Great idea
Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States
Viktor Slavtchev & Simon Wiederhold
American Economic Journal: Macroeconomics, forthcoming
Abstract:
Governments purchase everything from airplanes to zucchini. This paper investigates the role of the technological content of government procurement in innovation. In a theoretical model, we first show that a shift in the composition of public purchases toward high-tech products translates into higher economy-wide returns to innovation, leading to an increase in the aggregate level of private R&D. Using unique data on federal procurement in US states and performing panel fixed-effects estimations, we find support for the model's prediction of a positive R&D effect of the technological content of government procurement. Instrumental-variable estimations suggest a causal interpretation of our findings.
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Inventing Prizes: A Historical Perspective on Innovation Awards and Technology Policy
Zorina Khan
NBER Working Paper, July 2015
Abstract:
Prizes for innovations are currently experiencing a renaissance, following their marked decline during the nineteenth century. However, Daguerre’s “patent buyout,” the longitude prize, inducement prizes for butter substitutes and billiard balls, the activities of the Royal Society of Arts and other “encouragement” institutions, all comprise historically inaccurate and potentially misleading case studies. Daguerre, for instance, never obtained a patent in France and, instead, lobbied for government support in a classic example of rent-seeking. This paper surveys empirical research using more representative samples drawn from Britain, France, and the United States, including “great inventors” and their ordinary counterparts, and prizes at industrial exhibitions. The results suggest that administered systems of rewards to innovators suffered from a number of disadvantages in design and practice, some of which might be inherent to their non-market orientation. These findings in part explain why innovation prizes lost favour as a technology policy instrument in both the United States and Europe in the period of industrialization and economic growth.
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Lauren Cohen, Umit Gurun & Scott Kominers
Harvard Working Paper, June 2015
Abstract:
We show that increased litigation risk has driven innovators to shield themselves by shifting innovation out of industry and into universities. We show both theoretically and empirically that litigation by Non-Practicing Entities (NPEs) pushes innovation to spaces with reduced litigation threat. Innovation has shifted into universities (and away from public and private firms) in exactly those industries with the most aggressive NPE litigation, precisely following extensive NPE litigation. The extent of innovation shielding is large and significant. An increase of 100 NPE lawsuits in an industry shifts up the university share of innovation by roughly 70% in subsequent years (t=5.34).
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Estimating the reproducibility of psychological science
Brian Nosek et al.
Science, 28 August 2015
Abstract:
We conducted replications of 100 experimental and correlational studies published in three psychology journals using high-powered designs and original materials when available. There is no single standard for evaluating replication success. Here, we evaluated reproducibility using significance and P values, effect sizes, subjective assessments of replication teams, and meta-analysis of effect sizes. The mean effect size (r) of the replication effects (Mr = 0.197, SD = 0.257) was half the magnitude of the mean effect size of the original effects (Mr = 0.403, SD = 0.188), representing a substantial decline. Ninety-seven percent of original studies had significant results (P < .05). Thirty-six percent of replications had significant results; 47% of original effect sizes were in the 95% confidence interval of the replication effect size; 39% of effects were subjectively rated to have replicated the original result; and if no bias in original results is assumed, combining original and replication results left 68% with statistically significant effects. Correlational tests suggest that replication success was better predicted by the strength of original evidence than by characteristics of the original and replication teams.
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Underreporting in Psychology Experiments: Evidence From a Study Registry
Annie Franco, Neil Malhotra & Gabor Simonovits
Social Psychological and Personality Science, forthcoming
Abstract:
Many scholars have raised concerns about the credibility of empirical findings in psychology, arguing that the proportion of false positives reported in the published literature dramatically exceeds the rate implied by standard significance levels. A major contributor of false positives is the practice of reporting a subset of the potentially relevant statistical analyses pertaining to a research project. This study is the first to provide direct evidence of selective underreporting in psychology experiments. To overcome the problem that the complete experimental design and full set of measured variables are not accessible for most published research, we identify a population of published psychology experiments from a competitive grant program for which questionnaires and data are made publicly available because of an institutional rule. We find that about 40% of studies fail to fully report all experimental conditions and about 70% of studies do not report all outcome variables included in the questionnaire. Reported effect sizes are about twice as large as unreported effect sizes and are about 3 times more likely to be statistically significant.
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Daniele Fanelli, Rodrigo Costas & Vincent Larivière
PLoS ONE, June 2015
Abstract:
The honesty and integrity of scientists is widely believed to be threatened by pressures to publish, unsupportive research environments, and other structural, sociological and psychological factors. Belief in the importance of these factors has inspired major policy initiatives, but evidence to support them is either non-existent or derived from self-reports and other sources that have known limitations. We used a retrospective study design to verify whether risk factors for scientific misconduct could predict the occurrence of retractions, which are usually the consequence of research misconduct, or corrections, which are honest rectifications of minor mistakes. Bibliographic and personal information were collected on all co-authors of papers that have been retracted or corrected in 2010-2011 (N=611 and N=2226 papers, respectively) and authors of control papers matched by journal and issue (N=1181 and N=4285 papers, respectively), and were analysed with conditional logistic regression. Results, which avoided several limitations of past studies and are robust to different sampling strategies, support the notion that scientific misconduct is more likely in countries that lack research integrity policies, in countries where individual publication performance is rewarded with cash, in cultures and situations were mutual criticism is hampered, and in the earliest phases of a researcher’s career. The hypothesis that males might be prone to scientific misconduct was not supported, and the widespread belief that pressures to publish are a major driver of misconduct was largely contradicted: high-impact and productive researchers, and those working in countries in which pressures to publish are believed to be higher, are less-likely to produce retracted papers, and more likely to correct them. Efforts to reduce and prevent misconduct, therefore, might be most effective if focused on promoting research integrity policies, improving mentoring and training, and encouraging transparent communication amongst researchers.
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Insider Trading and Innovation
Ross Levine, Chen Lin & Lai Wei
University of California Working Paper, August 2015
Abstract:
This paper assesses whether the enforcement of insider trading laws increases or decreases patent-based measures of technological innovation. Based on about 75,000 industry-country-year observations across 94 economies from 1976 to 2006, we find evidence consistent with the view that enforcing insider trading laws spurs innovation — as measured by patent intensity, scope, impact, generality, and originality — after controlling for country-year and industry-year fixed effects. Consistent with theories that insider trading slows innovation by impeding the valuation of innovative activities, the relationship between enforcing insider trading laws and innovation is much larger in industries that are naturally innovative and opaque, where we use the U.S. to benchmark industries.
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Does Compulsory Licensing Discourage Invention? Evidence From German Patents After WWI
Joerg Baten, Nicola Bianchi & Petra Moser
NBER Working Paper, July 2015
Abstract:
This paper investigates whether compulsory licensing – which allows governments to license patents without the consent of patent-owners – discourages invention. Our analysis exploits new historical data on German patents to examine the effects of compulsory licensing under the US Trading-with-the-Enemy Act on invention in Germany. We find that compulsory licensing was associated with a 28 percent increase in invention. Historical evidence indicates that, as a result of war-related demands, fields with licensing were negatively selected, so OLS estimates may underestimate the positive effects of compulsory licensing on future inventions.
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Patent Publication and the Market for Ideas
Deepak Hegde & Hong Luo
Harvard Working Paper, August 2015
Abstract:
In this paper, we study the effect of invention disclosure — through patent publication — on the market for ideas. We do so by analyzing the effects of the American Inventor’s Protection Act of 1999 (AIPA), which required US patent applications be published 18 months after their filing date rather than at patent grant, on the timing of licensing deals in the biomedical industry. We find that post-AIPA US patent applications are significantly more likely to be licensed before patent grant and shortly after 18-month publication. Licensing delays are reduced by about ten months, on average, after AIPA’s enactment. These findings suggest a hitherto unexplored benefit of the patent system: by requiring inventions to be published through a credible, standardized, and centralized repository, it mitigates information costs for buyers and sellers and thus facilitates transactions in the market for ideas.
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Patent Pools, Competition, and Innovation — Evidence from 20 US Industries under the New Deal
Ryan Lampe & Petra Moser
Journal of Law, Economics, and Organization, forthcoming
Abstract:
Patent pools have become a prominent mechanism to reduce litigation risks and facilitate the commercialization of new technologies. This article takes advantage of a window of regulatory tolerance under the New Deal to investigate the effects of pools that would form in the absence of effective antitrust. Difference-in-differences regressions of patents and patent citations across 20 industries imply a 14% decline in patenting for each additional patent that is included in a pool. An analysis of the mechanism by which pools discourage innovation indicates that this decline is driven by technologies for which the creation of a pool weakened competition in R&D.
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Thomas Hannigan, Marcelo Cano-Kollmann & Ram Mudambi
Industrial and Corporate Change, June 2015, Pages 613-634
Abstract:
Analyzing the comprehensive 35-year patent data set associated with the Detroit auto cluster we confirm that innovation in clusters can increase in spite of a long-term decline in manufacturing activity. The “stickiness” of local knowledge is sustained by: (i) increasing technological specialization at the local level and (ii) growing connectedness to global centers of excellence. The very forces that bring about the decline in manufacturing in a cluster sustain their position as a global center of innovative excellence.
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Pricing Genius: The Market Evaluation of Innovation
David Galenson & Simone Lenzu
University of Chicago Working Paper, July 2015
Abstract:
Economists have neglected a key issue for understanding and increasing technological change, in failing to study how talented individuals produce innovations. This paper takes a quantitative approach to this problem. Regression analysis of auction data from 1965-2015 reveals that the age-price profiles of Jackson Pollock and Andy Warhol – the two greatest painters born in the 20th century – closely resemble the age profiles of the two artists derived both from textbooks of art history and from retrospective exhibitions. The agreement of these sources confirms that the auction market assigns the highest prices to the most important art, and examination of the artists’ careers reveals that this art is the most important because it is the most innovative. These results lend strong support to our understanding of creativity at the individual level, with a sharp contrast between the extended experimental innovation of Pollock and the sudden conceptual innovation of Warhol.
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Tradition and Innovation in Scientists’ Research Strategies
Jacob Foster, Andrey Rzhetsky & James Evans
American Sociological Review, forthcoming
Abstract:
What factors affect a scientist’s choice of research problem? Qualitative research in the history and sociology of science suggests that this choice is patterned by an “essential tension” between productive tradition and risky innovation. We examine this tension through Bourdieu’s field theory of science, and we explore it empirically by analyzing millions of biomedical abstracts from MEDLINE. We represent the evolving state of chemical knowledge with networks extracted from these abstracts. We then develop a typology of research strategies on these networks. Scientists can introduce novel chemicals and chemical relationships (innovation) or delve deeper into known ones (tradition). They can consolidate knowledge clusters or bridge them. The aggregate distribution of published strategies remains remarkably stable. High-risk innovation strategies are rare and reflect a growing focus on established knowledge. An innovative publication is more likely to achieve high impact than a conservative one, but the additional reward does not compensate for the risk of failing to publish. By studying prizewinners in biomedicine and chemistry, we show that occasional gambles for extraordinary impact are a compelling explanation for observed levels of risky innovation. Our analysis of the essential tension identifies institutional forces that sustain tradition and suggests policy interventions to foster innovation.
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Understanding the Changing Structure of Scientific Inquiry
Ajay Agrawal, Avi Goldfarb & Florenta Teodoridis
American Economic Journal: Applied Economics, forthcoming
Abstract:
The fall of the Iron Curtain led to an influx of new mathematical ideas into Western science. We show that research teams grew disproportionately in size in subfields of mathematics in which the Soviets were strongest. This is consistent with the knowledge burden hypothesis that an outward shift in the knowledge frontier increases the returns to collaboration. We also report additional evidence consistent with this interpretation: (1) The effect is present in countries outside the US and is not correlated with the local population of Soviet scholars, (2) Researchers in Soviet-rich subfields disproportionately increased their level of specialization.
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Do Economic Downturns Dampen Patent Litigation?
Alan Marco, Shawn Miller & Ted Sichelman
Journal of Empirical Legal Studies, September 2015, Pages 481–536
Abstract:
Recent studies estimate that the economic impact of U.S. patent litigation may be as large as $80 billion per year and that the overall rate of U.S. patent litigation has been growing rapidly over the past 20 years. And yet, the relationship of the macroeconomy to patent litigation rates has never been studied in any rigorous fashion. This lacuna is notable given that there are two opposing theories among lawyers regarding the effect of economic downturns on patent litigation. One camp argues for a substitution theory, holding that patent litigation should increase in a downturn because potential plaintiffs have a greater incentive to exploit patent assets relative to other investments. The other camp posits a capital constraint theory that holds that the decrease in cash flow and available capital disincentivizes litigation. Analyzing quarterly patent infringement suit filing data from 1971–2009 using a time-series vector autoregression (VAR) model, we show that economic downturns have significantly affected patent litigation rates. (To aid other researchers in testing and extending our analyses, we have made our entire data set available online.) Importantly, we find that these effects have changed over time. In particular, patent litigation has become more dependent on credit availability in a downturn. We hypothesize that such changes resulted from an increase in use of contingent-fee attorneys by patent plaintiffs and the rise of nonpracticing entities (NPEs), which, unlike most operating companies, generally fund their lawsuits directly from outside capital sources. Over roughly the last 20 years, we find that macroeconomic conditions have affected patent litigation in contrasting ways. Decreases in GDP (particularly economy-wide investment) are correlated with significant increases in patent litigation and countercyclical economic trends. On the other hand, increases in T-bill and real interest rates as well as increases in economy-wide financial risk are generally correlated with significant decreases in patent suits, leading to procyclical trends. Thus, the specific nature of a downturn predicts whether patent litigation rates will tend to rise or fall.
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Law and Innovation: Evidence from State Trade Secrets Laws
I.P.L. Png
Review of Economics and Statistics, forthcoming
Abstract:
Here, I study the effect of state enactment of the Uniform Trade Secrets Act (UTSA) on R&D among U.S. businesses between 1979-98. Using a new index of the legal protection of trade secrets, I find that the UTSA was associated with higher R&D among larger companies and those in high-tech industries. For the average company in the respective industry, the UTSA was associated with 3.2 percent more R&D in pharmaceuticals and 3.1 percent more R&D in computers and office equipment, as contrasted with no significant change in soaps and cleaners, and industrial machinery and equipment.
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Technology Entry in the Presence of Patent Thickets
Bronwyn Hall, Christian Helmers & Georg von Graevenitz
NBER Working Paper, August 2015
Abstract:
We analyze the effect of patent thickets on entry into technology areas by firms in the UK. We present a model that describes incentives to enter technology areas characterized by varying technological opportunity, complexity of technology, and the potential for hold-up in patent thickets. We show empirically that our measure of patent thickets is associated with a reduction of first time patenting in a given technology area controlling for the level of technological complexity and opportunity. Technological areas characterized by more technological complexity and opportunity, in contrast, see more entry. Our evidence indicates that patent thickets raise entry costs, which leads to less entry into technologies regardless of a firm’s size.