Technological Innovation, Resource Allocation, and Growth

Leonid Kogan, Dimitris Papanikolaou, Amit Seru, Noah Stoffman

NBER Working Paper No. 17769
Issued in January 2012
NBER Program(s):   AP   CF   EFG   ME   PR

We propose a new measure of the economic importance of each innovation. Our measure uses newly collected data on patents issued to US firms in the 1926 to 2010 period, combined with the stock market response to news about patents. Our patent- level estimates of private economic value are positively related to the scientific value of these patents, as measured by the number of citations that the patent receives in the future. Our new measure is associated with substantial growth, reallocation and creative destruction, consistent with the predictions of Schumpeterian growth models. Aggregating our measure suggests that technological innovation accounts for significant medium-run fluctuations in aggregate economic growth and TFP. Our measure contains additional information relative to citation-weighted patent counts; the relation between our measure and firm growth is considerably stronger. Importantly, the degree of creative destruction that is associated with our measure is higher than previous estimates, confirming that it is a useful proxy for the private valuation of patents.

Supplementary materials for this paper:

• online appendix

This paper was revised on May 25, 2016

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w17769

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