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on Innovation |
| By: | Ina Ganguli; Jeffrey Lin; Vitaly Meursault; Nicholas F. Reynolds |
| Abstract: | Over nearly two centuries, US inventions have become increasingly dissimilar: not just fewer head-to-head collisions between inventors, but growing distance between neighboring inventions. We document this secular decline in similarity using validated neural language models applied to the full text of claims in over 11 million US patents (1836–2023), corroborated by a 98% decline in patent interference rates, a measure of independent simultaneous invention. Measuring this correctly requires validation, since different representations of the same patent text can yield opposite conclusions about whether inventions are converging or spreading out. Our validation framework, the first systematic comparison for patent text, selects among these representations. We develop a spatial competition model in which inventors choose locations in idea space. The model explains spreading out and connects it to several independently documented patterns — rising R&D investment per inventor, increasing patent values, weakening knowledge spillovers, and declining research productivity. The mechanism is spatial; as inventors spread out to capture new territory, inventions become more valuable but also more costly for others to absorb. In doing so, the model turns spillover intensity, innovation step size, and research productivity from fixed primitives into outcomes of inventor positioning. A calibrated decomposition attributes roughly 40% of the long-run decline in US research productivity to these spatial forces, alongside traditional explanations such as fishing out and the burden of knowledge. Where inventors stand relative to each other in idea space matters as much for growth as how many of them there are. |
| JEL: | C55 O31 O41 O47 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35499 |
| By: | Daniel P. Gross; Bhaven N. Sampat; Hansen Zhang |
| Abstract: | Between 1945 and 1970, the U.S. Department of Defense was one of the country's largest funders of university research, and the most important in the physical sciences and engineering. Political pressures subsequently led to this funding declining nearly two-thirds by the mid-1970s and never fully recovering. We show that these cuts were felt across the U.S. research system, with ensuing declines in university scientists, PhD production, and research output. Early career scientists who were DoD-funded in 1970 were more likely than peers to leave universities, with many moving to industry. Though some became more likely to patent, in the aggregate, this appears to have reduced science-linked innovation in related technologies and compressed U.S. leadership in formerly DoD-driven fields. These effects extend to outcomes more closely related to military objectives: fewer PhDs entered the defense industrial base, and an initial increase in science-linked defense patenting in the most exposed technology areas gave way to a long-run decline. |
| JEL: | H56 I23 N42 N72 O31 O32 O33 O38 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35491 |
| By: | Gustavo De Souza; Andrew J. Fieldhouse; Karel Mertens; Ishan B. Nath; Valerie A. Ramey |
| Abstract: | This paper provides the first causal estimates of the global social returns to U.S. public R&D. We use a narrative identification strategy to quantify the effects of exogenous shocks to U.S. R&D appropriations on the dynamic TFP response of 69 foreign economies from 1980–2019. A U.S. R&D appropriations shock equal to 1 percent of the federal R&D capital stock raises foreign TFP by approximately 1 percent after 12 years. This response is driven primarily by nondefense rather than defense R&D and is concentrated in non-OECD economies. These patterns are most consistent with diffusion occurring through openly accessible scientific content, capital-embodied trade, and technological leapfrogging by economies further from the global frontier. A back-of-the-envelope calculation suggests that the global social returns to U.S. public nondefense R&D are roughly twice as large as the domestic returns, meaning the U.S. captures about half of these productivity benefits. |
| JEL: | E62 F62 O33 O38 O47 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35517 |
| By: | Matthew S. Clancy; Matthew Esche; Siddhartha Haria; Claire T. McMahon; Christopher M. Snyder; Caleb Watney |
| Abstract: | The U.S. federal government spends roughly $150 billion a year on research and development through mechanisms ranging from grants and contracts to prizes, advance market commitments, and tax credits. These funding mechanisms differ markedly in risk allocation, decision authority, and incentive power, yet policymakers have little systematic guidance for choosing among them. We develop a framework that asks the policymaker three initial questions about the contracting environment: Can they articulate the work to be done? Can they specify what would constitute a successful solution? Can they identify the most capable performers to contract with? The answers considerably narrow the set of viable mechanisms, enabling a more tractable choice of the efficient mechanism based on further considerations from the innovation-economics literature. |
| JEL: | L52 O32 O38 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35549 |
| By: | Maczulskij, Terhi |
| Abstract: | Abstract This study examines the effects of the 2004 European Union enlargement on firm productivity and innovation in Finland. Using linked employer–employee and firm-level data, the analysis exploits increased access to workers from the ten new EU member states (EU10). To address the endogenous geographic distribution of immigrants, I construct an instrumental variable based on historically predetermined migration patterns. The results show that increased EU10 employment raises firm labor productivity, the probability of having a granted patent, and STEM employment, while effects on other innovation outcomes are more limited. The responses also differ across sectors. In manufacturing, EU10 employment increases process innovation but reduces STEM employment, whereas in services it increases labor productivity and the probability of having granted patents. Overall, the findings suggest that immigration-induced labor-supply changes can improve firm performance and affect selected dimensions of innovation, with the effects varying across sectors and innovation margins. |
| Keywords: | EU enlargement, Firms, Immigration, Innovation, Instrumental variables, Productivity |
| JEL: | D22 F22 O30 |
| Date: | 2026–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:rif:wpaper:145 |
| By: | Michael Seewald (Universität Witten/Herdecke) |
| Abstract: | Economic innovation and transformation are future-oriented fields where financial risk-return and economic growth considerations permeate with visions of technological progress and cultural determinants of human behavior. This case study about the evolution of the entrepreneurial persona in the history of economic thought demonstrates how narrative research can contribute to understanding the growth dynamics of economic ecosystems. Rather than being indicators of flaws in otherwise rational economic processes, narrative twists and turns reflect the institutional and cultural preconditions of economic growth and innovation.Since the early days of industrialization, economic thought takes recourse to the institutional persona of the entrepreneur to explain dynamics of innovation and transformative growth. The descriptions of the entrepreneur in the works of Robert Cantillon, Joseph Schumpeter and Frank Knight show how the parameters of innovation, cristallized in the features of entrepreneurial activity, change along the trajectories of, and reflect, industrial and economic development. What these descriptions have in common are the fundamental features of innovative activity in otherwise steady economic ecosystems: the ability to embrace the uncertainty of a future venture through an informed view about future market demand; the stamina to impose change to incumbent structures and processes; and the acumen to mobilize ample financial funding to realize an innovative venture.The current debate around artificial intelligence and its potential to generate unprecedented future growth goes along with a messianic turn in the discourse about entrepreneurial activity. In the current debate about AI-led innovation, the entrepreneurial narrative, unchanged at its core, takes on a quasi-spiritual dimension. Entrepreneurs appear as saviour-like personae, able to break through a state of general stagnation and decline in order to enable not less than a new, technology-fuelled chapter for humanity. While the jury is out whether this scenario will unfold, the messianic turn of the entrepreneurial discourse shows that the instruments of mainstream economics do not seem to be suited to assess the growth dynamics of AI-led innovation. To assess this messianic turn of the entrepreneur and its bearings for future economic growth trajectories, a narrative turn in economic research appears warranted. |
| Date: | 2026–08–21 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05238679 |
| By: | Hong Lee (Korea Institute for Industrial Economics and Trade) |
| Abstract: | This study analyzes the paradoxical mechanism by which one country’s protectionist industrial policy unintentionally redirects the path of technological innovation in its trading partners, often to the supplying country’s own disadvantage. Historical episodes, including the OPEC oil shock, the Soviet Union’s threats to natural gas supplies to the West, China’s rare earth embargo against Japan, and US semiconductor export controls against China, share a common pattern.<p> First, the supplying country restricts exports of the resources and technologies it holds, or manipulates their prices, inflicting a supply shock on the importing country. The relative price of the resource then surges, dramatically raising the incentives of firms and researchers in the importing country to develop substitute and workaround technologies. Private R&D combines with the government’s directed industrial policy (R&D subsidies, public procurement, and regulatory reform) to bring substitute technologies quickly to market.<p> Over the long run, the importing country’s dependence on the resource declines, and the supplying country’s bargaining power and market position erode. This study argues that a supply restriction strategy raises short-term bargaining power but can carry a self-defeating quality, eating away the supplier’s own market base. For the importing country, by contrast, a supply shock can become the occasion for a technological leap, and here the government’s directed industrial policies, R&D subsidies among them, act as complements that accelerate private innovation. |
| Keywords: | rare earths; rare earth elements; REEs; directed technological change; DTC; protectionism; industrial policy; supply chain security; resource weaponization; economic security |
| JEL: | F13 F52 L52 O33 |
| Date: | 2026–07–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kietrp:023560 |
| By: | Alex Chan |
| Abstract: | Public AI benchmarks steer research and allocate investments. They are therefore market designs. Public examples can reveal the process behind a private final test, while a finite public score cannot cover a broad task space inherent to general intelligence. I show how both gaps become profitable when scores move capital and how targeted effort erodes the signal used by later investors. The market design lesson is to separate development from certification: publish practice tasks, but choose the investment-consequential generator after the submitted system's evaluation policy is fixed. |
| JEL: | D40 D47 D82 D83 D86 O3 O32 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35641 |
| By: | Kadriu, Valon |
| Abstract: | The scientific community rewards priority: the researcher who establishes a novel finding first, claims credit that later entrants cannot. This reward may increase the incentive to reach statistical significance. Using 43, 140 tests published in the AER, JPE, and QJE between 2001 and 2010, together with text-based and bibliographic measures of novelty, I examine whether more novel articles are more prone to selective reporting. Running caliper regressions around conventional significance thresholds, I find suggestive evidence that novel articles are more likely to report just-significant results at the 10 percent level, an association concentrated around the threshold and driven by textual novelty. |
| Keywords: | novelty, selective reporting, science of science |
| JEL: | A11 A14 C12 O31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:310 |