MISCONCEPTION 3: Spending More on R&D Increases Innovation

It seems almost obvious that increasing R&D investment will increase innovation. In fact, this belief is so widely held that when the government wanted to increase innovation in 1981, it implemented R&D tax credits. The government’s goal for innovation is similar to companies’ goal. Both want growth. Companies want growth because it increases their market value; the government wants economic growth because it increases the number of jobs, the level of wages, and accordingly the standard of living for all its citizens. What’s convenient about economic growth is that it’s largely just the collective growth of all the companies in the economy. So the best way for the government to achieve ...

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