Germany’s Early Industrialization:

Regional Innovativeness and Technology Transfer,

1843-1877*

Alexander Donges† and Felix Selgert‡

26 February 2016

Abstract

In this paper we introduce a new dataset of over 1,500 patents granted in the Grand-Duchy of Baden between 1843 and 1877. Since almost 80 percent were owned by non-domestic patentees, the dataset sheds light on technology transfer within Germany and Europe. We show that technology transfer became increasingly important since the late 1850s. Thereby, innovative activity was concentrated within some major research economies and German regions. Compared to the period 1877-1914 this pattern remained fairly stable – except for the rise of the United States. Regional innovativeness cannot be explained with the emergence of strong technological clusters related to the leading industries of Germany’s early industrialization. Indeed, we only observe a strong specialization in these technologies in the Rhineland and the Prussian province of Saxony. Furthermore, our data suggests that the incentives to apply for patent protection were negatively influenced by distance due to boarder effects and high transaction costs. At last, we investigate the effects of technology transfer on the local research economy of Baden. Here, we find evidence for spillover-effects in agriculture-related technologies. However, in the case of textile and railway related industries, domestic inventors were crowded out by foreign competitors.

Keywords: Industrialization, Innovation, Patents, Technology transfer.JEL classification: N43, N74, N93, O14, O19, O33, O34, O38

* We thank Jochen Streb for his valuable comments and for sharing his patent data for the period 1877-1913. We also appreciate the comments of the discussants at the Sound Economic History Workshop in Lund.

† †Alexander Donges is postdoctoral researcher at the University of Mannheim, Department of Economics; email: donges@uni-mannheim.de.

‡ ‡Felix Selgert is postdoctoral researcher at the University of Vienna; email: felix.selgert@univie.ac.at.

1. Introduction

It is generally agreed that the ability to produce a continuous stream of technological

innovations fostered the transition to sustained economic growth since the late 18 th century.*

In particular this is also true for Germany.† Albeit this consensus, almost no empirical

research was carried out on Germany’s national innovation system in the decades prior and

during the country’s first phase of industrialization between 1840 and 1880; though there is a

growing number of studies covering the period of the Second Industrial Revolution during the

last two decades of the 19th century. This can easily be explained by the availability of data.

Innovation is often measured by patenting activity,‡ but a harmonized German patent system

was not established until 1877. Research had been restricted by the lack of aggregated patent

records for earlier periods. However, patenting was already common before 1877, but the

laws and the actual practice of patent granting differed significantly between German states.§

Patent protection in one state did not imply patent protection in another state, and while some

states pursued a very patent-friendly policy, others restricted patent protection.**

In this paper, we analyze technology transfer during Germany’s First Industrial Revolution in

the mid-19th century, measured by foreign patenting activity. We introduce a novel and unique

patent dataset for the period between 1843 and 1877 using patent records from the Grand-

Duchy of Baden, one of the medium-sized German states. In Baden, a high share of patents

was granted to non-domestic inventors from other German states like Prussia or from foreign

countries like France. Therefore, our dataset allows us to draw general conclusions about

industrialization, patenting activity and the importance of technology transfer.

First, we show that technology transfer became increasingly important since the late 1850s.

Second, we identify regional centers of innovation from which technology diffused into

* J. Mokyr, The lever of riches: Technological creativity and economic progress, Oxford paperbacks (New York: Oxford Univ. Press, 1992), p. 4

† J. Streb, J. Baten and S. Yin, ‘Technological knowledge spillover in the German empire 1877-1918’, Economic History Review LIX (2006), 347–73

‡ Early works are from: K. L. Sokoloff, ‘Inventive Activity in Early Industrial America: Evidence From Patent Records, 1790–1846’, Journal of Economic History 48 (1988), 813 and B. Z. Khan and K. L. Sokoloff, ‘“Schemes of Practical Utility”: Entrepreneurship and Innovation Among “Great Inventors” in the United States, 1790–1865’, Journal of Economic History 53 (1993), 289. For a critical assessment of the use of patent statistics see: Z. Griliches, ‘Patent Statistics as Economic Indicators: A Survey’, Journal of Economic Literature 28 (1990), 1661–707 and J. Streb, ‘The Cliometric Study of Innovations’, in C. Diebolt and M. Haupert (eds.), Handbook of cliometrics (Berlin: Springer Reference, 2016), pp. 448–68.

§ Throughout this paper we refer to the member states of the German Empire as ’German states’. Thus Austria is defined as a non-German state, although it was a member of the German Bund until 1866.

** A. Müller, Die Entwicklung des Erfindungsschutzes und seiner Gesetzgebung in Deutschland, Dissertation Universität München (München, 1898), p. 9

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Baden. We show that foreign patenting activity is negative influenced by distance due to high

transaction costs. Taking this effect into account, our results provide evidence for a strong

path-dependency, indicating that the most innovative regions remained quite stable over time.

Third, we ask which regions specialized in which technologies and whether we observe

technological clustering and local knowledge spillovers. Fourth, we are interested in the

effects of technology transfer on the local research economy of Baden. Over time, the number

of non-domestic patents grew much faster than the number of domestic patents. Inventors in

Baden may have profited from the disclosure of foreign technologies by adapting them and

with time developed own patentable inventions. We find evidence for spillover-effects in

traditional industries related to agriculture and the processing of agricultural goods, but not in

textile and railway related technologies, sectors that are typically associated with the

industrial revolution.

The paper essentially contributes to the empirical research about innovation in Germany. For

the period before 1877, no disaggregated patent data exists so that there is a general lack of

empirical research.* Our paper is a first step to fill this gap providing detailed information

about patenting activity in Germany before 1877, which allows us to analyze both the regional

distribution and the technological trends. In doing so, the paper complements research

focusing on the Second Industrial Revolution. Jochen Streb, Jörg Baten and Shuxi Yin

introduced a rich data-set of long lived high value patents after 1877, a sample that is based

on the published patent records of the Imperial Patent Office. The authors determine the

timing of technological cycles and the spatial distribution of innovative activity for the period

between 1877 and 1918.† Furthermore, Streb et al. identify industrial specialization in one of

the leading industries of the Second Industrial Revolution and the existence of clusters of

technologically related industries within a region as a crucial determinant of innovative

activity. In subsequent studies the latter argument is solidified by industry specific case

studies.‡ Another strand of literature focuses on national and international technology

diffusion. Carsten Burhop and Nikolaus Wolf show that Germany like the United States

* The literature only reports information about the total number of patents granted per year on the state-level so that the explanatory power of this data is very limited. A yearly time series is imprinted for the five leading German states in: P. Kurz, Weltgeschichte des Erfindungsschutzes: Erfinder und Patente im Spiegel der Zeiten : zum 100jährigen Jubiläum des Gesetzes betreffend die Patentanwälte vom 21. Mai 1900 (Köln, München [u.a.]: Heymanns, 2000), p. 346.

† Streb, Baten and Yin, ‘Technological knowledge spillover’.‡ J. Baten, A. Spadavecchia, J. Streb and S. Yin, ‘What made southwest German firms innovative around

1900? Assessing the importance of intra- and inter-industry externalities’, Oxford Economic Papers 59 (2007), i105-i126; J. Streb, J. Wallusch and S. Yin, ‘Knowledge spill-over from new to old industries: The case of German synthetic dyes and textiles (1878–1913)’, Explorations in Economic History 44 (2007), 203–23; R. Richter and J. Streb, ‘Catching-Up and Falling Behind: Knowledge Spillover from American to German Machine Toolmakers’, Journal of Economic History 71 (2011), 1006–31.

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developed a national technology market during the last two decades of the 19 th century;

though they observe considerable international and national border effects.* Harald Degner

and Jochen Streb focus on foreign patent activity in Germany between 1877 and 1932.† They

conclude that the distribution of foreign patents in Germany was time-invariant and highly

concentrated on a small number of research economics, first of all the United States,

Switzerland and the United Kingdom.

The remainder of the paper is organized as follows. The next section gives an overview of the

German patent system in the 19th century. In particular, this section argues why patents from

Baden are a useful measure and why non-domestic patents should represent high value patents

under the existing patent laws in this time.‡ The following section describes the data set in

more detail. In section four, we analyze how patenting activity evolved over time, while

section five identifies regional centers of innovation and compares these results with the

second half of the 19th century. Section six then analyzes regional technological specialization

while section seven investigates the effects of technology diffusion for the local research

economy of Baden.

2. The German patent law in the 19th century

A unique German patent law did not emerge until 1877, when the Imperial government

harmonized the multitude of different patent systems of the German states and introduced a

central administration, the Imperial Patent Office in Berlin. Before 1877, every German state

pursued its individual patent policy so that the specific rules and the actual practice of

patenting differed distinctly. Inventors had to apply for patent protection in each state

separately, making patenting very expensive. Furthermore, because some patent laws were * C. Burhop, ‘The Transfer of Patents in Imperial Germany’, Journal of Economic History 70 (2010), 921–39;

C. Burhop and N. Wolf, ‘The German Market for Patents during the “Second Industrialization,” 1884–1913: A Gravity Approach’, Business History Review 87 (2013), 69–93. For the United States cf.: Khan and Sokoloff, ‘“Schemes of Practical’; N. R. Lamoreaux and K. Sokoloff, ‘Inventors, Firms, and the Market for Technology in the Late Nineteenth and Early Twentieth Centuries’, in N. R. Lamoreaux, D. M. G. Raff and P. Temin (eds.), Learning by doing in markets, firms, and countries, National Bureau of Economic Research conference report (Chicago, Ill.: University of Chicago Press, 1999), pp. 19–60; N. R. Lamoreaux and K. L. Sokoloff, ‘Market Trade in Patents and the Rise of a Class of Specialized Inventors in the 19th-Century United States’, The American Economic Review 91 (2001), 39–44.

† H. Degner and J. Streb, ‘Foreign patenting in Germany: 1877-1932’, in P.-Y. Donzé and S. Nishimura (eds.), Organizing Global Technology Flows: Institutions, Actors, and Processes (Routledge, 2013), pp. 17–38

‡ This is important, because a patent may also been granted to an invention that is not useful in economic terms. Considering only those patents which were not received without significant costs takes this criticism into account. See: Streb, The Cliometric Study. However, one should also have in mind that patent statistics are only “second best measures” for a region’s innovative activity ( Ibid., p. 450). There are two reasons for this limitation. First, not all innovations are patentable. Second, not all industries have the same propensity to patent their inventions. For a quantification of these two points see: P. Moser, ‘Innovation without Patents: Evidence from World’s Fairs’, The Journal of Law and Economics 55 (2012), 43–74.

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more restrictive than others, a successful grant application in one state did not necessarily

imply that the invention received patent protection in a second German state.*

Although the harmonization of the German patent law was not successful before 1877, there

had been earlier attempts of legal unification. Since the late 1830s, the patent-friendly

Southern states, Baden, Bavaria and Wuerttemberg, as well as Saxony promoted the

harmonization of the patent law within the German Custom Union, the Zollverein.† Yet,

stalemate between the supporters of legal unification and its adherents blocked an agreement.

Although Prussia promoted the liberalization of trade, it effectively blocked all attempts to

create a unique patent law within the Zollverein. The Prussian position was strongly

influenced by the free trade movement which did not only promote the free flow of goods but

also of ideas and knowledge.‡ The result of the negotiations was thus a meagre compromise.

According to the Zollverein agreement of 21 September 1842, only the original inventor could

legally apply for patent protection in any member state if the same invention was already

granted protection in another member state.§ For this reason, the member states agreed to the

mutual exchange of information about patents, but there were no serious attempts to establish

a unique patent register. As a result, an all-embracing patent statistic does not exist for the

period before 1877. However, the agreement of 1842 did not imply the right to automatic

patent protection in all member states of the Custom Union. On the contrary, the Zollverein

even restricted regional patent protection in 1842 by stipulating that conferment of a patent in

an individual state of the Zollverein did not establish the right to ban the import and the usage

of imported goods that were identical with goods protected by the awarded patent.** Only

machine tools for the use in production facilities were exempt from this stipulation.†† From

the inventors’ perspective, this was an inadequate solution since they had to get a patent grant

in as many member states as possible in order to protect their inventions effectively.

Otherwise, there was a high risk of imitation. This can be illustrated by the following

example: Assume that an inventor from Cologne received a patent for a new type of breaking

* For an general overview: Kurz, Weltgeschichte des Erfindungsschutzes, pp. 324-586.† The Zollverein was founded in 1834. When the Kingdom of Hannover and the Grand Duchy of Oldenburg

joined the union in 1854, the union spanned nearly the complete territory of the subsequent German Empire; for the discussion about the harmonization of patent law in the Zollverein: A. Heggen, Erfindungsschutz und Industrialisierung in Preußen: 1793 - 1877, Studien zu Naturwissenschaft, Technik und Wirtschaft im neunzehnten Jahrhundert Forschungsunternehmen "Neunzehntes Jahrhundert" der Fritz Thyssen Stiftung (Göttingen: Vandenhoeck & Ruprecht, 1975), vol. 5, pp. 42–7; Kurz, Weltgeschichte des Erfindungsschutzes, pp. 347–50.

‡ Heggen, Erfindungsschutz und Industrialisierung, vol. 5, pp. 72-82.§ Müller, Entwicklung, p. 38; Kurz, Weltgeschichte des Erfindungsschutzes, pp. 349–50.** W. Fischer, Der Staat und die Anfänge der Industrialisierung in Baden 1800-1850: Erster Band. Die

staatliche Gewerbepolitik (Berlin: Duncker & Humblot, 1962), p. 90; Kurz, Weltgeschichte des Erfindungsschutzes, pp. 349–50.

†† Ibid., pp. 349–505

system for railway cars in Prussia, but he did not apply for patent protection in Baden. In this

case, a competitor from Baden could not only copy, produce and sell similar engines within

Baden, he could also export these engines to Prussia without getting in conflict with the law.

Thus, the inventor from Cologne has to apply for patent protection both in Prussia and other

German states to prevent competitors from copying and exporting his product.*

Hence, there was a strong incentive for an inventor to apply for patent protection in every

state of the Zollverein – or not at all. This argument also applies to non-German inventors.

The decision to apply for patent protection in foreign states was mainly influenced by two

factors. On the one hand, the existence of a potential market for the product or the technology

related to the patent, and, on the other hand, a high risk of imitation through competitors.† The

latter statement is a vital part of our argument, because, as Petra Moser has shown, patent

protection is only necessary when the affected technologies can easily be copied and secrecy

is no option.‡ As soon as an inventor decided to reveal his technology in a member state of the

Zollverein, he confronted the risk of imitation in adjunct member states. We argue that this

strategy was only applied to high value patents, those patents that promised high profits in the

future, since multi-patenting was very expensive. The inventor had to pay application fees in

every member state of the Zollverein, and, furthermore, he typically had to spend additional

money for lawyers and agents on the ground. In the case of non-German inventors the

transaction costs were even higher due to fees for the translation of patent description as well

as greater monitoring effort. Thus, potential patent-value may have been on average even

greater than for patents granted to German inventors.

Different cost structures make it difficult to produce an exact estimation of application fees.

Yet, in Baden a successful patentee had to pay between 35 to over 100 guilders (fl.). § In

Bavaria fees were dependent on the lifetime of a patent; protecting a technology for five years

produced costs of ca. 60 fl., extending the lifespan of the patent to another five years boosted

total costs to 150 fl.** For Prussia, the fees amounted at least to 100 Thaler (= 175 fl.).†† Given

* For non-Zollverein members relatively high tariff barriers made this kind of imitation process more costly.† Cf.: Streb, The Cliometric Study, p. 451.‡ P. Moser, ‘How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World's Fairs’,

The American Economic Review 95 (2005), 1214–36; Moser, ‘Innovation without Patents’.§ Submission fees consisted of several components. There was first an application fee (Sportel) of ca. 5

guilders; furthermore an applicant had to use special sheets which cost around 1 guilders each. Finally there was a fee on awarding the patent between 50 and 100 guilders; Großherzogtum Baden, Tax-, Sportel- und Stempelordnung für das Großherzogtum Baden: mit Einschluß der Hoheitslande (Karlsruhe, 1807).

** Müller, Entwicklung, p. 26.†† Ibid., p. 13. The Zollverein set the relation of Thaler to Guilder to 1.75 fl. = 1 Thaler, cf. W. Trapp, Kleines

Handbuch der Münzkunde und des Geldwesens in Deutschland, Universal-Bibliothek (Stuttgart: Reclam, 1999), vol. 18026, p. 99.

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that the annual income of craftsmen and workers during the middle of the 19th century are

estimated to be around 182 fl., patent fees were relatively high.*

The high transaction costs that were intertwined with multi-patenting make it plausible that

inventors only registered technologies with high economic value in foreign states.† We

therefore concentrate on foreign patents to extent our knowledge about Germany’s national

system of innovation to the period of the country’s pre-industrialization and “take-off” phase.‡

The fact that we choose patents granted in Baden is not only motivated by the availability of

data but also by its patent system, which was less restrictive than the Prussian one.§ Therefore

the patent law in Baden rather resembles the nationwide law that was established in 1877 than

its Prussian counterpart. This allows, to some degree, for comparisons with the dataset on

high-value patents collected by Streb et al. for the period after 1877.** The differences

between the major German patent regimes are also illustrated by TABLE 1.

[Insert TABLE 1 here]

TABLE 1 reports the average number of all patents granted per year in the five largest German

states between 1841 and 1877.†† The figures include both domestic and foreign patents. In

addition to the absolute numbers, we provide the average number per million inhabitants in

order to account for differences in population size. Saxony and Wuerttemberg granted not

only the highest absolute number on average but also in relation to the population. By far the

lowest number of patents per capita was granted in Prussia. In Baden, we observe a relatively

* R. Gömmel, Realeinkommen in Deutschland: Ein internationaler Vergleich, (1810-1914), Vorträge zur Wirtschaftsgeschichte (Nürnberg: Selbstverlag, 1979), vol. 4. Gömmel reports incomes in Mark. We convert his estimates into guilders using the official exchange rate of 1 fl. = 1.71 Mark reported by Trapp, Münzkunde, vol. 18026, pp. 110–5.

† Streb, The Cliometric Study, p. 451. ‡ W. W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto (Cambridge: Cambridge

University Press, 1960). The exact timing of the shift to industry as the major source of growth is controversial. Some scholars put it to the early 1840s others to the 1860s. Cf. H.-W. Hahn, Die Industrielle Revolution in Deutschland, Enzyklopädie deutscher Geschichte, 3., um einen Nachtr. erw. Aufl. (München: Oldenbourg, 2011), vol. 49, pp. 90–2.

§ Baden was only a medium-sized state with roughly 1.4 million inhabitants in 1850, while 16.5 million people lived in Prussia, the largest German state.Population figures from G. Franzmann, Histat-Datenkompilation: Stand und Bewegung der Bevölkerung des Deutschen Reichs, der Deutschen Staaten und der Regionen, 1841 bis 1886: ZA8565 (Data file version 1.0.0). http://www.gesis.org/histat/de/data.

** Streb, Baten and Yin, ‘Technological knowledge spillover’. The authors define high-value patents as all patents with a lifespan of more than ten years. According to the federal patent law a patent had to be renewed annually while renewal fees increased with each extension. Thus only economically valuable technologies were protected for a longer time span.

†† Aside from Prussia, Saxony and the Southern states, formal patent rules had also been established in the smaller German territories, but it is also worth to point out that there was still a group of backward-oriented states where it was not possible to get patent protection at all until 1877. The latter include the free cities of Hamburg, Bremen and Lübeck as well as in the Grand Duchy of Mecklenburg-Schwerin and the Duchy of Mecklenburg-Strelitz ); Müller, Entwicklung, p. 34.

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low number in absolute terms, but due to the smaller population the number of patents granted

per capita was more than seven times higher than in Prussia and distinctly higher than in

Bavaria. There is no clear evidence that the degree of industrialization was causal for this

disparity. Regional studies show that important proto-industrial centers emerged both in

Saxony and Wuerttemberg, but this argument holds also for the Rhineland, Westphalia and

Silesia, regions that were all part of Prussia.* By contrast, Bavaria was for the main part an

agricultural state, but the number of patents granted per capita was distinctly higher than in

Prussia. Thus, there is strong evidence that these figures reflect rather failed legal unification

and significant differences between the regional patent laws than the degree of economic

development.

The low number of patent grants in Prussia can be explained by its restrictive policy.† In

Prussia, where patent policy had been shaped by the free trade movement and economic

liberalism. Formal patent rules existed since 1815, including an evaluation of all applications

by a technical commission, but the Prussian administration set very restrictive rules so that

only a relatively small number of patents had been eligible for patent protection and patent

grants were very expensive.‡ In this context contemporary sources estimate that the technical

commission refused roughly 80 percent of all patent applications.§ Furthermore, additional

restrictions were set in Prussia: Inventions related to agriculture or health care could get no

patent protection at all, and foreign inventors had been discriminated for a long period of

time.**

By contrast, the government of Baden pursued a policy in favor of patent protection. Early

forms of patenting had been established in 1808. In this year, the state of Baden assigned the

first privilege (Privilegium), which initially included a lifetime protection not only for the

inventor but also for his wife and his successors.†† However, the maximal duration of

subsequent privileges was later limited. In contrast to other German states, Baden also

pursued a more liberal allocation procedure by frequently awarding patents to foreigners. A

* H. Kiesewetter, Industrielle Revolution in Deutschland: Regionen als Wachstumsmotoren, Geschichte, [Neuausg.] (Stuttgart: Steiner, 2004); S. C. Ogilvie, ‘Proto-industrialization in Germany’, in S. C. Ogilvie (ed.), European proto-industrialization (Cambridge: Cambridge Univ. Press, 1996), pp. 118–36, at pp. 132-35.

† For an overview of patent policy in Prussia: Heggen, Erfindungsschutz und Industrialisierung, vol. 5.‡ In Prussia, the patent system based on the “Publicandum about the granting of patents”, a statutory ordinance

proclaimed by the Prussian government in 1815. Inventors had no formal legitimate claim to get a patent granted, but we can argue that, in practice, a factual claim existed if the patent application satisfied all formal and substantive requirements; Müller, Entwicklung, pp. 12-13.

§ Ibid., pp. 18-19.** They could only get patent protection by applying for the Prussian citizenship or registering the patent for an

agent with the Prussian citizenship; Ibid., p. 14.†† Ibid., p. 8.

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formal system of patent protection was established in 1845, when the Ministry of the Interior

of Baden decreed a detailed set of rules that described the requirements and the process of

patent granting. All patent applications were subject to a reviewing process by a commission

of technical experts, ensuring that only new, useful and significant products or production

technologies got a patent grant.* This contrasts with the practice in Bavaria and Wuerttemberg

where the administration was satisfied with the control of formal requirements.† Based on the

1845 decree, Baden assigned patents until 1877. Patents were typically granted for three or

five years, but both a longer lifespan and the extension of an expiring patent were possible.

We argue that the patent system in Baden was on the one hand more restrictive than in

Bavaria or Wuerttemberg, where no review of a technical commission was necessary, on the

other hand it was less restrictive than in Prussia, where only a relatively small number of

inventions got patent protection. Therefore, data on foreign patentees that got patent

protection in Baden, allows us to explore the importance of innovation and technology

transfer during the first wave of industrialization.

3. The dataset

Our dataset includes all patents granted in the state of Baden between 1843 and 1877. It is

based on hand-written patent records compiled by the Ministry of the Interior.‡ The records

provide information about the name of the patentee, his place of residence, the date when the

patent was granted, its duration and a brief technical description of the underlying invention.

Furthermore, we can identify whether the original inventor received the patent, and whether

the grant was related to a new invention or to the extension of an old patent. The original

patent records do not classify patents according to technological classes like it is common for

records published in later periods. We therefore assign a class for each patent based on the

technical description in the patent records. For reasons of comparison, we use the

classification scheme that was introduced by the Imperial Patent Office in 1877. It

distinguishes between 89 different main technological classes.

* Ibid., p. 31.† Ibid., p. 8.‡ Großherzoglich Badisches Ministerium des Inneren, Die Verzeichnisse der im Großherzogtum Baden

erteilten Erfindungspatente (1843-1866) and Großherzoglich Badisches Ministerium des Inneren, Die Verzeichnisse der im Großherzogtum Baden erteilten Erfindungspatente (1867-1877), in: Generallandesarchiv Karlsruhe (GLA) section 236, fascicles 5914 and 5916. The patents granted between 1852 and 1862 are also published in: R. Dietz, Die Gewerbe im Großherzogtum Baden: Ihre Statistik, ihre Pflege, ihre Erzeugnisse, (im Auftrag des ghzg. bad. Handelsministeriums) (Karlsruhe, 1863).

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TABLE 2 reports some basic information about our dataset. It includes in total 1,584 patent

grants, thereof 1,459 are related to new patents. As additional information, we also list the

number of patent extensions, 125 in total. The upper panel of TABLE 2 distinguishes between

patents that are owned by the original inventor and patents where the original inventor was

not the patentee. The great majority, 96 percent of all new patent grants, falls into the former

category. The middle panel of TABLE 2 presents information about the different types of

patentees, more precisely individual inventors, private partnerships and corporations.* This

gives us a better understanding in which context inventions were developed. Individual

inventors owned roughly 85 percent of all new patents and private partnerships account for 12

percent, corporation made only up to less than three percent of all new patent grants. This

corresponds with the findings of Tom Nicholas that still in the last quarter of the 19 th century

the share of individual inventors accounted for almost 90 percent in Britain, more than 90

percent in the United States and 100 percent in Japan.†

[Insert TABLE 2 here]

In the lower panel of TABLE 2, we report the location of the patentees. About 19 percent of all

new patents were granted to domestic patentees, defined as individuals, partnerships or

corporations that were located in the state of Baden.‡ Foreign patentees from other German

states, for example Prussia or Wuerttemberg, account for 42 percent and non-German

countries, for example France or Switzerland, represent roughly 38 percent. Together, non-

domestic patents thus made up to 80 percent of all patents granted in Baden between 1843 and

1877. As argued in section 2, we assume that these patents should in general reflect inventions

with a higher economic value than domestic patents due to the fact that transaction and

information costs were very high during the 19th century. We therefore concentrate our

empirical analysis on the sub-sample of foreign patents.

We only include new patent grants in order to avoid double counting. Furthermore, we do not

distinguish whether the patentee was also the inventor or not. The number of non-inventor

* We code the patentees as a private partnership if the patent was granted to more than one person or to firm lacking a legal entity. Joint stock companies and other firms that can accurately be identified as legal entities are coded as corporations.

† T. Nicholas, ‘The Role of Independent Invention in US Technological Development, 1880-1930’, Journal of Economic History 70 (2010), 57–82; T. Nicholas, ‘Independent invention during the rise of the corporate economy in Britain and Japan’, Economic History Review 64 (2011), 995–1023.

‡ Since there are patents owned by two or more patentees from different countries, we computed a simple score. This score is equal to one if one or more than one patentees live in the same country. If, for example, a patent is owned by both a patentee from Baden and France than each patentee gets a score of 0.5. To compute the aggregated figures we summed up the scores, but we only report rounded figures in the respective tables.

10

patents is very small and a high share of these patents is related to firms so that we assume

that the invention was created within the firm. Including patents of non-inventors would only

bias our results if we focused on domestic patents. In this case, we would overestimate

Baden’s innovativeness by including inventions from foreigners that licensed their inventions

to entrepreneurs from Baden who then got the official grant. However, we only observe 10

domestic patents for which the patentee is not the inventor. Lastly, we do not analyze

individual inventors, partnerships and corporations separately due to the small number of

patents within the latter groups.

4. Growing patent activity and the business cycle

Germany was among the late-comers in the process of industrialization in Europe. However,

there is some academic debate about its starting point. The lack of accurate GDP estimates

makes it difficult to determine its breakthrough. Some scholars argue that the economy

already took off during the 1840s,* so that there seems to be a parallel to the emergence of

railways. The first German railway line started to operate between the Franconian cities of

Nuremberg and Fürth in 1835, and railway companies expanded massively in the first half of

the 1840s. Railway construction was indisputably one of the leading sectors in Germany,† but

relative to the total economy it was not yet important in this period. In the 1840s, a Pauperism

crisis hit Germany as a result of bad harvests, illustrating that agriculture still shaped the

business cycle. Therefore, other scholars argue that the breakthrough of industrialization was

much later, more precisely in the 1860s.‡ Our patent data support the view of late

breakthrough.

As FIGURE 1 shows, the total number of patents granted in Baden rose considerably after

1855 but then stagnated for several years. A second upward movement followed after the

Austrian defeat in the Austro-Prussian War of 1866, only interrupted in 1871 as a result of the

German-French War. If we compare patenting activity with estimated real net investment in

Germany, plotted on the right axis of FIGURE 1, we observe a similar trend behavior. Because * For this interpretation cf.: R. H. Tilly, Vom Zollverein zum Industriestaat: Die wirtschaftlich-soziale

Entwicklung Deutschlands 1834 bis 1914, dtv (München: Dt. Taschenbuch-Verl., 1990), vol. 4506; H.-U. Wehler, Deutsche Gesellschaftsgeschichte: Von der Reformära bis zur industriellen und politischen "Deutschen Doppelrevolution" 1815-1845/49, 4. Aufl., 5 vols. (München: Beck, 2005), vol. 2. For a concise overview summary of the debate cf.: Hahn, Die Industrielle Revolution, vol. 49, pp. 90–6.

† R. Fremdling, ‘Railroads and German Economic Growth: A Leading Sector Analysis with a Comparison to the United States and Great Britain’, Journal of Economic History 37 (1977), 583–604.

‡ S. Sarferaz and M. Uebele, ‘Tracking down the business cycle: A dynamic factor model for Germany 1820–1913’, Explorations in Economic History 46 (2009), 368–87, at 383–5 and K. Borchardt, ‘Wirtschaftliches Wachstum und Wechsellagen, 1800-1914’, in H. Aubin (ed.), Handbuch der deutschen Wirtschafts- und Sozialgeschichte (Stuttgart: Klett-Cotta, 1976), vol. 2, pp. 198–275.

11

population growth was small, the same pattern can be observed by using patents per capita. In

Baden, population rose from 1.3 million in 1843 to 1.5 million in 1876, implying an average

yearly growth rate of 0.43 percent. By contrast, the number of patents granted increased in the

same period on average by 12.78 percent per year. Domestic patenting also grew significantly

in the course of time, but patents granted to foreigners were the main driver of the upswing

which started in the late 1860s. While patentees from Baden accounted on average for 25

percent of all grants in the 1850s, their share dropped to 23 percent in the 1860s and merely

14 percent in the period between 1870 and 1876. Thus, the breakdown of patents by patentee

indicates evidence of vigorous and growing technical transfer within Europe. Our findings for

such an early period are remarkable, since Petra Moser argues that around the middle of the

19th century high transaction costs prohibited foreign patenting.*

[Insert FIGURE 1 here]

5. Long-term regional innovativeness

Empirical studies provide evidence for a high concentration of innovation within a small

number of countries and regions and a strong path-dependency over time. For the United

States, Sokoloff shows in a seminal study that patenting activity was heavily skewed towards

Southern New England and New York during the first half of the 19 th century.† Nicholas

identifies the counties in north and especially south-east England as by far the most

innovative clusters in the United Kingdom between 1880 and 1930.‡ In Japan, which started

to catch-up in the same period, innovative activity was concentrated in the Kanto region and,

to a lesser extent, to the Chubu and Kinki regions.§ As Streb et al. show for the period

between 1877 and 1918, there was also a strong regional variation of patenting activity within

Germany, indicating that the most innovative clusters were located along the Rhine, in

Greater Berlin and Saxony.** Furthermore, Degner and Streb point out that the United States,

the United Kingdom, France and Switzerland represent the countries with the highest share of

high-value patents granted in Germany between 1877 and 1914, and these countries were still

* Moser, ‘How Do Patent’, 1216.† Sokoloff, ‘Inventive Activity’, 827‡ Nicholas, ‘Independent invention during’, 1001. With time the lead of south-east England became even more

pronounced. However, note that Nicholas focuses on independent inventors which made up for ca. 90 percent of all patents in Great Britain in 1880 and ca. 50 percent in 1930.

§ Ibid., p. 1002. The Chubu region lost its innovative edge over time while the Kinki region became more innovative. Note again that Nicholas only reports data for independent innovators. Their share toted up to 100 percent in 1890 until 1930 it decreased to ca. 50 percent.

** Streb, Baten and Yin, ‘Technological knowledge spillover’, 366.12

among the most innovative today.* Apart from Japan, no country could catch up to these

leading countries during the 20th century.† Our data confirms this results indicating that

already in the middle of the 19th century a small number of countries and regions accounted

for a very high share of patents, and even within regions patenting activity was concentrated

in a small number of cities. Furthermore, there is evidence for strong persistence over time.

In the following, we use patents granted to non-domestic patentees in Baden as a proxy to

identify regional clusters of innovation within Germany and Europe in the period before 1877.

TABLE 3 lists all states with at least 20 observations in our dataset. In addition, Prussia is split

up in smaller territorial units because of its size, differences in institutions and historical

origins. We distinguish between the Prussian mainland in the East including Berlin and

territories in Central and West Germany that Prussia gained after the Napoleonic Wars

(Rhineland and Westphalia, Prussian province of Saxony) and the Austro-Prussian War of

1866 (Hannover, Hesse-Nassau).‡ Furthermore, we separate Alsace-Lorraine from the rest of

France for two reasons: First, the region became part of Germany in 1871 which might have

affected the incentives of Alsatian inventors to apply for patent protection in Baden. Second,

Alsace-Lorraine was an important trading partner and provider of foreign direct investment to

Baden.§ Together 1,026 patents, out of a total number of 1,154 patents granted to non-

residents, were bestowed on patentees from these nine countries. The number of countries that

exported technology to a noticeable extent was thus highly concentrated with 89 percent of all

patents originating from these nine leading states.**

[Insert TABLE 3 here]

Prussia was the most important source of technology transfer with 327 patents, representing a

share of 28.4 percent. Within Prussia, the mainland accounts for the highest number of

patents, but was less innovative than the provinces in the West if we take differences in

population into account (column five in TABLE 3). Actually, the Prussian mainland in the East

was mainly dominated by agriculture, except of Berlin, which had indeed a major cluster of

* Degner and Streb, Foreign patenting; Streb, The Cliometric Study, pp. 443-445.† J. Cantwell, Technological innovation and multinational corporations (Oxford: Blackwell, 1989); K. A.

Hafner, ‘The pattern of international patenting and technology diffusion’, Applied Economics 40 (2008), 2819–37.

‡ The remaining Prussian territories include Hohenzollern, a small principality in Southern Germany, and Schleswig-Holstein.

§ Cf.: F. Ploeckl, ‘The internal impact of a customs union; Baden and the Zollverein’, Explorations in Economic History 50 (2013), 387–404.

** A high concentration of innovative countries is the norm. Cf. Streb, The Cliometric Study and Degner and Streb, Foreign patenting.

13

innovation. A relatively high number of patents also originated from Wuerttemberg, the

neighboring state of Baden in the West, Bavaria and the Kingdom of Saxony. However, the

number of patents per inhabitants was much larger in Wuerttemberg than in the latter two.

Within the group of non-German states, France was the country from which most patents

originated. Including Alsace-Lorraine, it accounted for 226 patents, representing a share of

19.4 percent. However, relative to its large population, the number of patents was quite small.

By contrast, Alsace-Lorraine and Switzerland, which were both neighboring regions of Baden

were important in absolute terms but the number of patents is also high relative to population

size. A high share of patents also originated from the United Kingdom, Austria-Hungary and

the USA, but as in the case of France the numbers are relatively small if we take population

size into account.

The distribution of patentees suggests that, for the 19th century, distance was a crucial factor in

explaining regional differences in foreign patenting activity. We illustrate this pattern in

FIGURE 2. It reports the number of patents originated for each respective country or region

between 1843 and 1877 divided by its mean population on the y-axis and distance to Baden in

logarithmic scale on the y-axis. The size of the bubbles are proportional to the total number of

patents indicating the countries and regions that were quantitatively relevant in our dataset.

We observe a significantly negative relationship with territories closer to Baden receiving

more patents per population. Our data thus support the findings of Burhop and Wolf, who

show that there were considerable distance and border effects in the German market for

patents between 1884 and 1913.*

[Insert FIGURE 2 here]

Patenting activity was not only concentrated in a couple of states, it was even more

concentrated within states. This pattern is illustrated in TABLE 4, in which we report the

number of places with at least one patent observation, the share of the most innovative city,

the share of the top three innovative cities as well as the Herfindal-Hirschmann Index (HHI).

The HHI provides a measure of concentration within each state or region with a HHI equal to

one indicating the highest level of concentration, while a HHI of zero represents a perfect

uniform distribution.

[Insert TABLE 4 here]

* Burhop and Wolf, ‘The German Market’.14

Within the group of German states, we observe the highest degree of concentration in the

Prussian province of Saxony, for which we compute a HHI of 0.61. Its major cluster of

innovation, the city of Magdeburg, accounts for roughly 78 percent of all observations in this

region. Concentration was also high in the Prussian mainland and the province of Hesse-

Nassau, given a HHI of 0.49 and 0.44 respectively. Berlin represents about 70 percent of all

patents observed for the Prussian mainland, and Frankfurt am Main the main cluster of

innovation in Hesse-Nassau with a share of 66 percent. By contrast, our data indicates a

distinctly lower level of concentration for the Rhineland and Westphalia. The most innovative

cluster in this region, Cologne, accounts for only 20 percent of the patents and the HHI is only

0.08. In other German regions, patenting activity was more massed than in the Rhineland and

Westphalia, but the level of concentration was lower than in the highly concentrated Prussian

provinces. The HHI ranges between 0.15 in the Kingdom of Saxony and 0.29 in Hesse-

Darmstadt. Within the group of non-German states, the picture looks similar. We observe a

high level of concentration in France, excluding Alsace-Lorraine, where Paris was by far the

most innovative city accounting for 72.5 percent of all patents. Patenting activity was also

concentrated in Austria-Hungary with a HHI of 0.37. However, in Switzerland, the United

Kingdom, and the United States as well as in Alsace-Lorraine, our observations are

distributed more equally across cities. The HHI ranges between 0.15 in Switzerland and 0.21

in the United Kingdom.

As mentioned above, innovative activity tends to concentrate within certain countries and

regions. Yet, the question remains, whether concentration is stable over time or if declining

centers of innovation were replaced by new upstarting regions. The former may imply that

early innovators could have benefitted from spillover effects between geographically related

regions originating from a cluster of entrepreneurs, technicians, artisans and venture

capitalists.* We therefore compare our findings with patenting activity in the German Empire

after the introduction of the German Patent Law in 1877. For this period, Jochen Streb et al.

analyze the regional distribution of patenting based on a sample that includes all patents

granted in Germany with a lifespan of at least 10 years.† Based on their data, we aggregate the

number of high-value patents for each state and province for the two subsamples 1877-1899

and 1900-1913, respectively. For reason of comparison, we exclude all patentees from Baden

and Alsace-Lorraine. TABLE 5 reports the ranks for the 10 most innovative regions, based on

the absolute number of patent observations for our Baden sample (1843-1877) and the sample

of Streb et al. (1877-1899 and 1900-1913).* Cf. Streb, Baten and Yin, ‘Technological knowledge spillover’ and Degner and Streb, Foreign patenting.† Streb, Baten and Yin, ‘Technological knowledge spillover’, 366.

15

[Insert TABLE 5 here]

Both the Prussian mainland and the provinces of the Rhineland and Westphalia accounted for

the highest share of patents in all three samples. However, the relative positions differ to some

extend at the lower ranks. In particular, Wuerttemberg is ranked third in our dataset, but only

seventh in 1877-1899 and sixth in 1900-1913, while Saxony accounted for a relatively higher

number of patents in the period after 1877 so that it reaches rank three, in comparison with

rank five in our Baden-sample. The literature provides strong evidence that Saxony was by far

one of the most developed regions in the middle of the 19 th century with a strong focus on

textile industry and machine-building, while industrialization was less advanced in

Wuerttemberg.* Neither a catching-up process in Saxony nor a relative decline of

Wuerttemberg may provide a sound explanation for this pattern. Therefore, we suggest that

the differences in foreign patenting activity were driven by the geographical location of the

region of origin. As we have argued above and in FIGURE 2, transaction costs were a crucial

factor in this period, which naturally increase with distance. Wuerttemberg shared a long

border with Baden, while Saxony was in the East of Central Germany, implying that an

inventor in Wuerttemberg had a higher incentive to apply for a patent grant in Baden than an

inventor from Saxony. After 1877, this was not relevant any more due to the harmonization of

the German patent system. We so overestimate the innovativeness of neighboring regions in

our dataset to some extent. Accounting for the bias to neighboring countries, the pattern of

innovative regions within Germany seems to be relatively time persistent. Early innovators

thus remained innovative implying that these regions benefited from spillover effects between

geographically related industries.

We observe a stronger path-dependency by comparing the ranks of patents originating from

non-German countries in our dataset with foreign patenting after 1877. TABLE 6 shows that

the ranking of the countries remained relatively stable supporting the findings of Degner and

Streb for the period 1877-1932.† However, we observe some minor shifts. France ranked first

in our dataset but it is ranked third after 1877. For reasons of comparison, we excluded all

patents from Alsace-Lorraine in all subsamples so that we can exclude the cession of this

* The following figures illustrate the differences in industrialization: In 1846, 172 spinning mills were in operation in the Kingdom Saxony in comparison with 59 in Wuerttemberg, although the population was almost the same (1,8 million in Saxon and 1,7 million in Wuerttemberg); Kiesewetter, Industrielle Revolution in, p. 171. The lead of Saxony seems to be even more impressive if we compare its 232 machine-building factories in 1846 with only 17 that were installed in Wuerttemberg; W. Becker, ‘Die Entwicklung der deutschen Maschinenbauindustrie von 1850 bis 1870’, in A. Schröter and W. Becker (eds.), Die deutsche Maschinenbauindustrie in der industriellen Revolution (Berlin: Berlin : Akademie-Verl., 1962), pp. 137–285.

† Degner and Streb, Foreign patenting.16

province to Germany as an explanation. Distance provides a sound explanation for this

pattern. Transaction costs decreased in the course of time as a result of innovations in

communication and transportation so that inventors from more distant places got higher

incentives for patent protection. This can even more explain the increasing importance of the

United States. Since 1866, the Atlantic telegraph cable allowed for the fast transmission of

information between the New and the Old World, and the emergence of steamships fostered

the growth of international trade.* It thus seems highly plausible that falling transaction costs

increased incentives for inventors in the United States to apply for patent protection in

Europe.† However, the increasing share of patents originated from the United States also

reflects the stronger population growth and the fact and that the United states became the

major economic power at the onset of the First World War.‡ The ranks of the other major

leading countries remained quite stable: Austria-Hungary is ranked third in our sample while

it ranked fourth after 1877, Switzerland remains its position within all time periods and

Belgium changed its position with Sweden in the subsample 1877-1899, but both remained

within the seven leading countries. Russia lost four ranks between 1843 and 1913, which

reflects the growing economic problems within the Tsarist Empire, while Italy and Denmark

could both improve its relative positions.

[Insert TABLE 6 here]

6. Technological specialization and clusters

In this section, we identify technological clusters and technological specialization within

countries and regions. Our dataset includes patents from 86 different technological classes

with an average number of 16.8 patents per class. The median number of patents per class is

12.0, indicating a distribution that is skewed to the left. At the top, we mainly observe

* C. Hoag, ‘The Atlantic Telegraph Cable and Capital Market Information Flows’, Journal of Economic History 66 (2006); Bordo M. D., Taylor A. M. and Williamson J. G. (eds.), Globalization in historical perspective, A National Bureau of Economic Research conference report (Chicago: Univ. of Chicago Press, 2003).

† In the United States, the number of domestic patent applications rose only slightly during the 1870s compared to later periods, cf. J. Schmookler, ‘The Level of Inventive Activity’, The Review of Economics and Statistics 36 (1954), 183–90, at 186 (Table 1).

‡ Data about foreign patenting in Spain supports this argument. Patricio Sáiz observes a relative decline of French patenting in Spain, while the share of patents held by patentees from the United States rose remarkably between 1820 and 1879; P. Saiz, ‘Social Networks of Innovation in the European Periphery: Exploring Independent versus Corporate Patents in Spain circa 1820-1939’, Historical Social Research / Historische Sozialforschung 37 (2012), 348–69, at 357.

17

technological classes that are related to the construction and improvement of locomotives and

railway wagons, reflecting one of the leading sector of industrialization in Germany.*

The technological diversification of a country is dependent on the total number of patents

granted, as FIGURE 3 suggests. We computed the HHI for the concentration of technologies

within each country based on the number of patents within one technological class in relation

to the total number of patents that originated from this country. A HHI equal to one indicates

that all patents originating from a country are assigned to one single technological class, while

a HHI of zero implies a uniform distribution of patents across technological classes. We use

the same territorial definition as in section 5 so that we treat the regions within Prussia as well

as Alsace-Lorraine as separate countries. Furthermore, we include only territories for which

we observe at least 20 patents to ensure some variation with regard to technologies. The

empirical result is straightforward: concentration decreases with the absolute number of

patents in our dataset, or, in other words, larger territorial entities are typically more

diversified than others. In the following, we restrict our analysis to these leading countries.

[Insert FIGURE 3 here]

In the preceding section we argued that innovative activity within regions may have been a

result of the (exogenous) specialization in technologies related to the leading sectors of the

actual phase of industrialization and the existence of clusters in which knowledge spillovers

can take place.† For the period of 1843-1877 we can discuss this hypothesis in more depth. In

doing so, we compute an index of revealed technological advantage (RTA) for all territories

included in FIGURE 3.‡ Furthermore, we focus on the most frequent technological classes,

including at least 20 patent observations, which are grouped in four clusters: 1. Railways,

including the classes “steam boilers”, “railway operations” and “firing installations”; 2. Power

machines including the technology classes “steam engines”, “combustion engines” and

“machine parts”; 3. Textile-related technologies consisting of the classes “textile processing”,

“sewing and embroidery”, “spinning mills” and “weaving mills”. 4. Technologies related to

agriculture including the classes “alcoholic drinks”, “agricultural equipment”, “flour mills”,

and “tobacco”. The former three of these clusters represent technologies related to the leading

* Fremdling, ‘Railroads and German’.† Degner and Streb, Foreign patenting; Streb, Baten and Yin, ‘Technological knowledge spillover’.‡ For this approach see also Degner and Streb, Foreign patenting and J. Cantwell and S. Iammarino,

Multinational corporations and European regional systems of innovation, Studies in global competition (London, New York: Routledge, 2003), v. 18.

18

sectors of the first phase of the industrial revolution in Germany.* The latter cluster represents

technologies related to rather traditional industries.

As we have argued above, foreign patents tend to be considerably more valuable than

domestic patents. We consequently exclude the latter to avoid biased results. The RTA for

class c and country i is defined in the following way:

RTAci=

pci

pi

pc

p

(1)

The ratio pci/pi represents the number of patents in class c of country i relative to the total

number of patents from country i, and pc/p represents the number of patents in class c relative

to the total number of patents, excluding all patents related to domestic patentees.

An index of RTAci larger (smaller) than one thus indicates that country i has – compared to

other countries – a disproportionately high (low) share in technological class c. Given this

feature of the RTA, we define a country as specialized in a technological class if its RTAic is

among the three highest. Furthermore, a country commands over a technological cluster if it is

specialized in at least two technological classes of the same technological group defined

above. TABLE 7 gives an overview of technological specialization. We report the number of

patents relative to the mean population of the respective territorial unit in column two and the

leading technological classes including the index of RTA in brackets in column three. The

technological clusters are identified in the last column.

[Insert TABLE 7 here]

As TABLE 7 shows, we identify technological clusters in railways for the Prussian provinces

of Saxony, Rhineland and Westphalia as well as Hanover. The Rhineland and Westphalia also

exhibits a cluster in power engines, reflected by a very high RTA in combustion engines (4.7).

* Fremdling, ‘Railroads and German’. Although the textile sector played an important role for Germany’s industrialization, scholars agree that it does less so than the railway sector. Cf.: G. Kirchhain, ‘Das Wachstum der deutschen Baumwollindustrie im 19. Jahrhundert: Eine historische Modellstudie zur empirischen Wachstumsforschung’, Münster, Univ., Diss., 1971 (1973) and K. Ditt, ‘Vorreiter und Nachzügler in der Textilindustrie. Das Vereinigte Königreich und Deutschland während des 19. Jahrhunderts im Vergleich’, in H. Berghoff and D. Ziegler (eds.), Pionier und Nachzügler?: Vergleichende Studien zur Geschichte Großbritanniens und Deutschlands im Zeitalter der Industrialisierung ; Festschrift für Sidney Pollard zum 70. Geburtstag, Veröffentlichung / Arbeitskreis Deutsche England-Forschung, 2. unveränd. Aufl. (Bochum: Brockmeyer, 1996), pp. 29–58.

19

A cluster in power engines is also identified for Austria-Hungary. However, we have to point

out that the relative number of patents was low given the large population.

Except of Austria-Hungary and the United States, all foreign states were specialized in at least

one technological class related to textiles, one of the leading sectors of the first Industrial

Revolution. In particular, we observe textile clusters in Baden’s neighboring regions. For

spinning mills we compute a RTA of 4.2 in Alsace-Lorraine and 3.0 in Switzerland, and for

weaving mills 2.6 and 3.7, respectively. There is strong evidence that the high share of textile

related patents from Alsace-Lorraine and Switzerland was driven by the Zollverein’s trade

policy that set strong incentives for patent protection within Baden. The textile sector was by

far the biggest industrial sector in Baden employing more than 50 percent of the industrial

workforce,* and there existed strong interlinkages with the neighboring regions.† Indeed, after

Baden joined the Zollverein in 1836, Swiss and Alsatian entrepreneurs founded companies

over there and shifted their production into the country in order to circumvent the newly

erected tariff barriers and to secure access to the German market. The dominance of inventors

from Switzerland and the Alsace in textile-related technology classes reflects this pattern and

suggests that Swiss and Alsatian entrepreneurs aimed to protect their technological lead by

applying for patent protection in Baden.

TABLE 7 also points to the existence of clusters in technologies related to the processing of

agricultural goods in Alsace-Lorraine, Hesse-Darmstadt, the Prussian province of Hesse-

Nassau, and Wuerttemberg. We explain this pattern by the structure of agriculture in these

countries. South-West Germany and the Upper Rhine region in particular were characterized

by the cultivation of special crops like wine and tobacco. As a result, we observe a relatively

strong patenting activity in the related technological classes. For Hesse-Darmstadt, for

example, a regional specialization in the processing of tobacco is indicated by a remarkably

high RTA of 14.3 in the class “tobacco”. Inventors from the neighboring states had a strong

incentive to apply for patent protection in Baden since there was both a relatively large market

for these products in Baden and the risk of competition. This argument is supported by

employment data revealing the growing importance of foodstuff industries in Baden, which

made imitation in the related technological fields very likely.‡

* See: Fischer, Staat, p. 309 and Großherzogtum Baden, ‘Die gewerblichen Unternehmungen mit 10 und mehr Arbeitern’, Statistische Mitteilungen über das Land Baden (1875), 73–80.

† Ploeckl, ‘The internal impact’, 400; D. Eusterbrock, Industrielle Entwicklung und Integration im südlichen Oberrheingebiet: (Oberbaden - Oberelsaß) 1740 - 1966 (1968), pp. 55–7.

‡ The share of workers in the foodstuff industry rose from 1,910 workers in the modern, factory liked organized sector or 7.5 percent in 1849, to 10,437 (11.7 %) in 1861 and 14,460 (20.8 %) in 1874. See: Fischer, Staat, p. 309; Dietz, Gewerbe; Großherzogtum Baden, ‘Gewerbliche Unternehmungen’.

20

Our data suggests a strong spatial pattern of technological clusters. The Western and Northern

regions of Germany had technological clusters related to the railway sector and power

engines, southern economies specialized in foodstuffs. While the former represents the

booming ‘high-tech’ sectors in this period, the latter are associated with traditional industries

from the pre-industrial period. We therefore argue that the Western and Northern regions of

Germany profited from a technological advantage over the south resulting in an earlier take

off of the local economy. It is also striking that German regions did not only specialize to a

large extend in foodstuffs but also in other more traditional technologies like glass production

or pit and quarry industries. In total, our data suggests that the specialization of German

regions in technologies related to the industries of the first industrial revolution was

surprisingly weak. This argument is even stronger if one considers that there is no evidence

for a regional specialization in textile-related innovations within German states and that, given

the number of patents per million inhabitants, only the Prussian provinces of Saxony and

Rhineland and Westphalia commanded over strong technological clusters related to the

leading sector of the industrial revolution.

Since these two regions produced a relatively high number of patents per million inhabitants

one might conclude that a strong technological cluster related to the leading sector of the

Industrial Revolution in Germany is a good predictor for a region’s innovativeness. Yet, as

TABLE 7 shows, clustering in agriculture related technologies correlates with even higher

values of patents per million inhabitants in the two Hessian territories and Wuertemberg.

While the latter may in part be driven by close vicinity to Baden, this cannot be a valid

explanation for the Kingdom of Saxony and the Prussian mainland where per capita values

were also relatively high but no technological clusters existed. There is thus no strong

convincing evidence for a causal link between specializations in technological clusters related

to the leading sector of industrialization.

7. How technology transfer affected innovation in Baden

In Baden, the number of patents granted to non-domestic inventors was considerable higher

than the number of patents granted to domestic inventors. Only 19.8 percent of all patents in

our dataset represent the latter. Baden was thus a major recipient of foreign technology. In

theory, this should have generated positive spillover effects and fostered innovative activity

by the application of foreign technologies – learning by doing – and the exploitation of these

technologies by local entrepreneurs after patent protection had expired. However, as Sydney

21

Pollard has pointed out, this is only possible if the receiving country commands over a

significant share of skilled technicians and a sufficiently skilled workforce that is able to

imitate a foreign technology from its blueprint or working model.* Yet, if a country lacks such

a skilled workforce, actual technology transfer is linked to the transfer of skilled labor and

foreign patenting does not translate into positive spillover effects. It may even have a negative

effect on the local research economy. This will be the case, if foreigners introduce a

technology or its resulting finished products to the local research economy that are superior to

technologies developed by domestic inventors making the latter worthless while the former

cannot be copied. In this section we investigate which of these two effects have prevailed in

Baden between 1843 and 1877.

First, domestic patenting in Baden shows a very different technological pattern in comparison

with patents granted to foreigners. Based on the shares of patents within a technological class

relative to all patents granted to inventors from each groups, we observe an overall correlation

of 0.8 between German states and other countries. By contrast, the correlation between Baden

and German states and Baden and foreign countries is 0.5, respectively. This pattern is also

illustrated in TABLE 8, which compares the rank of the technologies of the three groups of

countries. For simplification, we only report the ten most frequent technologies.

[Insert TABLE 8 here]

Inventors in Baden were especially innovative in the technological classes ‘agricultural

equipment’ and ‘beer, wine and alcohol’, which accounted both for 5.4 percent of all domestic

patent grants respectively. Together with “flour mills”, ranked tenth, agriculture was the

dominant technological cluster in Baden making up to 13.3. A high share of domestic

inventions is also related to pumps. Although we treat this class not as part of the agricultural

cluster, we can argue that pumps were used in agriculture for irrigation so that inventions in

this field could be indirectly affected by the sectoral specialization.

By contrast, inventions related to railways and power engines were underrepresented in

Baden. Likewise, the textile cluster was very small. We observe only the class “sewing and

embroidery” within the ten most frequent classes with a share of 2.9 percent. Worth

mentioning is Baden’s strength in precision engineering. The class “horology” accounts for

* S. Pollard, Peaceful conquest: The industrialization of Europe, 1760 - 1970, Reprint (Oxford: Oxford Univ. Press, 2002), pp. 147–8

22

4.7 percent and reflecting the country’s competitive and innovative watchmaking industry in

the southern Black Forest.*

As columns two and three of TABLE 8 show, the distribution of patents from other German

states and foreign countries differed considerably. Railways and power engines dominated in

the case of German inventors that received patent protection in Baden. Railway related

technologies made up for 15.5 percent of these patents and power machines for another 11.1

percent. Together these two clusters accounted for 26.6 percent within the group of German

patentees out of Baden. These states were thus an important source for technologies related to

German leading sectors.† The agricultural cluster represents 10.4 percent. As we have shown

in section 6, the Southern states were specialized in this sector. Therefore, we see a quite

similar pattern like in Baden, if we take the regional factor into account. By contrast,

innovations related to the textile industry seems to be not only relatively unimportant in

Baden but also in other German states.

The patenting activity of the non-German countries in our data-set was a little more

diversified with 13.3 percent in the railway cluster, 12.4 percent in textile related technologies

and 8.9 percent in the technological cluster power machines.

The pattern described here reveals some support for both hypothesizes presented above.

While there were apparently no spillover effects in the technological groups related to the

leading sectors of Germany’s industrial revolution (railways, power engines and textiles),

such effects existed in foodstuffs related technologies and to a lesser extent in technological

groups related to precision engineering. These spillover effects, however, existed nearly

exclusively between Baden and its neighbors who specialized in foodstuffs related

technologies (cf. TABLE 7).

Since the share of workers in the modern, factory-like part of the textile sector in Baden made

up for 55 percent in the period between 1844 and 1874, the absence of spillover effects in

textile related technology classes is astonishing and suggest that the import of superior

Alsatian and Swiss technologies led to a crowding out effect of technologies originating from

Baden.‡ FIGURE 4 confirms this view. The figure depicts the share of spinning patents in

percent of all patents granted in the Grand-Duchy of Baden in approximately ten-year time * In 1847 the watch-making industry employed 2566 workers; their number rose until 1861 to 4025 but then

stagnated in the following decade (1875: 4550 workers). Compared to the overall number of workers employed in industry the watch-making industry accounted for 5.7 and 4.4 percent in 1847 and 1861, respectively. Due to a significant rise in employment figures and a further diversification of industry during the 1860’s and 1870’s the watch-makings industry’s share plumped to 1.9 percent in 1875. See: Fischer, Staat, p. 306; Dietz, Gewerbe, pp. 23; 28 and Großherzogtum Baden, ‘Ergebnisse der Gewerbeaufnahme vom 1. Dezember 1875’, Statistische Mitteilungen über das Land Baden (1877), 263–8, at 264–5.

† Fremdling, ‘Railroads and German’.‡ Fischer, Staat, p. 309; Dietz, Gewerbe; Großherzogtum Baden, ‘Gewerbliche Unternehmungen’.

23

periods differentiating between the sources of a patent’s origin. While in the time period

1843-1849 all spinning patents originated from Baden or the rest of Germany, their share

collapsed during the 1850’s and further declined during the 1860’s and 1870’s. This loss

during the 1850’s was almost completely compensated by patents from non-German –

especially French and Swiss – inventors. Even when the share of spinning patents declined

during the 1860’s and 1870’s, non-German inventors remained the dominant group in this

technological class. Obviously, German inventors in general and Baden inventors in particular

were not able to match the expertise of the non-German inventors.*

[Insert FIGURE 4 here]

The technologies related to the railway sector, depicted in FIGURE 5, showed a similar

picture. Also in this technological classes, non-German inventors were crowding out

technologies patented by Baden and German inventors; but in contrast to spinning

technologies, German inventors re-gained “market”-share during the 1860’s even overtaking

the share of non-German inventors and although non-German inventors recaptured their

dominated position during the 1870’s, the share of railway patents granted to German

inventors remained constant. Obviously, German inventors successfully acquired the skills

and knowledge to successfully imitate railway technologies as well as to develop new

innovations on their own. According to Rainer Fremdling, Prussian entrepreneurs succeeded

in substituting foreign rails and railway equipment through German products around the

middle of the 19th century implying a successful transfer of state-of-the-art technologies.†

Yet, given our data, this process was limited to the Rhineland and Westphalia and to a lesser

extent to the Prussian provinces of Saxony and Hannover. Only a small number of railway-

related patents originated from Baden, in particular in the last years of our sample. This is

somehow surprising given the early starting point of railway production in Baden. The first

locomotive was constructed in 1843 – much earlier than in most other regions of Germany.‡

Until the 1860s, the Maschinenbaugesellschaft in Karlsruhe remained one of the leading

locomotive factories among Germany states. However, competitors, in particular from

Prussia, cached-up fast and overtook the Maschinenbaugesellschaft in the 1870s. The relative

decline of locomotive production in comparison with other German states is reflected in our

patent dataset.

* This interpretation is confirmed by Ditt, Vorreiter und Nachzügler, pp. 39–40.† Fremdling, ‘Railroads and German’.‡ Kiesewetter, Industrielle Revolution in, p. 206.

24

[Insert FIGURE 5 here]

Against the background of Baden’s employment structure, these different responses of

domestic inventors to the diffusion of technologies related to textiles, railways, power engines

and foodstuffs appear to be reasonable. Around 1844, between 35 and 42 percent of the

working population was employed in agriculture while only 4.9 percent were employed in the

modern-factory-like industrial sector.* There was thus a much higher creative potential to

absorb, imitate and develop technologies related to agriculture. The example of Baden is thus

a strong case for Pollards argument that technology transfer can only work if the

technological capabilities of the emitting and the receiving country are on the same stage.

The divergent experience of technology transfer in railway and textile related technologies,

also reminds us to treat the argument of the benefits of tariffs protecting nascent industries

with caution.† Although the German Customs Union introduced an educational tariff scheme

for iron and steel related products as well as for textiles, import substitution only took place in

the case of the former and only in some German regions.‡ Favorable local conditions, like a

sufficiently skilled workforce, risk-taking entrepreneurs, access to cheap finance and natural

resources as well as institutional factors, were thus equally important for a successful late-

development. In which ways these factors interacted is still not yet sufficiently explored. In

this respect, more comparative studies of regional differences in the phase of Germany’s early

industrialization will prove fruitful.

8. Conclusion

In this paper we introduce a new data-set of patents granted in Baden during the period 1843-

1877. Our data shows that already in the second quarter of the 19th century innovative activity

was concentrated in a small number of research economies. These represent mainly the same

regions and countries that had been identified as highly innovative in the last quarter of the

* Between 36.9 and 47.3 percent of the workforce was employed in the traditional craft-industries. See: Fischer, Staat, pp. 297–8. Fischer’s estimates are based on reports of the tax administration (Steuerdirektion) and the Ministry of Finance. Because the latter excludes the major part of unskilled laborers form its published data, the two statistics yield different employment shares.

† The argument of protecting nascent industries with an educational tariff (Erziehungszoll) was prominently brought forward by F. List, Das nationale System der politischen Ökonomie: Volksausgabe auf Grund der Ausgabe letzter Hand- und Randnotizen in Lists Handexemplar (Basel: Kyklos-Verl. {[u.a.], 1959), pp. 273–8.

‡ In both cases tariffs on raw products were small or did not exist at all, while intermediary and final products were taxed increasingly. For an overview see: H.-W. Hahn, Geschichte des Deutschen Zollvereins, Kleine Vandenhoeck-Reihe (Göttingen: Vandenhoeck & Ruprecht, 1984), vol. 1502. W. O. Henderson, The Zollverein (London: Cass, 1984).

25

19th century and the early 20th century. Yet, our data suggests that the seminal rise of the

United States as a leading global research economy did take place during the 1870’s. Since

the number of domestic patents within the United States was already high during mid-century,

the timing of the US rise in the German data suggests that the latter was a result of falling

information costs due to the communication revolution. Distance related transaction costs thus

played a role in an inventor’s decision to apply for patent protection in Baden. This finding is

supported by the fact that southern German regions are overrepresented in our data-set

compared to their population figures. In the case of non-German countries there is also

evidence that the erection of tariff barriers constituted a positive incentive to apply for patent

protection in Germany states.

On the other hand, we demonstrate that German regions did not predominantly specialize in

technologies related to the first phase of the industrial revolution. No German region had a

distinct specialization in technologies related to the textile sector; and only the Prussian

provinces of Saxony and Rhineland and Westphalia commanded over a strong technological

cluster related to the railway sector and power engines. The remaining (southern) German

regions specialized mainly in technologies related to food-processing and, to a lesser extent,

in other traditional technologies. Nevertheless, also the regions specialized in food-processing

here and there commanded over a specialization in a modern technology class foreshadowing

Germany’s rise to a global leading research economy. Yet, our data suggests that this rise was

far from clear in the 1870’s and that technological clustering in the phase of early

industrialization may not explain long term regional innovativeness sufficiently.

At last, our data allows studying the effects of technology diffusion on a local research

economy. Our results are divided. We find evidence that there were regional spillover effects

between Baden and its southern neighbors in technologies related to food-processing; but no

spillovers in the technologies related to the industries of the first industrial revolution. In the

case of spinning patents, we can actually observe the crowding out of domestic inventions

through Alsatian and Swiss inventors. The same was true for other German regions. Yet, in

contrast to the textile sector, German regions successfully adopted foreign state-of-the-art

technologies in the case of the railway sector. These regional differences suggest that a further

spatial comparative analysis of the early phase of the industrial Revolution in Germany will

be fruitful. In particular one may ask if differences in patent stipulations can explain

differences in regional innovativeness. The analysis of the Baden patent dataset furthermore

points to a strong spatial pattern of technology transfer within Germany and Europe that

deserves to be investigated in more depth.

26

27

Tables

TABLE 1: PATENTS GRANTED IN GERMAN STATES, 1841-1877

Average number per year, 1841-1877absolute per million inhabitants

Saxony 138.5 63.7Wuerttemberg 70.6 40.5Baden 39.7 28.5Bavaria 95.8 20.5Prussia 89.4 4.6Source: total number of patents: Kurz, Weltgeschichte des Erfindungsschutzes, p. 346; population figures: Franzmann, Bevölkerung des Deutschen Reichs.

28

TABLE 2: PATENTS GRANTED IN THE STATE OF BADEN, 1843-1877

New Extensions Total

Patentee absolute in % absolute in % absolute in %

I. Inventor:

Original inventor 1,405 96.3 118 94.4 1,523 96.1

Not original inventor 54 3.7 7 5.6 61 3.9

Total 1,459 100.0 125 100.0 1,584 100.0

II. Type of patentee:

Single individual 1,239 84.9 112 89.6 1,351 85.3

Private partnerships 180 12.3 12 9.6 192 12.1

Corporations 40 2.7 1 0.8 41 2.6

Total 1,459 100.0 125 100.0 1,584 100.0

III. Location of patentee:

Baden 281 19.3 33 26.4 314 19.8

German states (ex. Baden) 618 42.4 34 27.2 652 41.2

Other countries 552 37.8 58 46.4 610 38.5

Not available 8 0.5 . . 8 0.5

Total 1,459 100.0 125 100.0 1,584 100.0

German states include all states that were part of the German Empire in 1871, excluding Alsace-Lorraine, which is included in “Other countries”. For a small number of patents it was not possible to identify the patentees’ place of residences accurately.Source: own database.

29

TABLE 3: PATENTS GRANTED TO FOREIGN PATENTEES IN BADEN, 1843-1877

State Province Number of patents

Sharein %

Patents per million

inhabitantsGerman states:

Prussia

Main territory (1) 118 10.2 11.6Rhineland/Westphalia (2) 86 7.5 18.0Hesse-Nassau (3) 53 4.6 40.1Province of Saxony 45 3.9 23.1Hanover (4) 23 2.0 12.5Others (5) 2 0.2 1.9

Wuerttemberg 81 7.0 46.2Bavaria 61 5.3 20.4Saxony 58 5.0 26.4Hesse-Darmstadt 24 2.1 28.2Small German states 58 5.0Sum German states 609 52.8Other countries:

FranceMain territory 187 16.2 5.3Alsace-Lorraine (6) 37 3.2 24.2

UK 78 6.8 2.7Austria-Hungary (7) 72 6.2 2.2USA 51 4.4 1.6Switzerland 50 4.3 19.9Other countries 70 6.1Sum other countries 545 47.2Total 1,154 100.0(1): Provinces of Berlin-Brandenburg, East Prussia, Pomerania, Posen, Silesia and West Prussia; (2) Province of the Rhine and Province of Westphalia; (3) Duchy of Nassau and Electorate of Hesse until 1866; (4) Kingdom of Hannover until 1866; (5) Schleswig-Holstein and Hohenzollern; (6) Alsace-Lorraine became part of the German Empire in 1871; (7) aggregated population based on population of Austria in 1851 (17.5 million) and population in Hungary in 1850 (13.2 million).Source: patents: own database; population of German states and Prussian provinces: Franzmann, Bevölkerung des Deutschen Reichs; population figures of other countries are extracted from Angus Maddison’s database: http://www.ggdc.net/maddison/oriindex.htm.

30

TABLE 4: PATENTING ACTIVITY WITHIN LEADING COUNTRIES, 1843-1877

# of patents

# of places

firstin %

top 3in % HHI

German states:

Prussia

Main territory (1) 118 22 69.6 83.1 0.49

Rhineland/Westphalia (2) 86 40 19.7 39.9 0.08

Hesse-Nassau (3) 53 13 65.6 88.1 0.44

Province of Saxony 45 9 77.8 86.7 0.61

Hannover (4) 23 9 61.7 76.6 0.40

Wuerttemberg 81 22 44.1 67.7 0.23

Bavaria 61 28 33.7 51.0 0.14

Saxony 58 21 27.8 62.6 0.15

Hesse 24 8 47.8 78.3 0.29

Foreign countries:

FranceMain territory 187 42 72.5 77.6 0.53

Alsace-Lorraine (5) 37 13 28.5 62.9 0.17

UK 78 31 43.9 59.1 0.21

Austria-Hungary 72 18 58.6 76.6 0.37

USA 51 20 36.0 56.0 0.17

Switzerland 50 21 29.0 63.0 0.15

(1): Provinces of Berlin-Brandenburg, East Prussia, Pomerania, Posen, Silesia and West Prussia; (2) Province of the Rhine and Province of Westphalia; (3) Duchy of Nassau and Electorate of Hesse until 1866; (4) Kingdom of Hannover until 1866; (5) Alsace-Lorraine became part of the German Empire in 1871; HHI: Herfindahl-Hirschman-Index.Source: own database.

31

TABLE 5: PATENTS GRANTED TO GERMAN PATENTEES IN BADEN AND GERMANY

Baden1843-1877

Germany1877-1899

Germany1900-1913

rank abs. in % rank abs. in % rank abs. in %Prussia, main (1) 1. 118 19.4 2. 1,499 23.4 1. 4,472 29.1Prussia, RHW(2) 2. 86 14.1 1. 1,517 23.7 2. 3,543 23.0Wuerttemberg 3. 81 13.3 7. 224 3.5 6. 603 3.9Bavaria 4. 61 10.0 5. 535 8.4 5. 603 9.0Saxony 5. 58 9.5 3. 784 12.2 3. 1,444 9.4Prussia, HNA(3) 6. 53 8.7 4. 553 8.6 4. 1,441 9.4Prussia, PSA(4) 7. 45 7.4 6. 321 5.0 9. 396 2.6Hesse-Darmstadt 7. 24 3.9 9. 183 2.9 10. 269 1.7

Prussia, HAN(5) 9. 23 3.8 8. 194 3.0 7. 420 2.7Hamburg 10. 19 3.1 10. 174 2.7 8. 412 2.7Others 41 6.7 421 6.6 990 6.4Total 609 100.0 6,405 100.0 15,373 100.0

For reasons of consistency and comparison, we exclude all patents granted to patentees from Baden and Alsace-Lorraine in all columns respectively; (1): Provinces of Berlin-Brandenburg, East Prussia, Pomerania, Posen, Silesia and West Prussia; (2) Province of the Rhine and province of Westphalia; (3) Province of Hesse-Nassau, Duchy of Nassau and Electorate of Hesse until 1866; (4) Province of Saxony; (5) Province of Hannover, Kingdom of Hannover until 1866.Source: Baden: own database; Germany: sample of high-value based on data from Streb, Baten and Yin, ‘Technological knowledge spillover’.

32

TABLE 6: PATENTS GRANTED TO FOREIGN PATENTEES IN BADEN AND GERMANY

Baden1843-1877

Germany1877-1899

Germany1900-1913

rank abs. in % rank abs. in % rank abs. in %France (1) 1. 187 37.9 3. 435 17.3 3. 855 14.3UK 2. 78 15.8 1. 640 25.4 2. 930 15.5Austria-Hungary 3. 72 14.6 4. 316 12.6 4. 709 11.8USA 4. 51 10.3 2. 614 24.4 1. 1,868 31.1Switzerland 5. 50 10.1 5. 156 6.2 5. 638 10.6Belgium 6. 18 3.6 6. 107 4.3 7. 218 3.6Sweden 7. 14 2.8 7. 60 2.4 6. 230 3.8Russia (2) 7. 14 2.8 8. 42 1.7 10. 103 1.7Italy 9. 7 1.4 10. 29 1.2 8. 131 2.2Denmark 10. 5 1.0 9. 31 1.2 9. 117 2.0Others 12 2.4 85 3.4 200 3.3Total 508 100.0 2,515 100.0 5,999 100.0

(1): Excluding Alsace-Lorraine; (2) including Congress Poland.Source: Baden: own database; Germany: sample of high-value based on data from Streb, Baten and Yin, ‘Technological knowledge spillover’.

33

TABLE 7: TECHNOLOGICAL SPECIALIZATION AND CLUSTERS

CountryPatents per million inhabitants

Specialization Technological cluster

Prussia, Saxony 23.1 steam boilers (3.1), railway operations (1.7), firing installations (3.1) Railways

Prussia, Rhineland/Westphalia 18.0 steam boilers (1.8), firing installations (2.3), combustion engines (4.7), machine parts (1.9), chemicals (1.3), weapons (1.3) Railways; power engines

Prussia, Hannover 12.5 steam boilers (1.9), railway operations (1.9), steam engines (2.3), agricultural equipment (1.7), glass production (2.2), instruments (2.3) Railways

Austria 2.2 steam engines (1.5), machine parts (1.9), flour mills (4.2), paper production (2.2) Power engines

Alsace-Lorraine 24.2 Textile processing (2.2), sewing and embroidery (2.0), spinning mills (4.2), weaving mills (2.6), beer, wine and alcohol (2.6), tobacco (1.6), pit and quarry industries (1.9) Textiles; foodstuffs

Switzerland 19.9 railway operations (1.5), steam engines (2.2), textile processing (1.6), spinning mills (3.0), weaving mills (3.7), flour mills (2.0), weapons(4.6) Textiles

Wuerttemberg 46.2 weaving mills (2.4), agricultural equipment (2.1), tobacco (2.2) Foodstuffs

Prussia, Hesse Nassau 40.1 beer, wine and alcohol (2.6), flour mills (1.9), tobacco (2.2) Foodstuffs

Hesse-Darmstadt 28.2 combustion engines (1.5), spinning mills (1.3), beer, wine alcohol (2.2), agricultural equipment (1.7), tobacco (14.3), chemicals (1.3), glass production (2.2) Foodstuffs

Saxony 26.4 Textile processing (2.0), chemicals (1.6), glass production (1.8), paper production (3.1) None

Bavaria 20.4 firing installations (3.2), combustion engines (1.8), beer, wine and alcohol (2.2) None

Prussia, main territory 11.6 sewing and embroidery (2.4), agricultural equipment (1.5), pit and quarry industries (2.0) None

France, main territory 5.3 textile processing (1.9), chemicals (2.2) None

United Kingdom 2.7 machine parts (1.7), chemicals (1.6), glass production (4.0) None

United States 1.6 railway operations (1.7), sewing and embroidery (1.4), tobacco (2.2), weapons (6.7), pit and quarry industries (2.0) None

Index of RTA in parentheses; a table with all RTA-values is included in the appendix (table A.1).

34

TABLE 8: LEADING TECHNOLOGICAL CLASSES BY COUNTRY GROUP

Baden Germany Foreign

Tech-Class in % Tech-Class in % Tech-Class in %

agricultural equipment 5.4 railway operations 6.6 railway operations 7.1

beer, wine and alcohol 5.4 steam boilers 5.1 spinning mills 4.7

horology 4.7 instruments 4.4 chemicals 4.2

pumps 3.6 machine parts 4.1 steam engines 4.0

railway operations 3.6 firing installations 3.8 steam boilers 3.6

sewing and embroidery 2.9 combustion engines 3.7 flour mills 3.5

weapons 2.9 pit and quarry industry 3.4 machine parts 3.4

paper production 2.5 steam engines 3.3 textile-processing 3.3

pit and quarry industry 2.5 sewing and embroidery 2.9 instruments 2.9

flour mills 2.5 beer, wine and alcohol 2.8 weapons 2.9

Sum 36.0 Sum 40.1 Sum 39.6

Source: own database.

35

Figures

FIGURE 1: PATENTS GRANTED IN BADEN BY LOCATION OF PATENTEE

1843

1844

1845

1846

1847

1848

1849

1850

1851

1852

1853

1854

1855

1856

1857

1858

1859

1860

1861

1862

1863

1864

1865

1866

1867

1868

1869

1870

1871

1872

1873

1874

1875

1876

0

20

40

60

80

100

120

140

160

180

200

0

50

100

150

200

250

300

350

400

450

500

Baden German states ex. Baden

Other countries Real net investment, 1850 = 100 (right axis)

Source: patents: own database; real net investment in German states (1913 prices): R. Metz, Histat Datenkompilation: Säkulare Trends der deutschen Wirtschaft: ZA8179 (Datenfile Version 1.0.0).

36

FIGURE 2: PATENTS PER MILLION INHABITANTS AND DISTANCE TO BADEN, 1843-1877

10 100 1,000 10,0000

10

20

30

40

50

60

70

80

Distance in kilometres (logarithmic scale)

Pate

nts p

er m

illio

n in

habi

tant

s

Patents per million inhabitants: total number of patents granted in Baden by location of patentee divided by the mean population of the respective territorial unit (1843-1877). Distance is measured as the distance between the capital city of each territorial unit and Karlsruhe, which was the capital city of Baden. The size of the bubbles reflect the absolute number of patents.Source: patents: own database; population of German states and Prussian provinces: Franzmann, Bevölkerung des Deutschen Reichs; population of foreign countries from Angus Maddison’s database: http://www.ggdc.net/maddison/oriindex.htm.

37

FIGURE 3: TECHNOLOGICAL DIVERSIFICATION OF LEADING COUNTRIES, 1843-1877

0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.1 0.110

20

40

60

80

100

120

140

160

180

200

HHI of technological diversification

Num

ber o

f pat

ents

Number of patents: total number of patents granted in Baden by location of patentee divided by the mean population of the respective territorial unit (1843-1877). HHI of technological diversification: concentration of technologies within each territorial unit based on the number of patents within one technological class in relation to the total number of patents that originated from this territorial unit.Source: own database.

38

FIGURE 4: SHARE OF SPINNING PATENTS BY PATENTEE AND TIME PERIOD

1843-49 1850-59 1860-69 1870-770%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Baden German states Other countriesShare of patents that we assigned to the technological classes ‘spinning mills’ relative to the total number of patents granted in Baden in the respective period.Source: own database.

39

FIGURE 5: SHARE OF RAILWAY PATENTS BY PATENTEE AND TIME PERIOD

1843-49 1850-59 1860-69 1870-770%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Baden German states Other countries

Share of railway patents relative to the total number of patents granted in Baden in the respective period. Railway patents include all patents that we assigned to the technological classes ‘railway operations’, ‘steam boilers’ and ‘firing installations’.Source: own database.

40

Appendix

TABLE A.1 reports the index of revealed technological advantage for technological classes with at least 20 patent observations for the leading countries. The numbers in brackets indicate the number of the technological class according to the classification scheme used by the Imperial Patent Office after 1877. As described in section 5, we split up Prussia in different territorial entities and treat these entities like independent state. We do the same for Alsace-Lorraine. In order to avoid biased results we excluded all patents from domestic patentees, which means patents owned by people or firms located in the state of Baden. The grey-shadowed cells indicate the territorial entities with the highest RTA for each technological class. Due to the lack of space, we use the following abbreviations: Bavaria (BAV), Hesse-Darmstadt (HES), Prussian mainland (PRM), Hannover (HAN), Hesse-Nassau (HNA), Prussian Province of Saxony (PSA), Rhineland and Westphalia (RHW), Kingdom of Saxony (SAX), Wuerttemberg (WUE), Austria-Hungary (AUS), France main territory (FRM), Alsace-Lorraine (ALS), Switzerland (SWI), United Kingdom (UK) and United States (USA).

41

TABLE A.1: COMPARATIVE TECHNOLOGICAL ADVANTAGES, 1843-1877German states Foreign countries

Prussia France

Technological groups BAV HES PRM HAN HNA PSA RHW SAX WUE AUS FRM ALS SWI UK USA

Railway sector

(13) steam boilers 1.1 . 1.0 1.9 0.8 3.1 1.8 1.5 0.3 1.3 1.0 . 0.9 0.6 0.9

(20) railway operations 1.4 0.6 1.3 1.9 0.8 1.7 0.9 0.2 0.2 1.4 0.5 . 1.5 1.3 1.7

(24) firing installations 3.2 . 0.6 1.4 0.6 3.1 2.3 . 0.9 1.8 0.2 1.8 0.7 0.8 0.6

Power engines

(14) steam engines 1.3 . 0.5 2.3 0.5 0.6 1.3 0.5 1.1 1.5 0.9 0.8 2.2 0.7 1.1

(46) combustion engines 1.8 1.5 0.3 0.8 1.4 . 4.7 0.3 1.0 1.0 0.9 . 0.7 0.5 .

(47) machine parts 0.4 1.1 1.4 1.1 1.5 2.5 1.9 0.5 . 1.9 0.4 0.8 0.5 1.7 0.5

Textiles

(8) textile processing . . 1.0 . 1.5 . 0.5 2.0 0.5 1.1 1.9 2.2 1.6 1.5 .

(52) sewing and embroidery . . 2.4 . . 0.8 . 1.2 . 0.5 0.4 2.0 0.7 0.9 1.4

(76) spinning mills 1.0 1.3 0.5 . . . 0.7 1.0 0.8 0.8 1.1 4.2 3.0 1.2 0.6

(86) weaving mills 1.5 . 2.0 2.0 . . 1.1 1.6 2.4 . 0.7 2.6 3.7 1.2 .

Foodstuffs, drinks and tobacco

(6) beer, wine and alcohol 2.2 3.8 1.6 . 2.6 . 1.1 0.8 1.2 1.9 0.2 2.6 . 0.6 .

42

(45) agricultural equipment . 1.7 1.5 1.7 0.8 . 0.5 0.7 2.1 0.6 1.3 . . 1.3 .

(50) flour mills 0.5 . 0.6 . 1.9 . 1.2 1.7 0.9 4.2 0.2 0.9 2.0 0.9 .

(79) tobacco . 14.3 0.5 . 2.2 . . 1.0 2.2 . 0.6 1.6 . . 2.2

Other important groups

(12) chemicals . 1.3 1.1 . 0.6 . 1.3 1.6 . . 2.2 0.9 0.6 1.6 0.6

(26) glas production 0.8 2.2 . 2.2 1.0 . . 1.8 0.7 . . . . 4.0 .

(42) instruments 0.4 1.1 1.6 2.3 2.5 3.7 0.3 1.4 0.3 1.9 0.6 0.7 . 0.3 1.0

(55) paper production 0.7 . 0.6 . 0.9 . . 3.1 3.6 2.2 1.0 . 0.9 1.8 .

(72) weapons . . 0.5 . 1.1 . 1.3 . . . 0.9 . 4.6 . 6.7

(80) pit and quarry industries 1.6 1.4 2.0 1.4 0.6 . . 1.7 1.8 . 0.5 1.9 0.7 1.3 2.0

43

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