Apple's Changing Business Model: What Should the World's Richest Company Do with All Those Profits?

Accounting Forum, Forthcoming

41 Pages Posted: 16 Aug 2013

See all articles by William Lazonick

William Lazonick

The Academic-Industry Research Network

Mariana Mazzucato

University of York - Social Policy Research Unit (SPRU); University of Sussex

Öner Tulum

SOAS University of London; The Academic-Industry Research Network

Date Written: July 1, 2013

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 fiscal 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.

Keywords: Apple's business model, Risk-reward nexus, Innovative enterprise, Stock repurchase

Suggested Citation

Lazonick, William and Mazzucato, Mariana and Tulum, Öner, Apple's Changing Business Model: What Should the World's Richest Company Do with All Those Profits? (July 1, 2013). Accounting Forum, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2310608 or http://dx.doi.org/10.2139/ssrn.2310608

William Lazonick (Contact Author)

The Academic-Industry Research Network ( email )

12 Newport Road
Porter Square
Cambridge, MA 02140
United States

Mariana Mazzucato

University of York - Social Policy Research Unit (SPRU) ( email )

United Kingdom

HOME PAGE: http://www.sussex.ac.uk/spru/people/peoplelists/person/111262

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

Öner Tulum

SOAS University of London ( email )

Thornhaugh Street
Russell Square
London, WC1H 0XG
United Kingdom

HOME PAGE: http://https://www.soas.ac.uk/

The Academic-Industry Research Network ( email )

12 Newport Road
Porter Square
Cambridge, MA 02140
United States

HOME PAGE: http://www.theairnet.org/V2/people/tulum.php

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