Professor of Public Policy and Corporate Management in the Aetna Chair, Emeritus
This paper draws implications for technology policy from evidence on the size distribution of returns from eight sets of data on inventions and innovations attributable to private sector firms and universities. The distributions are all highly skew; the top 10% of sample members captured from 48 to 93 percent of total sample returns. It follows that programs seeking to advance technology should not be judged negatively if they lead to numerous economic failures; rather, emphasis should be placed on the relatively few big successes. To achieve noteworthy success with appreciable confidence, a sizeable array of projects must often be supported. The outcome distributions are sufficiently skewed that, even with large numbers of projects, it is not possible to diversify away substantial residual variability through portfolio strategies.
Scherer, F.M., and Dietmar Harhoff. "Technology Policy for a World of Skew-Distributed Outcomes." Research Policy 29.4 (April 2000): 559-566.