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)

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

No. of patents

1998

No. of patents

p.h.w. 1979

No. of patents

p.h.w. 1998

Annual growth (1979-1998)

DE 9095 69.9 231.5 0.039 FR 3674 58.0 212.0 0.052 GB 3464 36.7 127.9 0.049 IT 1584 21.6 64.3 0.041 FI 595 23.1 281.1 0.115 IE 74 8.0 32.5 0.063 JP 30840 81.6 453.6 0.077 US 80288 173.8 619.6 0.054 TW 3100 3.2 111.4 0.196 KR 3259 0.1 97.0 0.305

7

Important Patents per Country (p.h.w.)

Table 2

Top-5% (1998): BE 13.3; NL 9.8; SE 16.5Hardly any important patents for PT, ES, GR en Eastern Europe

Total 1979

Total 1998

Top-5% 1979

Top-5% 1998

DE 69.9 231.5 2.1 5.0 FR 58.0 212.0 2.2 3.8 GB 36.7 127.9 1.6 3.6 IT 21.6 64.3 0.4 0.8 FI 23.1 281.1 0.2 14.8 IE 8.0 32.5 0.0 1.2 JP 81.6 453.6 3.8 17.2 US 173.8 619.6 10.3 42.1 TW 3.2 111.4 0.0 4.2 KR 0.1 97.0 0.0 1.8

8

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

Table 3 Foo Che Met Off Ele Com Mot

DE 0.15 13.07 3.11 12.81 4.97 26.12 2.27

FR 0.17 13.32 2.32 27.37 7.95 22.41 1.12

GB 0.19 9.69 1.68 11.67 4.23 14.59 1.01

IT 0.07 5.50 0.54 7.29 1.66 5.37 0.58

FI 0.36 9.03 3.29 9.88 7.88 11.09 2.71

IE 0.07 1.88 1.41 1.61 1.61 5.95 0.70

JP 0.21 20.24 2.52 28.36 8.18 27.10 16.27

US 1.07 32.98 13.19 49.92 17.87 53.22 5.08

TW 0.02 0.68 2.07 1.28 2.07 3.79 0.79

KR 0.02 0.72 0.39 4.14 1.19 4.00 0.16

9

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

Table 4 Foo Che Met Off Ele Com Mot

DE 0.026 0.052 0.031 0.084 0.041 0.073 0.055

FR 0.066 0.074 0.044 0.081 0.048 0.066 0.061

GB 0.056 0.066 0.043 0.121 0.028 0.080 0.045

IT 0.045 0.061 0.063 0.050 0.066 0.110 0.078

FI ** 0.131 0.071 0.162 0.090 0.190 0.098

IE ** 0.023 ** ** 0.074 ** **

JP 0.032 0.073 0.077 0.122 0.090 0.083 0.080

US 0.023 0.050 0.035 0.141 0.045 0.069 0.035

TW ** 0.245 0.153 0.099 0.225 0.244 0.147

KR ** ** 0.257 ** ** ** **

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Specialization in Important Innovations

• “Revealed Comparative Technological Advantage” (RCTA):

(for country k in industry i)

Expressed in logarithms

C

k

ki

ki

C

k

ki

ki

ki

kik

i

nnn

nnn

1

*

1

*

**

RCTA

11

Trends in Technological Specialization(Selected Industries)

Table 6Foo Che Met Off Ele Com Mot

DE 70-74 -0.11 -0.25 -0.37 -1.12 -0.40 -0.54 -0.06

95-99 -0.64 -0.39 -0.41 -1.76 -0.88 -1.21 -0.18

FR 70-74 -0.43 -0.31 -0.49 -1.28 -0.24 -0.67 -0.40

95-99 -0.26 -0.47 -0.23 -0.89 -0.65 -0.90 -1.15

GB 70-74 0.24 0.14 -0.33 -0.06 -0.23 -0.24 -0.17

95-99 -0.72 -0.24 -0.41 -0.47 -0.35 -0.47 -0.69

US 70-74 0.08 0.10 0.10 0.17 0.11 0.11 0.05

95-99 0.25 0.24 0.07 0.37 0.24 0.29 0.16

JP 70-74 -0.90 -0.13 -0.44 -0.62 -0.12 -0.30 0.18

95-99 -1.06 -0.51 0.09 -1.22 -0.17 -0.46 0.08

TW 70-74 ** ** ** ** ** ** **

95-99 # -0.93 0.42 -0.99 -0.36 0.27 -1.68

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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 7Foo Che Met Off Ele Com Mot

DE 1.31 3.73 1.62 32.58 2.27 16.16 1.26

FR 1.01 5.21 0.90 28.80 4.19 18.27 5.47

GB 2.55 5.64 4.19 35.44 4.61 20.11 4.92

IT 2.20 5.06 2.64 31.10 3.00 15.50 3.35

FI 4.32 3.93 3.77 38.48 5.48 16.19 5.47

IE 7.20 11.68 3.76 36.19 13.39 28.63 5.00

JP 0.15 4.50 2.69 34.53 9.74 25.75 5.83

US 2.93 7.39 2.39 38.77 8.52 33.98 3.36

TW -0.15 3.08 1.92 35.28 3.41 24.21 1.69

KR 4.09 7.04 4.23 40.89 4.68 32.56 8.32

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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

total top5%

a b obs/R2 a b obs/R2

Food -0.026 1.121 47 0.008 0.292 37

(0.88) (3.69) 0.23 (0.34) (1.81) 0.09

Chem 0.073 -0.008 63 0.069 0.102 51

(3.85) (0.04) 0.00 (4.75) (0.86) 0.01

MetP -0.011 0.523 62 -0.001 0.269 58

(0.58) (2.60) 0.10 (0.04) (2.55) 0.10

OffM 0.146 0.020 54 0.135 0.305 33

(5.49) (0.13) 0.00 (5.10) (1.26) 0.05

Elec 0.017 0.585 57 0.034 0.173 50

(0.85) (2.52) 0.10 (1.82) (1.28) 0.03

Comp 0.075 0.439 57 0.070 0.330 45

(3.02) (2.55) 0.11 (3.71) (3.05) 0.18

Moto -0.021 0.751 55 0.011 0.058 40

(0.71) (2.93) 0.14 (0.46) (0.30) 0.00

16

Link to Initial Patent Stocks

Table 9

total top5%

a b obs/R2 a b obs/R2

Food 0.048 -0.001 58 0.047 -0.008 58

(1.81) (0.34) 0.00 (1.82) (0.36) 0.00

Chem 0.074 0.000 83 0.073 0.000 83

(4.73) (0.42) 0.00 (4.75) (0.38) 0.00

MetP 0.042 0.000 81 0.041 -0.001 81

(2.71) (0.35) 0.00 (2.71) (0.29) 0.00

OffM 0.125 0.000 69 0.122 0.000 69

(4.74) (0.42) 0.00 (4.84) (0.23) 0.00

Elec 0.064 0.000 76 0.063 -0.001 76

(3.69) (0.59) 0.00 (3.69) (0.46) 0.00

Comp 0.116 0.000 75 0.110 -0.001 75

(5.89) (1.27) 0.02 (5.90) (0.89) 0.01

Moto 0.050 0.000 71 0.049 -0.001 71

(2.20) (0.23) 0.00 (2.20) (0.14) 0.00

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