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Evolving Patterns of Innovation Across States and Industries

Summary:
Patents are an imperfect measure of innovation, but they can nonetheless convey the underlying story. Jesse LaBelle and Ana Maria Santacreu offer some interesting descriptions of how patent patterns changed between the 1980s and the 2000s in "Geographic Patterns of Innovation Across U.S. States: 1980-2010 (Economic Synopses, Federal Reserve Bank of St. Louis, 2021, #5). To interpret these figures, it's important to know that new patents granted each year have been rising substantially over time, from about 40,000 in 1980 to 110,000 in 2010. Here's a figure showing the distribution of patents by US state: the top panel shows the 1980s, and the bottom panel shows the 2000s (that is, 2000-2010). Given that overall patent levels have risen, the figure shows many more states with higher patent

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Patents are an imperfect measure of innovation, but they can nonetheless convey the underlying story. 
Jesse LaBelle and Ana Maria Santacreu offer some interesting descriptions of how patent patterns changed between the 1980s and the 2000s in "Geographic Patterns of Innovation Across U.S. States: 1980-2010 (Economic Synopses, Federal Reserve Bank of St. Louis, 2021, #5). 

To interpret these figures, it's important to know that new patents granted each year have been rising substantially over time, from about 40,000 in 1980 to 110,000 in 2010. Here's a figure showing the distribution of patents by US state: the top panel shows the 1980s, and the bottom panel shows the 2000s (that is, 2000-2010). Given that overall patent levels have risen, the figure shows many more states with higher patent levels (shown by the darker color). 
Evolving Patterns of Innovation Across States and Industries
The two figures also show a geographic shift in the patterns of innovation. The authors write: 
In the 2000s, patent creation was concentrated mostly in three regions:
  • Northeast: New York, New Jersey, Delaware, and the New England states
  • West Coast: Oregon, Washington, Idaho, and California
  • Rust Belt: Minnesota, Illinois, Michigan, Ohio, and Pennsylvania.
Together, these states accounted for about 67 percent of total patents granted in the 2000s. While the East and West Coast states specialized in the computers and electronics sector, the Rust Belt states specialized in the machinery sector. These two sectors were the most innovative, based on the numbers of patents granted. The least innovative states were Mississippi, Arkansas, and Alaska. The rate of patent creation in the most innovative state was 22 times larger than in the least innovative state.
Here's a figure looking at patents by industry. Again, be cautious in comparing the top and bottom panels because the total number of patents has risen (as shown in the horizontal axis). But it is striking that in the 1980s, the distribution of patents across industries covered a reasonably wide spectrum. By the 2000s, patent activity had become much more concentrated in the "Computer and electronic products" sector.  
Evolving Patterns of Innovation Across States and Industries
It's interesting to speculate about why patents have become more concentrated in one sector. Surely part of the reason is just the enormous technological gains made in computers and electronic products. But it's also possible that powerful companies in these industries are generating and buying patents as part of a "patent thicket" strategy to limit competitors, and it's possible that venture capitalists are more willing to support computer and electronics companies because of the possibility of lower costs and faster payoffs in this industry. For the large and diverse US economy, it seems important to have a very wide portfolio of efforts aimed at new technologies and innovation. 
Timothy Taylor
Managing editor of the Journal of Economic Perspectives, based at Macalester College in St. Paul, Minnesota, which can be read free on-line courtesy of the American Economic Association.

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