The Innovation Boom

GaveKal released a new book last year called Our Brave New World and it has been the subject of several Thoughts From the Frontline letters. Steven Vannelli, of Gavekal, offers us another look at platform companies and argues that research and development (R&D), or intellectual property, is much more important that capital expenditures, or manufacturing ability. He then shows several examples of US companies that have increased R&D compared to capital expenditures.

Platform companies have realized that to be competitive in the new global marketplace they must lead innovation. In 2004 the US spent $250 Billion on R&D while China only spent $20 Billion. The US is moving production capacity around the world and GaveKal argues that the important thing to watch is R&D and that is why this piece was picked for Outside the Box.