NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Measuring Technological Innovation over the Long Run

Bryan Kelly, Dimitris Papanikolaou, Amit Seru, Matt Taddy

NBER Working Paper No. 25266
Issued in November 2018, Revised in February 2020
NBER Program(s):Corporate Finance, Economic Fluctuations and Growth, Productivity, Innovation, and Entrepreneurship, Development of the American Economy

We use textual analysis of high-dimensional data from patent documents to create new indicators of technological innovation. We identify significant patents based on textual similarity of a given patent to previous and subsequent work: these patents are distinct from previous work but are related to subsequent innovations. Our measure of patent significance is predictive of future citations and correlates strongly with measures of market value. We identify breakthrough innovations as the most significant patents – those in the right tail of our measure – to construct indices of technological change at the aggregate, sectoral, and firm level. Our technology indices span two centuries (1840-2010) and cover innovation by private and public firms, as well as non-profit organizations and the US government. These indices capture the evolution of technological waves over a long time span and are strong predictors of productivity at the aggregate and sectoral level.

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Document Object Identifier (DOI): 10.3386/w25266

 
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