beautiful when it comes to innovation,” said PPI President Will Marshall. “In fact, large companies are critical components of the ‘innovation ecosystems’ that keep America ahead of the curve in global competition."

Mandel suggests the current environment makes scale a positive influence on innovation for the following reasons:

  • Economic and job growth today are increasingly driven by large-scale innovation ecosystems, such as the ones surrounding the iPhone, Android, and the introduction of 4G mobile networks, which require management by a company with both resources and scale.
  • Globalization puts more of a premium on size than ever before. In order to capture the fruits of innovation, U.S. companies have to have the resources to stand against foreign competition.
  • The U.S. faces a set of enormous challenges in reforming large-scale integrated systems such as health, energy and education – reforms for which conventional venture-backed startups don’t have the resources to tackle these mammoth problems.

The policy brief looks at scale as it relates to government policy, U.S. competitiveness and prosperity, finding that the biggest drags on the economy are lack of investment, weak innovation and an emphasis on consumption rather than production.

To access the full memo, visit: http://bit.ly/tuvEn0

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The Progressive Policy Institute is an independent research institution founded in 1989 that seeks to define and promote a new progressive politics in the 21st century. Through policy analysis and dialogue, PPI challenges the status quo and advocates for radical policy solutions.

For further questions, please contact Steven Chlapecka at schlapecka@ppionline.org, 202.525.3931 (office), 202.556.1752 (cell).

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