The Relationship Between Company Size and Research Output

Executive summary

  • Fake Innovation in Pharmaceuticals
  • Fake Innovation at Microsoft


An interesting, though undiscussed topic, is what type of or size of an organization is conducive to research and innovation. In this post on private vs. university research, we delve into the structural issues which limit the research discoveries in private companies which lack the innovation sharing infrastructure and incentives that private companies have vis-a-vis academia. However, in addition to the differences between private and university institutions, there appear to be differences between large and small companies. While the interpretation is that large companies have more resources to place in research, there appear to be diseconomies of scale in that larger companies appear to produce less innovation than smaller companies. This is very apparent in the pharmaceutical industry.

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Fake Innovation in Pharmaceuticals

Pharmaceutical companies spend most of their expenditures on marketing and distribution. They are in this way becoming consumer product companies and fewer research companies. The large pharmaceutical companies have pretensions of being science and research-oriented firms because admitting what they are would prevent them from achieving their goals. This is used to justify their stupendous profit margins. The actual research is mostly happening in universities, which pharmaceutical companies co-opt and take through funding and thorough research parks. These instruments are ways of placing a siphon on campus to remove its intellectual property in areas that can be monetized. There are some pharmaceuticals that have been paid for entirely by public university funding, and pharmaceutical companies have been able to patent these discoveries, which they did not invent, and the industry is currently making billions from this.

Fake Innovation at Microsoft?

Microsoft is another example of a company that is huge, has a huge research budget, but puts very little out regarding new discoveries. Vista took six years to develop and had the largest operating system budget ever in human history, yet all they came up with is new eye candy. An install of Vista 2 to 3 times bigger than Windows Server 2003, a product that is doing much more, yet no one seemed to notice this. It is less functional and slower than its predecessor. The supposed security improvements are so basic, and the only real improvement were natural improvements that should have been made years ago in XP and partly have been with Service Pack 1 and 2.

Can Microsoft claim it produces much intellectual property in return for the $100 billion a year that it takes in, Microsoft can claim one actual invention can claim, something they did not buy or steal from someone else….the paperclip in their Office Suite. This was entirely their invention.


The idea that large companies product innovation are not supported by evidence. Large companies that do, tend to be aligned with universities. Secondly, the larger the company, the more difficult it is to innovate and the more it tends to attract relatively noncreative people. The larger companies themselves reward conformance. Not the best environment to develop innovation.