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Kevin Lewis

February 18, 2015

Knowledge, Human Capital and Economic Development: Evidence from the British Industrial Revolution, 1750-1930

Zorina Khan
NBER Working Paper, January 2015

Abstract:
Endogenous growth models raise fundamental questions about the nature of human creativity, and the sorts of resources, skills, and knowledge inputs that shift the frontier of technology and production possibilities. Many argue that the nature of early British industrialization supports the thesis that economic advances depend on specialized scientific training or the acquisition of costly human capital. This paper examines the contributions of different types of knowledge to British industrialization, by assessing the backgrounds, education and inventive activity of the major contributors to technological advances in Britain during the crucial period between 1750 and 1930. The results indicate that scientists, engineers or technicians were not well-represented among the British great inventors until very late in the nineteenth century. Instead, important discoveries and British industrial advances were achieved by individuals who exercised commonplace skills and entrepreneurial abilities to resolve perceived industrial problems. For developing countries today, the implications are that costly investments in specialized human capital resources might be less important than incentives for creativity, flexibility, and the ability to make incremental adjustments that can transform existing technologies into inventions that are appropriate for prevailing domestic conditions.

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Religion, Gambling Attitudes and Corporate Innovation

Binay Adhikari & Anup Agrawal
University of Alabama Working Paper, May 2014

Abstract:
We find that local gambling preferences have economically meaningful effects on corporate innovation. Using a county’s Catholics-to-Protestants ratio as a proxy for local gambling preferences, we show that firms headquartered in areas with greater tolerance for gambling tend to be more innovative, i.e. they spend more on R&D, and obtain more and better quality patents. These results are supported by several robustness checks, tests to mitigate identification concerns, and analyses of several secondary implications. Investment in innovation makes a stock more lottery-like, a feature desired by individuals with a taste for gambling. Gambling preferences of both local investors and managers appear to influence firms’ innovative endeavors and facilitate transforming their industry growth opportunities into firm value.

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Does Cheap Access Encourage Science? Evidence from the WWII Book Replication Program

Barbara Biasi & Petra Moser
Stanford Working Paper, December 2014

Abstract:
Policies that reduce the costs of accessing prior knowledge (which is covered by copyrights) are becoming increasingly prominent, even though systematic empirical evidence on their effects continues to be scarce. This paper examines the effects of the 1942 Book Republication Program (BRP), which allowed US publishers to replicate science books that German publishers had copyrighted in the United States, on the production of new knowledge in mathematics and chemistry. Citations data indicate a dramatic increase in citations to BRP books after 1942 compared with Swiss books in the same fields. This increase is larger for BRP books that experienced a larger decline in price under the program. We also find that effects on citations are larger for disciplines in which knowledge production is less dependent on physical capital: Citations to BRP books increased substantially more for mathematics (which depends almost exclusively on human capital) than chemistry (which is more dependent on physical capital).

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Streams of Thought: Knowledge Flows and Intellectual Cohesion in a Multidisciplinary Era

Craig Rawlings et al.
Social Forces, forthcoming

Abstract:
How has the recent shift toward multidisciplinary research affected intellectual cohesion in academia? We answer this question through an examination of collaborations and knowledge flows among researchers. We examine the relevant case of Stanford University during a period of intense investment in multidisciplinary research, using a novel measure of knowledge flows in the short-cycled movement of published references from one researcher to another. We describe intellectual cohesion and its trajectory among 1,007 faculty members between 1997 and 2006, and then examine the social-structural antecedents of dyadic knowledge flows that help explain macro-level patterns. Results show that university collaborations have grown denser and more integrated across faculty members and their institutional divisions. However, this integration is led by “star” researchers and is accompanied by a greater centralization of knowledge flows around these individuals. Results illustrate important shifts in the nature of academic research, and contribute to a dynamic view of intellectual cohesion.

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Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials

Eric Budish, Benjamin Roin & Heidi Williams
American Economic Review, forthcoming

Abstract:
We investigate whether private research investments are distorted away from long-term projects. Our theoretical model highlights two potential sources of this distortion: short-termism and the fixed patent term. Our empirical context is cancer research, where clinical trials — and hence, project durations — are shorter for late-stage cancer treatments relative to early-stage treatments or cancer prevention. Using newly constructed data, we document several sources of evidence that together show private research investments are distorted away from long-term projects. The value of life-years at stake appears large. We analyze three potential policy responses: surrogate (nonmortality) clinical-trial endpoints, targeted R&D subsidies, and patent design.

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Public R&D Investments and Private-sector Patenting: Evidence from NIH Funding Rules

Pierre Azoulay et al.
NBER Working Paper, January 2015

Abstract:
We quantify the impact of scientific grant funding at the National Institutes of Health (NIH) on the rate of patent production by pharmaceutical and biotechnology firms. Our paper makes two contributions. First, we use newly constructed bibliometric data to develop a method for flexibly linking specific grant expenditures to private-sector innovations. Second, we take advantage of idiosyncratic rigidities in the rules that govern peer review within NIH to generate exogenous variation in funding across research areas. Our results show that NIH funding spurs the development of private-sector patents: a $10 million boost in NIH funding leads to a net increase of 3.1 patents. A back-of-the-envelope calculation, focusing solely on patents for FDA-approved biopharmaceuticals, suggests that one dollar of NIH funding generates $2 in expected lifetime drug sales (or 70 cents in median lifetime drug sales).

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How Important is US Location for Research in Science?

Shulamit Kahn & Megan MacGarvie
Review of Economics and Statistics, forthcoming

Abstract:
This paper asks whether being located outside the US lowers research productivity in a dataset of foreign-born, US-educated scientists. Instrumenting location with visa status that requires return to home countries, we find a large negative relationship between non-US location and research output for countries with low income per capita, but none for countries with high income per capita. This suggests that a scientist exogenously located in a country at the top of the income distribution can expect to be as productive in research as he or she would be in the US.

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Why Do Inventors Sell to Patent Trolls? Experimental Evidence for the Asymmetry Hypothesis

Stephen Haber & Seth Werfel
Stanford Working Paper, January 2015

Abstract:
Why do individual patent holders assign their patents to "trolls" rather than license their technologies directly to manufacturers or assert them through litigation? We explore the hypothesis that an asymmetry in financial resources between individual patent holders and manufacturers prevents individuals from making a credible threat to litigate against infringement. First, individuals may not be able to cover the upfront costs associated with litigation. Second, unsuccessful litigation can result in legal fees so large as to bankrupt the individual. Therefore, a primary reason why individual patent holders sell to PAEs is that they offer insurance and liquidity. We test this hypothesis by experimentally manipulating these financial constraints on a representative sample of inventors and entrepreneurs affiliated with Stanford University and UC Berkeley. We find that in the absence of these constraints, subjects were significantly less likely to sell their patent to a PAE in a hypothetical scenario. Furthermore, treatment effects were significant only for subjects who were hypothesized to be most sensitive to these constraints.

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Age and the Trying Out of New Ideas

Mikko Packalen & Jay Bhattacharya
NBER Working Paper, January 2015

Abstract:
Older scientists are often seen as less open to new ideas than younger scientists. We put this assertion to an empirical test. Using a measure of new ideas derived from the text of nearly all biomedical scientific articles published since 1946, we compare the tendency of younger and older researchers to try out new ideas in their work. We find that papers published in biomedicine by younger researchers are more likely to build on new ideas. Collaboration with a more experienced researcher matters as well. Papers with a young first author and a more experienced last author are more likely to try out newer ideas than papers published by other team configurations. Given the crucial role that the trying out of new ideas plays in the advancement of science, our results buttress the importance of funding scientific work by young researchers.

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Public investment in U.S. agricultural R&D and the economic benefits

Matthew Andersen
Food Policy, February 2015, Pages 38–43

Abstract:
A better understanding of the relationship between public investments in agricultural R&D and the productivity enhancing benefits they produce is critical to informing the public funding of agricultural R&D and insuring future increases in agricultural productivity. This paper describes a method of estimating the relationship between research investments, productivity growth, and the resulting economic benefits generated. The data requirements include indexes of multi-factor productivity, investments in R&D, and the value of agricultural output. The real rate of return to public investments in agricultural R&D in the United States is estimated to be 10.5% per annum; however, a reduction in the growth of spending on public agricultural R&D in recent decades raises concerns about productivity growth in coming decades, which is required to insure an adequate supply of food to meet increasing demand.

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Intellectual Property Rights and Access to Innovation: Evidence from TRIPS

Margaret Kyle & Yi Qian
NBER Working Paper, December 2014

Abstract:
We examine the effect of pharmaceutical patent protection on the speed of drug launch, price, and quantity in 60 countries from 2000-2013. The World Trade Organization required its member countries to implement a minimum level of patent protection within a specified time period as part of the TRIPS Agreement. However, members retained the right to impose price controls and to issue compulsory licenses under certain conditions. These countervailing policies were intended to reduce the potential static losses that result from reduced competition during the patent term. We take advantage of the fact that at the product level, selection into TRIPS "treatment" is exogenously determined by compliance deadlines that vary across countries. We find that patents have important consequences for access to new drugs: in the absence of a patent, launch is unlikely. That is, even when no patent barrier exists, generic entry may not occur. Conditional on launch, patented drugs have higher prices but higher sales as well. The price premium associated with patents is smaller in poorer countries. Price discrimination across countries has increased for drugs patented post-TRIPS and prices are negatively related to the burden of disease, suggesting that countervailing policies to offset expected price increases may have had the intended effects.

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Innovation Efficiency, Global Diversification, and Firm Value

Wenlian Gao & Julia Chou
Journal of Corporate Finance, February 2015, Pages 278–298

Abstract:
This paper investigates whether multinational firms are less or more efficient in innovation activities than domestic firms. Using patents and citations scaled by R&D expenses and R&D capital as measures of innovation efficiency, we find that multinational firms have lower levels of innovation efficiency than purely domestic firms. This finding has been supported by additional evidence using peer pressure as an exogenous shock to firms’ strategy of going internationalization. We also find that information asymmetry and the low cost of capital could be the major channels through which global diversification impacts innovation efficiency adversely. Our results further suggest that innovation efficiency is more valuable to multinational firms that mainly diversify into developed markets or markets with better patent protection.

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Are Patent Fees Effective at Weeding out Low-quality Patents?

Gaétan de Rassenfosse & Adam Jaffe
NBER Working Paper, December 2014

Abstract:
The paper investigates whether patent fees are an effective mechanism to deter the filing of low-quality patent applications. The study analyzes the effect of the Patent Law Amendment Act of 1982, which resulted in a substantial increase in patenting fees at the U.S. Patent and Trademark Office, on patent quality. Results from a series of difference-in-differences regressions suggest that the increase in fees led to a weeding out of low-quality patents. About 16–17 per cent of patents in the lowest quality decile were filtered out. The figure reaches 24–30 per cent for patents in the lowest quality quintile. However, the fee elasticity of quality decreased with the size of the patent portfolio held by applicants. The study is relevant to concerns about declines in patent quality and the financial vulnerability of patent offices.

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Localized Knowledge Spillovers: Evidence from the Agglomeration of American R&D Labs and Patent Data

Kristy Buzard et al.
Federal Reserve Working Paper, January 2015

Abstract:
We employ a unique data set to examine the spatial clustering of private R&D labs, and, using patent citations data, we provide evidence of localized knowledge spillovers within these clusters. Jaffe, Trajtenberg, and Henderson (1993, hereafter JTH) provide an aggregate measure of the importance of knowledge spillovers at either the state or metropolitan area level. However, much information is lost regarding differences in the localization of knowledge spillovers in specific geographic areas. In this article, we show that such differences can be quite substantial. Instead of using fixed spatial boundaries, we develop a new procedure — the multiscale core-cluster approach — for identifying the location and size of specific R&D clusters. This approach allows us to better capture the geographic extent of knowledge spillovers. We examine the evidence for knowledge spillovers within R&D clusters in two regions: the Northeast Corridor and California. In the former, we find that citations are from three to six times more likely to come from the same cluster as earlier patents than in comparable control samples. Our results are even stronger for labs located in California: Citations are roughly 10 to 12 times more likely to come from the same cluster. Our tests reveal evidence of the attenuation of localization effects as distance increases: The localization of knowledge spillovers is strongest at small spatial scales (5 miles or less) and diminishes rapidly with distance. At the smallest spatial scales, our localization statistics are generally much larger than JTH report for the metropolitan areas included in their tests.


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