Final answer:
Jeffrey Pfeffer suggests that investing in business ideas can lead to competitive advantages. Companies often underinvest in innovation due to the risk of new inventions being copied and the lack of private gain compared to the social benefit.
Step-by-step explanation:
According to Jeffrey Pfeffer, companies that invest in business ideas can create long-lasting competitive advantages that are difficult for competitors to duplicate. Market competition incentivizes firms to innovate to produce products more cheaply or with desirable characteristics, as emphasized by Gregory Lee, CEO of Samsung. However, the private sector tends to underinvest in innovation because new inventions can be easily copied, leading to a diminished incentive for prolonged investment in research and development. This issue is compounded by the fact that new technology often has positive externalities—benefits enjoyed by firms other than the innovator—meaning that the social benefits often exceed the inventor's private gains. A greater participation in the broader social benefits could motivate firms to invest more heavily in innovation.