Nurturing the Accumulation of Innovations: Lessons from the Internet

Innovation and Economic Growth, Networks, the Internet, and Cloud Computing and Internet

Article Snapshot


Shane Greenstein


in Accelerating Energy Innovation: Insights from Multiple Sectors, Rebecca Henderson and Richard Newell, eds., University of Chicago Press, 2011, pp. 189-224


This chapter summarizes positive and negative contributions to the development of the Internet.

Policy Relevance

Public support for the development of the Internet can serve as a model for future government involvement in research and technology.

Main Points

  • The Internet grew out of an avant-garde research project funded by the Department of Defense with no immediate or concrete goals.
  • DARPA, the funding agency, pooled the work of researchers from universities in an isolated organization designed to nurture the rapid development of practical ideas.This was a great success.
    • Advancement in the project was achieved by producing projects peers found useful.
    • Inventors of processes and programs were also the direct users.
  • After several decades of development, the infrastructure developed through DARPA was turned over to the National Science Foundation, opened to universities and eventually commercial interests.
  • Commercialization of the Internet was also a success, creating value in three ways:
    • Firms explored and created e-commerce markets;
    • Firms experimented with novel products complementing the internet backbone developed earlier;
    • Firms competed with different standards, to the benefit of consumers.
  • Government support was key:
    • DARPA and NSF provided funding and fostered the creation of open, common standards for basic internet function.
    • Project leaders insulated the project from political interference.
    • The telephone industry was compelled by regulators to facilitate internet service providers.
    • Antitrust action against telecoms in the commercial period prevented large firms from controlling access to the Internet.

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