Capitalism’s Invisible Innovators: Historical Evidence from Mechanized Reapers and Cloud Computing

Abstract

Existing theories of technological innovation posit a split between the incremental innovations produced by large incumbents and the radical innovations produced by entrepreneurial start-ups. This study presents empirical evidence challenging this foundational assumption by demonstrating that entrepreneurs play a leading role, not a subordinate role, in sourcing incremental innovations through secondary inventions and design modifications. In making this argument, I present parallels between two separate instances involving the diffusion of radical innovations: the mechanized reaper (1804 – 1884) and cloud computing services (1960 – 2011). Although these technologies arose in markedly different environments and eras, each instance demonstrates that without the sustained introduction of secondary inventions and design modifications by entrepreneurs, the dominant designs would have remained dormant. Applying the techniques of historical econometrics, this study reveals that among the highest-ranked incremen...