Fostering innovation through networking information

There’s been a little flurry of posting from econbloggers (see Brad DeLong post and Mark Thoma’s post) following Virginia Postrel’s New York Times article on how job-hopping by engineers in Silicon Valley has fostered creativity there. For me the key paragraph of Ms. Postrel’s article was this:

When employees jump from company to company, they take their knowledge with them. “The innovation from one firm will tend to bleed over into other firms,” Professor Rebitzer explained. For a given company, “it’s hard to capture the returns on your innovation,” he went on. “From an economics perspective, that should hamper innovation.”

I certainly remember this as being true. Back in the 1970’s there was an extraordinary burst of new microprocessor development that happened because just a few designers went from Intel, to Zilog, to Motorola and back again carrying their knowledge of microprocessor design, the designs they’d created for their previous employers, how to elude their previous employers’ patents, and the future plans of their previous employers with them.

The knowledge that engineers carry in their heads is the only kind of intellectual property that hasn’t successfully been tied down by restrictive laws, particularly in the state of California. I’ve long thought that every creative person in the United States should go down on their knees every night and thank God for Olivia de Havilland. It was her lawsuit, de Havilland v. Warner Bros. Pictures, Inc. that limited the duration and enforceability of personal services contracts. In Europe, to the contrary, career-long personal services contracts are enforceable. It may be just a coincidence that the rate of innovation is slower there.

My sense is that the free exchange of ideas and networking of creative people sharing those ideas is a significantly more powerful driver for innovation than economic motivation. You need only look at the incredible burst of creativity driven by the greatest engine greatest engine of innovation in recent memory, the World Wide Web, for an illustration of this. I think that the blogger at Through the Looking Glass has the right of it:

If people were only motivated to do creative work when it was maximizing someone’s financial gain, then “starving artist” wouldn’t be a cliché.

Financial incentives may be helpful in fostering innovation but they’re not sufficient and, when they tie down ideas effectively in perpetuity as is the case with our current system of patents and copyrights, they may actually work against creativity.

It bears mentioning that one of the reasons employers want to continue and even expand the H-1B visa program has nothing whatsoever to do with the availability of workers with the necessary skills over here but everything to do with tying up the knowledge inside the imported workers’ heads. Fear of deportation can be a powerful motivator. These employers don’t just want skills; they want slaves.