Prof. Lazonick's piece is interesting, but it seems like there are other forces at work, too. The central thrust of his argument is that public markets have not

Prof. Lazonick's piece is interesting, but it seems like there are other forces at work, too. The central thrust of his argument is that public markets have not lived up to their function as capital providers to firms, noting that american markets have been cash negative. He then notes that this is caused by result the prioritization of shareholder value, which consequently undervalues research and other innovation. Let me provide an alternative thesis: Firms weigh the value of research and have recognize it is too expensive to be more useful than returning money to shareholders. They do this because the tools they use to understand their capital tell them that's the case. But there's an issue there: What if those tools are wrong and the quantified value of research endeavors is commonly calculated wrong. If that's the case it isn't a problem with prioritizing shareholder value that's at issue, but instead an issue with research being unfairly handicapped in a fight against a share buy-back or dividend payment on the finance sheets. Research valuation is commonly undervalued because alternative use cases for the capital rarely, if ever, account for the erosive effects of competition upon their margins and sale volume. Accordingly, at steady state, large firms predispose themselves to stop researching once they've finished growing and reached stable market pricing. There was a fantastic article about this, but I can't seem to find it, but there is support from an econometric perspective that this effect is visible in the markets though [1]. [1] http://onlinelibrary.wiley.com/doi/10.1111/0022-1082.00411/full http://onlinelibrary.wiley.com/doi/10.1111/0022-1082.00411/f...