How High are the Giants' Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth

The pace of industrial innovation and growth is shaped by many forces that interact in complicated ways. Profit-maximizing firms pursue new ideas to obtain market power, but the pursuit of the same goal by other means that even successful inventions art eventually superseded by others; this known as creative destruction. New ideas not only yield new goods but also enrich the stock of knowledge of society and its potential to produce new ideas. To a great extent this knowledge is non-excludable, making research and inventions the source of powerful spillovers. The extent of spillovers depends on the rate at which new ideas outdate old ones, that is on the endogenous technological obsolescence of ideas, and on the rate at which knowledge diffuses among inventors. In this paper we build a simple model that allows us to organize our search for the empirical strength of the concepts emphasized above. We then use data on patents and patent citations as empirical counterparts of new ideas and knowledge spillovers, respectively, to estimate the model parameters. We find estimates of the annual rate of creative destruction in the range of 2 to 7 percent for the decade of the 1970s, which rates for individual sectors as high as 25 percent. For technological obsolescence, we find an increase over the century from about 3 percent per year to about 12 percent per year in 1990, with a noticeable plateau in the l970s. We find the rate of diffusion of knowledge to be quite rapid, with the mean lag between I and 2 years. Lastly, we find that the potency of spillovers from old ideas to new knowledge generation (as evidenced by patent citation rate) has been declining over the century: the resulting decline in the effective public stock of knowledge available to new inventors is quite consistent with the observed decline in the average private productivity of research inputs

The dominant Law and Economics paradigm regarding “Intellectual Property" – a vehicle or an obstacle for innovation, growth and progress?

The term "intellectual property" is a relatively a modern term, first used in its current meaning when the UN established the World Intellectual Property Organization (WIPO) in 1967. Beforehand laws around the world protected various aspects of informational goods - inventions and creations - using separate legal concepts, such as copyright, patents and trademarks, which were not perceived as property rights. This linguistic aspect is by no means anecdotal or marginal as it can be argued that the term "intellectual property" constituted its contemporary meaning including the economic analysis of informational goods and services, as can be demonstrated by the recent call to treat trade secrets not as a contractual agreement but as intellectual property (Epstein, 2005). This paper focuses on the normative analysis of IP rights and criticizes the implicit shift in economic analysis of IP from the incentives paradigm, which is founded upon the public good analysis of neo-classical micro-economic theory, to the new propriety paradigm, which is intellectually founded upon the tragedy of the commons literature. It further criticizes the dominant contemporary Law and Economics writings in this field as pre-assuming information to be an object of property, overlooking its fundamental differences from physical property and thus focusing on its management and maximization of value for its "owners" rather than on its initial justifications and its social value and contribution to innovation, growth and progress.Law; intellectual property; growth; incentives

The International Dynamics of R&D and Innovationin the Short Run and in the Long Run

In this paper we estimate the dynamic relationship between employment in R&D and generation of knowledge as measured by patent applications across OECD countries. In several recently developed models, known as ‘idea-based’ models of growth, the afore mentioned ""ideagenerating"" process is the engine of productivity growth. Moreover, in real business cycle models technological shocks are an important source of fluctuations. Our empirical strategy is able to test whether knowledge spillovers are strong enough to generate sustained endogenous growth and to estimate the quantitative impact of international knowledge on technological innovation of a country in the short and in the long run. We find that a country’s stock of knowledge, its R&D resources and the stock of international knowledge move together in the long run. International knowledge has a very significant impact on innovation. As a consequence, a positive shock to R&D in the US (the largest world innovator) has a significant positive effect on the innovation of all other countries. Such a shock produces its largest effect on domestic and international innovation after five to ten years from its occurrence.Innovation, Weak Scale Effects, Panel Cointegration, Error Correction Mechanism,International Knowledge Spillovers

Exploring the evidence base : an overview of the literature on the economic impact of knowledge transfer

This paper presents a policy-focused overview of relevant extant and ongoing research relating to the economic impact of knowledge transfer from higher education institutions. It highlights gaps in the current higher education research policy agenda on knowledge transfer as well as making suggestions where further research could most usefully inform policy. Consideration is also given within this paper to the development and use of metrics related to knowledge transfer activities of higher education institutions

The International Dynamics of R&D and Innovation in the Short and in the Long Run

In this paper we estimate the dynamic relationship between employment in R&D and generation of knowledge as measured by patent applications across OECD countries. In several recently developed models, known as `idea-based' models of growth, the afore mentioned "idea-generating" process is the engine of productivity growth. Moreover, in real business cycle models technological shocks are an important source of fluctuations. Our empirical strategy is able to test whether knowledge spillovers are strong enough to generate sustained endogenous growth and to estimate the quantitative impact of international knowledge on technological innovation of a country in the short and in the long run. We find that a country's stock of knowledge, its R&D resources and the stock of international knowledge move together in the long run. International knowledge has a very significant impact on innovation. As a consequence, a positive shock to R&D in the US (the largest world innovator) has a significant positive effect on the innovation of all other countries. Such a shock produces its largest effect on domestic and international innovation after five to ten years from its occurrence.

The Decline of the Independent Inventor: A Schumpterian Story?

Joseph Schumpeter argued in Capitalism, Socialism and Democracy that the rise of large firms%u2019 investments in in-house R&D spelled the doom of the entrepreneurial innovator. We explore this idea by analyzing the career patterns of successive cohorts of highly productive inventors from the late nineteenth and early twentieth centuries. We find that over time highly productive inventors were increasingly likely to form long-term attachments with firms. In the Northeast, these attachments seem to have taken the form of employment positions within large firms, but in the Midwest inventors were more likely to become principals in firms bearing their names. Entrepreneurship, therefore, was by no means dead, but the increasing capital requirements%u2014both financial and human%u2014for effective invention and the need for inventors to establish a reputation before they could attract support made it more difficult for creative people to pursue careers as inventors. The relative numbers of highly productive inventors in the population correspondingly decreased, as did rates of patenting per capita.