Scale Effects in Invention? Evidence from Urban Areas in the U.S.

Abstract

Creative and inventive individuals are the principal inputs for the generation of ideas which ought to imply the presence of a strong “scale effects” in the production of new ideas. Identifying the relationship between population size and idea generation is difficult at the level of national economies due to the many confounding factors. This paper is motivated by the question of whether there are scale effects in the production of new ideas in urban economies. Patenting activity is a privileged data source as both the production of ideas and who the producers are can be tracked with very high precision. The very high levels of economic, social, institutional, political and cultural integration among the urban areas of the United States provide the conditions to investigate whether there is positive a feedback loop between population and ideas. The evidence presented indicates that both the level and growth rate of urban patents are positively affected by the size of the inventive labor force but the effect is less than proportional (in the case of initial number of inventors) or proportional (when measuring the effect of growth of inventors). The story of urban patenting one of scale effects but without increasing returns. What we know about how patenting gets done, and who does it, provide the micro foundations for the results presented here.

Keywords: invention, patenting, scale effects, urban areas

JEL Classification: O31, R12, J10