Working Paper: NBER ID: w15905
Authors: Shane Greenstein
Abstract: The innovations that became the foundation for the Internet originate from two eras that illustrate two distinct models for accumulating innovations over the long haul. The pre-commercial era illustrates the operation of several useful non-market institutional arrangements. It also illustrates a potential drawback to government sponsorship - in this instance, truncation of exploratory activity. The commercial era illustrates a rather different set of lessons. It highlights the extraordinary power of market-oriented and widely distributed investment and adoption, which illustrates the power of market experimentation to foster innovative activity. It also illustrates a few of the conditions necessary to unleash value creation from such accumulated lessons, such as standards development and competition, and nurturing legal and regulatory policies.
Keywords: Internet; Innovation; Government Sponsorship; Market Dynamics
JEL Codes: L86; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government sponsorship through DARPA (H56) | Significant innovations in packet-switching technology (L96) |
| Precommercial era's institutional arrangements (P13) | Certain innovations (O35) |
| Transition to the commercial era (P19) | Market-oriented innovations (O36) |
| Removal of government control and introduction of competition (L33) | Broader range of entrepreneurial activities and experimentation (O35) |
| Establishment of standards and competition (L15) | Sustaining innovation in the commercial era (O35) |
| Transition to the commercial era (P19) | Substantial economic value creation (D46) |