Bell Labs

Question 1

What are the major innovations of Bell Labs?

Answer 1

Transistors and transistor technology
The use of the binary system in message transmission and related to this the shift from digital to analog transmission
Communication satellites
Lasers and optical fibres
The mobile ‘cell’ phone systems

Question 2

What were some of the technical problems Bell Labs had to solve?

Answer 2

he loss of signal over long transmission lines
The absence of a ring tone
The absence of a phone hang-up hook
The effects of atmospheric disturbances when calls were sent via radio waves
The management for billing purposes of the spectacular growth in the numbers and routes of calls for billing purposes;
Meeting the 40 year durability standard including responding to the effects of termites, fungus, rodents, wind, salt, and marine worms.

Question 3

Conclusions on Bell Labs’ performance

Answer 3

→ While the Labs had a primarily applied orientation it generated lots of basic discoveries, due to lots of room for basic research
→ It was in many respects university-like, that is, it had flexible organization, some
curiosity-driven research, at least some room for eccentricity, but its performance was
much better than that of most universities.

Question 4

What does this tell us about the broader question of the conditions that facilitate R&D?

Answer 4

→ In the 1890s AT&T was engaged in fierce competition with independent local phone
companies who refused to carry its calls over their lines and the sound quality of calls
was poor.
→ In the early 20th century AT&T developed the following policies:
→ Buy local phone companies where possible
→ Make the case to the government for the utility character of phone service and, consequently, the need for monopoly to ensure adequate provision
→ Use R&D as part of an implicit contract with the government - that is, AT&T kept its monopoly and, in exchange, did a lot of R&D and made the results of that R&D broadly available.
→ This liberal approach kept the justice off their backs
→ The glory years of Bell Labs innovation came to an end with the deregulation of the phone industry and the break up of AT&T in the 1970s.
Bell Labs’ innovation and the diffusion of that innovation, then, did rest on monopoly power. But only because of the threat that it could lose it. The threat of anti-trust was critical to the firm’s innovation. (Schumpeter’s Ideas)