NEW YORK – An economist at Northwestern University believes that U.S. innovation is slowing and as a result, economic growth will suffer, the Wall Street Journal (WSJ) reports.

U.S. companies aren’t innovating like they used to, maintains Robert Gordon, an economist at Northwestern University. And in order to advance beyond what just investment and labor allow, our economy needs innovation.

Gordon said an aging society and increasing inequality has strained U.S. innovation. Even with the boost provided by personal computers and the Internet through the last part of the last decade, innovation since the 1970s hasn’t been as strong as in earlier decades.

The WSJ said that a look at what is happening today with technology suggests that Gordon may be on to something.

Technology traditionally gets cheaper, though recently, prices for software purchased by U.S. companies hasn’t been falling as quickly as in the past, notes J.P. Morgan Chase economist Mike Feroli.

Prices of information-processing equipment in the second quarter were down 6.8% from two years earlier, according to Commerce Department data. In the 1990s, the average two-year decline was 17.7%. Software prices fell 3.4% over the same period, compared with an average decline of 9.5% in the 1990s.

Additionally, U.S. companies’ demand for technology has slowed, with spending in the decade ending in 2011 rising at its slowest pace since the 1940s. “So the price signal still makes sense: If firms aren't as willing to buy into innovation, there is less incentive to innovate,” WSJ concludes.

“Until that view changes, and more of the secret sauce is mixed up, the U.S. economy may not be able to expand as quickly as it used to. And since this ultimately powers sales and profits, the future for companies, and their investors, will be a little less bright.”

Read more on creating a culture of innovation in your business in the August NACS Magazine.