GMAT Test Prep: RC-22054415 GMAT Reading Comprehension

There is widespread belief that the emergence of giant industries has been accompanied by an equivalent surge in industrial research. A recent study of important inventions made since the turn of the century reveals that more than half were the product of individual inventors working alone, independent of organized industrial research. While industrial laboratories contributed such important products as nylon and transistors, independent inventors developed air conditioning, the automatic transmission, the jet engine, the helicopter, insulin, and streptomycin. Still other inventions, such as stainless steel, television, silicones, and Plexiglas were developed through the combined efforts of individuals and laboratory teams.

Despite these finding, we are urged to support monopolistic power on the grounds that such power creates an environment supportive of innovation. We are told that the independent inventor, along with the small firm, cannot afford to undertake the important research needed to improve our standard of living while protecting our diminishing resources; that only the giant corporation or conglomerate, with its prodigious assets, can afford the kind of expenditures that produce the technological advances vital to economic progress. But when we examine expenditures for research, we find that of the more than $35 billion spent each year in this country, almost two-thirds is spent by the federal government. More than half of this government expenditure is funneled into military research and product development, accounting for the enormous increase in spending in such industries as nuclear energy, aircraft, missiles, and electronics. There are those who consider it questionable that these defense-linked research projects will either improve our standard of living or do much to protect our diminishing resources.

Recent history has demonstrated that we may have to alter our longstanding conception of the process actuated by competition. The price variable, once perceived as the dominant aspect of the process, is now subordinate to the competition of the new product, the new business structure, and the new technology. While it can be assumed that in a highly competitive industry not dominated by single corporation, investment in innovation—a risky and expensive budget item—might meet resistance from management and stockholders concerned about cost-cutting, efficient organization, and large advertising budgets, it would be an egregious error to equate the monopolistic producer with bountiful expenditures on research. Large-scale enterprises tend to operate more comfortably in stable and secure circumstances, and their managerial bureaucracies tend to promote the status quo and resist the threat implicit in change. Moreover, in some cases, industrial giants faced with little or no competition seek to avoid the capital loss resulting from obsolescence by deliberately obstructing technological progress. By contrast, small firms undeterred by large investments in plant and capital equipment often aggressively pursue new techniques and new products, investing in innovation in order to expand their market shares.

The conglomerates are not, however, completely except from strong competitive pressures. There are instances in which they too must compete with another industrial Goliath, and then their weapons may include large expenditures for innovation.
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Which of the following best describes the organization of the second paragraph of the passage?