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Apple's changing business model: What should the world's richest company do with all those profits?

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  • William Lazonick
  • Mariana Mazzucato
  • Öner Tulum

Abstract

Apple Inc. stands out as the world's most famous, and currently richest, company. To the general public, Apple is known for three things: its intriguing CEO Steve Jobs, who has achieved iconic status in death as in life; its amazing iOS products, especially the iPhone and the iPad, and their predecessor the iPod, which have literally placed sophisticated technology in the hands of the masses; and its stratospheric stock price, which even when in March 2013 it had dropped to 63 percent of its September 2012 peak, gave Apple the highest market capitalization of any company in the world. As a result of its phenomenal success, at the end of fiscal 2012 Apple had $121 billion in liquid assets. In April 2013 the company committed to distributing as much as $100 billion to shareholders in stock buybacks and cash dividends by the end of calendar 2015. By employing the theory of innovative enterprise to analyze how over the course of its 37-year history Apple became so profitable, we argue that there is no economic justification from a risk-reward perspective for this distribution to Apple's shareholders. Taxpayers and workers have superior claims on these profits. In analyzing by whom value is created as a basis for considering for whom value should be extracted, we raise the implications of Apple's changing business model for the future of innovation at this heretofore exceptional American company and even in the U.S. economy as a whole.

Suggested Citation

  • William Lazonick & Mariana Mazzucato & Öner Tulum, 2013. "Apple's changing business model: What should the world's richest company do with all those profits?," Accounting Forum, Taylor & Francis Journals, vol. 37(4), pages 249-267, December.
    • Handle: RePEc:taf:accfor:v:37:y:2013:i:4:p:249-267
    DOI: 10.1016/j.accfor.2013.07.002
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    1. William Lazonick & Mariana Mazzucato, 2013. "The risk-reward nexus in the innovation-inequality relationship: who takes the risks? Who gets the rewards ?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(4), pages 1093-1128, August.
    2. Lazonick, William, 2010. "Innovative Business Models and Varieties of Capitalism: Financialization of the U.S. Corporation," Business History Review, Cambridge University Press, vol. 84(4), pages 675-702, January.
    3. William Lazonick, 2009. "Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number spne, December.
    4. Lazonick, William & Tulum, Öner, 2011. "US biopharmaceutical finance and the sustainability of the biotech business model," Research Policy, Elsevier, vol. 40(9), pages 1170-1187.
    5. William Lazonick, 2010. "Innovative Business Models and Varieties of Capitalism: Financialization of the U.S. Corporation," Business History Review, Harvard Business School, vol. 84(4), pages 675-702, December.
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