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EUKLEMS Consortium Meeting (June 9 – 11, 2005, Helsinki)

Do Important Home-Made Innovations Affect Productivity Growth? Some Industry-Level Explorations Carolina Castaldi and Bart Los (GGDC, University of Groningen). EUKLEMS Consortium Meeting (June 9 – 11, 2005, Helsinki)

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EUKLEMS Consortium Meeting (June 9 – 11, 2005, Helsinki)

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  1. Do Important Home-Made Innovations Affect Productivity Growth? Some Industry-Level ExplorationsCarolina Castaldi and Bart Los(GGDC, University of Groningen) EUKLEMS Consortium Meeting (June 9 – 11, 2005, Helsinki) This project is funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, "Policy Support and Anticipating Scientific and Technological Needs".

  2. Introduction • WP9: Development of technology indicators to assess effects of innovation on productivity performance (R&D expenditures, patents, etc.) • Body of literature on patents as output indicator (Schmookler, Scherer, Griliches, etc). Conclusion: patents useful but noisy indicator of innovation • Patents very heterogeneous in importance (Hall, Pakes, Schankerman, etc.) • Citations to patents indicator of importance (Trajtenberg, Jaffe, etc.)

  3. Objectives • Build database on U.S. patent flows and stocks by country and by industry; • Distinguish between “important” innovations and “less important” innovations by means of citation data; • Give insights into international industry-level differences in technological specialization patterns; • Analyze trends in technological specialization patterns; • Analyze whether production of (important) patents stimulates labor productivity growth; • Discuss future EUKLEMS work in this field.

  4. Importance Indicator • Point of departure: patents that receive more citations in subsequent patents are more important • Problem 1: Patenting behavior varies across industries • Problem 2: Citation behavior varies over time • Problem 3: Citations are not received immediately (mean lag > 4 years) • Important patents determined by constructing citation-based quantiles by industry and year of grant for all patents issued by USPTO; • Patents are “important” if they belong to “an upper quantile”.

  5. Data Sources • NBER Patent-Citations Datafile (updated by Bronwyn Hall) • Numbers of citations (1975-2003) to all utility patents granted by USPTO in 1963-2003 • Our subset: 1970-1999 (>2.4M patents, of which 1.0M to non-US inventors) • Country of first inventor • USPTO’s PATSIC-CONAME Database • Industry of manufacture (OTAF: 42 industries) • “Fractional counting” in case of multiple OTAF codes • GGDC 60-Industry Database • Value added (new PPPs, US hedonic deflators for computers and semiconductors) • Labor inputs (numbers of hours worked) • After matching: 20 industries, 26 countries, 1979-1998 (to be extended soon).

  6. Raw Patent Counts per Country Table 1 HU (1998): 10.6; CZ (1998): 2.4; PL (1998): 1.0

  7. Important Patents per Country (p.h.w.) Table 2 Top-5% (1998): BE 13.3; NL 9.8; SE 16.5 Hardly any important patents for PT, ES, GR en Eastern Europe

  8. Patents (p.h.w.), by Industry(average 1979-99) Table 3

  9. Patents Growth (annual, p.h.w.), by Industry (1979-98) Table 4

  10. Specialization in Important Innovations • “Revealed Comparative Technological Advantage” (RCTA): (for country k in industry i) Expressed in logarithms

  11. Trends in Technological Specialization(Selected Industries) Table 6

  12. Overall Situation with Respect to Innovation • Europe’s “big” economies have generally low patenting growth rates; • Europe’s “big” economies tend to despecialize in important innovations; • Fundamental question: how serious are these problems? • Theory 1: Knowledge is highly public and imitation is easy • Theory 2: Knowledge is highly tacit and cumulative • Links to labor productivity growth rates should be investigated

  13. Labor Productivity Growth Rates (%)(1979-2002) Table 7

  14. Regression Analysis (preliminary) • (Important) Patents stocks by industry • perpetual inventory method • common annual depreciation rate of 15% • initial stock for 1979 constructed using actual 1970-1978 patents, and estimates for 1963-1969 • ratio to hours worked • Two basic specifications • lp-growth(t) = a + b * patgrowth(t-1) • lp-growth(t) = a + b * initpatlevel(t) • time dummies, additional variables (not reported) • Periods: 1979-1983, 1984-1988, 1989-1993, 1994-1998

  15. Link to Patent Stock Growth Rates Table 8

  16. Link to Initial Patent Stocks Table 9

  17. Future Research • Panel data estimation • Patents assigned to industry-of-use instead of industry-of-manufacture (Johnson) • More advanced methods to identify important patents (Silverberg and Verspagen) • Figure 1: Pareto plot of EPO 1989 patent citation data

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