The Global Economy in Turbulent Times

CHAPTER 111 Innovation: Catalyst for Recovery¹

History teaches that spending on innovation must be sustained through tough times in order to better compete when recovery resurfaces. Otherwise, companies will emerge from the recession with obsolete products or services—with nothing new in added value and no initiatives in modernization, automation, and intellectual property to compete for markets. General Electric (GE), for example, failed to keep up in the 2001–2003 recession, with rivals developing more efficient LED lighting technology now competing with incandescent bulbs. Investments sow the seeds of innovations, including software in new/improved systems, processes, and methods that enhance their competiveness globally. Innovative products like iPod (Apple) and RAZR cell phone (Motorola) were hatched during the downturn of the early 2000s. Despite plunging sales, GE spent billions following the end of the Cold War to develop new engines with blades lighter than titanium. This paid off handsomely in the 2000s, earning billions more from servicing these engines. Of particular interest is Corning’s “rings of defense” strategy in the face of the current recession—innovation spending was placed in the innermost ring, making it the last to be cut.

Recession and Research and Development

With growing interdependence, the United States and eurozone face keen competition from China, India, Japan, and South Korea, which have continued to invest. According to the latest private ...