Is Big good?

December 17, 2011 Editor 0

The Economist, in one of its columns, Schumpter, discussed whether big companies are better catalysts of innovation than smaller ones.

Three developments favour big companies; economic growth increasingly driven by ecosystems such as Apple and Android OS; globalisation; and the pressing issues of today-education, health and climate change- are too complex for small players.

The column, does however make an important point, which is  big companies are not suited to disruptive technologies or innovation. Disruptive innovation is more about business model rather any new or break  through technology. Big established players are often reluctant to disrupt their business models. Small companies, however, can make incremental changes or create a business model to an existing technology to disrupt the market.

The  argument that big is better for innovation can have implications for African Governments and donor agencies. The promotion of SMEs as an engine for growth is top of the development agenda. Would it be wise instead to support the development of big companies? These could own a number of small companies.

The column concluded that the key to innovation is allowing energetic new companies to grow and let inefficient ones die. In this, what African governments can do is to support growth of new companies through an enabling business and regulatory environment.

Francis Stevens George

Link to the Schumpeter blog

Categories: Innovation

Tags: big companies, Business model, Innovation