Cambridge, MA--"The rate and pace of innovation is a very important thing to factor into growth expectations for the economy." Those are the words of Josh Lerner, an economist at the Harvard Business School. He and Samuel Kortum, an economics professor at Boston University, are studying the recent patent explosion. They report that U.S. inventors in the decade from 1985 to 1995 pushed patent applications to highs of about 120,000 a year, up from 40,000 to 80,000 a year since 1900.
In a recent paper, the economists ruled out two common explanations for this surge: "friendly" laws that encourage more applications, and "loading" by big, high-tech firms. Rather, the team says better management of research by companies and others, such as venture capitalists, has produced the increase.
The researchers examined evidence from several sources: aggregate statistics on international patent applications, detailed statistics by technology class and assignee of patents granted in the U.S., and aggregate measures of research effort. As a result of these studies, the team concluded that a jump in research productivity--as suggested by a "fertile technology" hypothesis--signals accelerating technological change. This, in turn, indicates "a favorable outlook for U.S. productivity growth as more inventionsare adopted."
Examining international patent data allowed the team to differentiate between the U.S. as a destination for patents and as a source of patentable inventions. Preliminary findings indicate that the patenting surge is spread among old-line giants and small firms, but that the share of small newcomers is gaining ground.