Tuesday, March 17, 2009

Does Innovation Emerge From Recessions?

It is beyond question that the economy is in a recession and that job losses abound. One common theme that has emerged from the many recent articles and blog posts discussing our economic predicament is the intuitive notion that job losses force innovation and entrepreneurship.

I discussed this theme in detail in my post "Does Recession = Boom Times for VCs and Entrepreneurs?" and noted the recent New York Times article discussing the demise of Venture Capital (a subject I have also discussed recently here, here and here) which concluded:

If there is a silver lining, the large-scale downsizing from major companies will release a lot of new entrepreneurial talent and ideas — scientists, engineers, business folks now looking to do other things ... There will be a lot of forced entrepreneurship that will lead to innovations.

What is even more interesting to me is whether there is any historic support for the intuitive notion that great disruptive companies are born in the crucible of a recession.

I recently came across a nice visual representation that at least provides some anecdotal support for this. It shows the various down cycles in the US economy over the last 60 years or so and identifies some of the major innovating companies that were formed during each period. Although not analytically rigorous, it is an interesting visual tool.


  1. Interesting question to explore Hank. Not sure about the disruptive nature, but historian Niall Ferguson http://www.niallferguson.com/site/FERG/Templates/Home.aspx?pageid=1 has some interesting things to say about innovation and recession. Check him out.

    Alex H. @goodchemist

  2. Thanks for the feedback Alex. Niall Ferguson is a smart man -- thanks for the link to his site.


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