The Impact of Institutions on Innovation

77 Pages Posted: 31 Jul 2016 Last revised: 11 Aug 2017

Alexander Donges

University of Mannheim - Department of Economics

Jean-Marie A. Meier

London Business School, Department of Finance

Rui Silva

London Business School - Department of Finance

Date Written: August 10, 2017

Abstract

We study the impact of inclusive institutions on innovation using novel hand-collected county-level data for Imperial Germany. Exploiting the timing and geography of the French occupation of different German regions after the French Revolution as an instrument for institutional quality, we find that the number of patents per capita was more than twice as high in counties with the longest occupation compared to unoccupied counties. Conservative social norms and low financial development weaken the impact of institutions on innovation. The results suggest that innovation is a quantitatively reasonable channel for the previously documented effect of institutions on economic prosperity.

Keywords: Innovation, Patents, Institutions, Institutional Reform, Economic Growth

JEL Classification: O31, O43, N43, N13, K40, P16

Suggested Citation

Donges, Alexander and Meier, Jean-Marie A. and Silva, Rui, The Impact of Institutions on Innovation (August 10, 2017). Available at SSRN: https://ssrn.com/abstract=2815541

Alexander Donges

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

HOME PAGE: http://donges.vwl.uni-mannheim.de/

Jean-Marie A. Meier (Contact Author)

London Business School, Department of Finance ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom

HOME PAGE: http://www.jean-mariemeier.com/

Rui Silva

London Business School - Department of Finance ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

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