It's a small number of research labs inside tech giants that are driving the rapid rise of AI today. But this is not the first time such labs have taken center stage, a new study shows: The United States' rise as a technological superpower was fueled not just by inventions, but by the emergence of industrial research labs in the 1920s – which reshaped who invented, where innovation happened, and how breakthroughs were made.
AT A GLANCE:
- The making of a tech superpower: The U.S. transition to a leading economy was not gradual; it happened abruptly in the early 1920s
- Research labs as key drivers: The industrial research lab – an idea born in the German-speaking world – supercharged teamwork and led to an explosion of innovation
- Engineers took over: engineers made up just 0.7% of the U.S. population but accounted for 25% of all patents by 1945
- The shift did not benefit everyone equally: women and immigrants were largely shut out of the new system
- This provides a new perspective on today's AI breakthroughs, which are driven by a revival of R&D labs at tech giants like Google, Meta, and Amazon
How did the United States overtake Europe to become the world's technological leader within just a few decades? A new study by researcher Frank Neffke from the Complexity Science Hub (CSH) and colleagues from the Growth Lab at Harvard University published in the journal Research Policy suggests that the answer lies not primarily in technological breakthroughs but in a fundamental shift in how innovation itself was organized.
"We analyze systemic shifts in the way invention was organized in the US, supported by a massive data effort – digitizing hundreds of thousands of pages of historical documents, covering 1.6 million patents from millions of inventors between 1856 and 2000," Neffke says.
The researchers found that U.S. innovation did not evolve gradually. Instead, a cluster of abrupt changes occurred in the early 1920s. "At the center of this transformation was an organizational innovation: the industrial research lab – an idea born in the German-speaking world that rapidly diffused in the U.S. after World War I." Around this time, invention became more science-based, teamwork became the norm, and engineers replaced craftsmen as the driving force behind technological progress.
THE RISE OF THE INDUSTRIAL RESEARCH LAB
For much of the 19th century, American innovation was a craft. Individual inventor-entrepreneurs – think Edison, think Tesla – tinkered their way to breakthroughs. Often, inventor teams were held together by family networks or a few trusted collaborators. It was a system that worked and produced important advances but relied largely on trial and error rather than systematic scientific inquiry. It had a ceiling.
Then, in the early 1920s, the idea of the industrial research lab crossed the Atlantic: "Firms began hiring teams of specialized engineers and scientists who worked together," Neffke says. "This shift enabled an explosion of what economists call 'Neue Kombinationen' – novel combinations of existing technologies that drive innovation forward."
By 1945, engineers made up just 0.7% of the US population but accounted for 25% of all patents. Invention had become a profession, and the lab had become its home.
TEAMWORK SUPERCHARGED
Research labs proved especially effective at organizing teamwork. "In fact, invention became teamwork," says Neffke, who is also a professor at the Interdisciplinary Transformation University (IT:U). The study shows that teams working in these research labs were more likely to collaborate repeatedly, collaborate across long distances, and produce novel technological combinations than teams working outside them.
Also, invention became increasingly science-based. Instead of relying primarily on practical know-how, inventors began drawing on formal scientific knowledge. This marked a decisive shift from a craftsmanship-based system to one rooted in science and engineering.
A NEW GEOGRAPHY OF INNOVATION
The rise of industrial research labs reshaped where innovation happened. During the late 19th century, inventive activity had spread from the large cities to smaller cities and towns. But with the emergence of research labs, innovation increasingly reconcentrated in a few large metropolitan areas.
"This shift helped fuel the rise of a small number of large cities in what we now know as the American Rust Belt, but which in its heyday was the Silicon Valley of the early 20th century," says Neffke.
BARRIERS TO PARTICIPATION
While the new system accelerated innovation, it also changed who could participate. The study finds that women and foreign-born inventors became significantly underrepresented in the emerging science-based innovation system compared to the remnants of the craftsmanship-based innovation of the prior era.
These shifts created participation barriers that persisted for decades, highlighting how changes in the organization of innovation can have lasting social consequences.
A CENTURY LATER, THE LAB IS BACK
However, industrial research labs did not dominate forever. Their importance diminished after the 1970s, when firm-based teams underperformed standalone teams in novelty creation, the researchers found. But just recently, "we have seen a revival of R&D labs driven by tech giants like Google, Meta, and Amazon," Neffke says.
"They have rebuilt large-scale research operations, and the pattern looks familiar: As in much of the 20th century – when behemoths like Bell Labs not only patented, but also pushed the scientific frontier, spawning several Nobel Prize winners and entire academic fields – many of today's most consequential breakthroughs in AI are coming from industrial labs."
LESSONS FOR TODAY'S INNOVATION SYSTEMS
"We often describe the history of technology as a succession of technological breakthroughs, from steam engines to the Bessemer process in steel production, electricity, transistors, and so on that transform economies and societies. However, our study suggests that social innovations may be just as important."
Industrial research labs not only accelerated invention but also reshaped the structure of the innovation system and the composition of the workforce. Today, we witness how another organizational innovation – online collaboration platforms – transforms how work and innovation are organized. Understanding these dynamics is crucial, the researchers argue, because such shifts in the organization of innovation can have far-reaching consequences – not only for technological progress, but for economic development and society as a whole.
About the study
The study " Inventing modern invention: The professionalization of technological progress in the US " by M. Hartog, A. Gomez-Lievano, R. Hausmann, and F. Neffke was recently published in the journal Research Policy (doi: 10.1016/j.respol.2025.105382).
About the Complexity Science Hub
The Complexity Science Hub (CSH) is Europe's research center for the study of complex systems. We derive meaning from data from a range of disciplines – economics, medicine, ecology, and the social sciences – as a basis for actionable solutions for a better world. CSH members are Austrian Institute of Technology (AIT), BOKU University, Central European University (CEU), Graz University of Technology, Interdisciplinary Transformation University Austria (IT:U), Medical University of Vienna, TU Wien, University of Continuing Education Krems, Vetmeduni Vienna, Vienna University of Economics and Business, and Austrian Economic Chambers (WKO).
