Technological Innovation, Resource Allocation and Growth

78 Pages Posted: 22 Dec 2012 Last revised: 5 Feb 2017

Leonid Kogan

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Dimitris Papanikolaou

Northwestern University - Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER)

Amit Seru

Stanford University

Noah Stoffman

Indiana University - Kelley School of Business - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: May 10, 2016

Abstract

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.

Keywords: Innovation, patents, growth, reallocation

JEL Classification: G14, E32, O3, O4

Suggested Citation

Kogan, Leonid and Papanikolaou, Dimitris and Seru, Amit and Stoffman, Noah, Technological Innovation, Resource Allocation and Growth (May 10, 2016). Quarterly Journal of Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2193068 or http://dx.doi.org/10.2139/ssrn.2193068

Leonid Kogan (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-636
Cambridge, MA 02142
United States
617-253-2289 (Phone)
617-258-6855 (Fax)

HOME PAGE: http://web.mit.edu/lkogan2/www/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dimitris Papanikolaou

Northwestern University - Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Amit Seru

Stanford University ( email )

650 Knight Management
Stanford, CA 94305
United States

Noah Stoffman

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
(812) 856-5664 (Phone)

HOME PAGE: http://kelley.iu.edu/nstoffma/

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