R&D failure and second generation R&D: New potentialities

Abstract

Ample incentives exist for firms to pursue product, service, or process innovations to increase their profitability. In contrast, few incentives exist for firms to pursue innovations that provide social externalities if these are not inherently profitable. This article provides an argument that first generation research and development (R&D), or R&D that does not utilise economies of scale (as second generation R&D does), cannot effectively provide societal innovation that is not incentivised by market forces. An example of an alternative model for global societal problem solving, based on second generation R&D, is offered.