Where Innovation Happens, and Where It Does Not

In the United States, economic growth rates are remarkably steady. Innovation is typically seen as a primary explanation for this growth. One measure of innovative effort is research & development (R&D) expenditure, which also appears in aggregate to be a broadly steady activity. This aggregate steadiness, however, masks remarkable underlying sectoral differences and dynamics, where specific industries have experienced extraordinarily different productivity gains and innovation investment. Why would innovative effort differ so greatly across industries? If the innovation engine operates weakly in some sectors, is this outcome inevitable? What are the implications of these differences for meeting ongoing challenges? As the US economy appears caught in an aggregate productivity slowdown, what roles and opportunities can individual sectors play in overcoming this challenge? This chapter addresses these questions.The discussion integrates across the sector-specific analyses that constitute this book and provide rich and diverse perspectives. The goal here is a synthesis that, while necessarily incomplete and often speculative, provides a framework for thinking about the enormous diversity in innovative effort and productivity gains that we see.