The Reorganization of Inventive Activity in the United States during the Early Twentieth Century
The standard view of U.S. technological history is that the locus of invention shifted during the early twentieth century to large firms whose in-house research laboratories were superior sites for advancing the complex technologies of the second industrial revolution. In recent years this view has been subject to increasing criticism. At the same time, new research on equity markets during the early twentieth century suggests that smaller, more entrepreneurial enterprises were finding it easier to gain financial backing for technological discovery. We use data on the assignment (sale or transfer) of patents to explore the extent to which, and how, inventive activity was reorganized during this period. We find that two alternative modes of technological discovery developed in parallel during the early twentieth century. The first, concentrated in the Middle Atlantic region, centered on large firms with in-house R&D labs and superior access to the region's rapidly growing equity markets. The other, located mainly in the East North Central region, consisted of smaller, more entrepreneurial enterprises that drew primarily on local sources of funds. Both modes seem to have made roughly equivalent contributions to technological change through the 1920s. The subsequent dominance of large firms seems to have been propelled by a differential access to capital during the Great Depression that was subsequently reinforced by the regulatory and military procurement policies of the federal government.
We would like to express our thanks to Oana Ciobanu, Shogo Hamasaki, Scott Kamino, and Ludmila Skulkina for their able research assistance, to Yun Xia for his help with programming, and above all to Shih-tse Lo for his comments and other assistance. We have also benefited from comments by Michael Darby, Rochelle Dreyfuss, Harry First, Paul Israel, Dan Kevles, Tom Nicholas, Ariel Pakes, Ross Thomson, Lynn Zucker, participants in seminars at the NYU Law School, UC Merced, and UCLA's Anderson School of Management, and members of the audience at the UCLA conference in honor of Kenneth Sokoloff in November 2008 and at the 2009 World Economic History Congress in Utrecht. We also gratefully acknowledge the financial support provided by the Social Sciences and Humanities Research Council of Canada (SSHRC), Le Centre interuniversitaire de recherche en économie quantitative (CIREQ) in Montréal, the Harold and Pauline Price Center for Entrepreneurial Studies at the UCLA Anderson School of Management, and the UCLA Center for Economic History. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
The Reorganization of Inventive Activity in the United States during the Early Twentieth Century, Naomi R. Lamoreaux, Kenneth L. Sokoloff, Dhanoos Sutthiphisal. in Understanding Long-Run Economic Growth: Geography, Institutions, and the Knowledge Economy, Costa and Lamoreaux. 2011