Technological Innovation, Resource Allocation and Growth
Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)
Northwestern University - Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER)
University of Chicago - Booth School of Business
Indiana University - Kelley School of Business - Department of Finance
September 19, 2015
We propose a new measure of the economic importance of each innovation. Our measure uses newly collected data on patents issued to US firms in the 1926 to 2010 period, combined with the stock market response to news about patents. Our patentlevel estimates of private economic value are positively related to the scientific value of these patents, as measured by the number of citations that the patent receives in the future. Our new measure is associated with substantial growth, reallocation and creative destruction, consistent with the predictions of Schumpeterian growth models. Aggregating our measure suggests that technological innovation accounts for significant medium-run fluctuations in aggregate economic growth and TFP. Our measure contains additional information relative to citation-weighted patent counts; the relation between our measure and firm growth is considerably stronger. Importantly, the degree of creative destruction that is associated with our measure is higher than previous estimates, confirming that it is a useful proxy for the private valuation of patents.
Number of Pages in PDF File: 45
Keywords: Innovation, patents, growth, reallocation
JEL Classification: G14, E32, O3, O4
Date posted: December 22, 2012 ; Last revised: September 26, 2015
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