Overall, the trend in patenting is up - both in absolute numbers and controlling for population. Innovation has increased over the past decade, but not at the breakneck pace of the 1980s and 1990s. There have been two dips in patenting over the past decade - the first in the wake of the tech crisis of 2001 and the second, more recently, concurrent with the onset of the housing and financial bubbles and the subsequent economic crisis.
Overall, the trend in patenting is up - both in absolute numbers and
controlling for population. Innovation has increased over the past
decade, but not at the breakneck pace of the 1980s and 1990s. There
have been two dips in patenting over the past decade - the first in the
wake of the tech crisis of 2001 and the second, more recently,
concurrent with the onset of the housing and financial bubbles and the
subsequent economic crisis.
American innovation has shifted and become more geographically
concentrated. Places like Silicon Valley and Seattle have seen a steady
increase in innovation while older, industrial centers like Pittsburgh
and Detroit have declined significantly. Innovation in large cities
like New York and Chicago has stagnated. And American innovation has
grown increasingly dependent on non-resident, foreign inventors.
Today, I focus on a broader historical question: How do economic
crises affect American innovation? Does innovation slow down or speed
up during periods of crisis?
Joseph Schumpeter long ago argued
that crises were seedbeds of innovation and entrepreneurship.
Innovations developed during crises generate the gales of creative
destruction that launch new technologies, remake existing industries,
and give birth to entirely new ones - setting in motion new rounds of
economic growth. Economists Gerhard Mensch and Christopher Freeman
have examined the historical timing of innovations, with Freeman
famously arguing that the pace of innovation is actually relatively
constant: Innovations bunch up during crises, only to be unleashed as
economic conditions are restored.
The graph above is reproduced by economist Alfred Kleinknecht.
It shows patent activity from 1750 to 1970. It tracks actual patents
granted from 1901 to 2005. There are clear spikes in innovative
activity during the Long Depression of the 1870s and 1880s and the
Great Depression of the 1930s.
The historical literature also suggests that crises are periods of significant innovation. Joel Mokyr and Naomi Lamoreaux
have documented the rise of important innovations like the incandescent
light, the steam turbine, and the transformer during the Long
Depression. Economic historian Alexander Field finds the 1930s to be the "most technologically progressive" decade of the 20th century.
The chart below, compiled by the MPI's Patrick Adler based upon a
reading of the historical literature, identifies some of the major
innovations of the Long Depression and the Great Depression. If the
past is any guide, we should expect some acceleration of innovation -
and particularly of the dramatic innovation Mandel wants to see - in
the coming decade.
The graph below, compiled by my colleague Charlotta Mellander,
updates the story, charting patents granted per 10,000 people from the
1890s to 2007. The rate of innovation rose significantly after the Long
Depression. It then dipped during the Great Depression before trailing
off considerably during the World War II period. American innovation
rebounded remarkably in the post-war period before trailing off in the
1970s. Since the early 1980s, however, American innovation has surged
to record highs. There have been two dips in innovation in the 2000s.
But as of 2007, innovation has fallen only slightly from its
So what's happened to U.S. innovation?
Like virtually every other
facet of the economy, it has been - and continues to be - reshaped by
globalization. As we saw on Wednesday,
foreign non-resident inventors have become a key element growing U.S.
patenting and a big piece of the American innovation system. Beginning
around 1980, non-resident inventors essentially closed the gap with
U.S. inventors. By the late 1990s, they had pulled even and were at
times outpacing U.S. inventors. This is part and parcel of the
globalization of the economy and the fact that the U.S. is the biggest
market and most innovative nation on the planet.
This has altered the American system of innovation in a deep and
fundamental way - changing it from a system that for the better part of
a century was based on producing and commercializing innovations to one
that is more attuned to attracting inventors and innovation globally.
This shift is also reflected in the changing geography and regional
concentration of U.S. innovation - the decline of old, integrated,
regional innovations systems in locations like Pittsburgh and Detroit
and the rise of new, globally focused clusters like Silicon Valley.
Innovation is no longer an American game - or, for that matter, a
game of any one nation. The countries of the world are now all part of
a much more global innovation system. Strategically, this shift means
from organizing to generate new breakthrough innovations to organizing
to absorb innovations coming from many different sources worldwide.
The U.S. is uniquely positioned because of its size, scale,
universities, and venture capital system; its sophisticated end-users
and customers; and its ability to attract global talent - to harness
and reap the benefits of this global system. Its major innovation
clusters reinforce this advantage and they will be hard to displace.
That said, for the first time, the overall rate of American innovation
has come to depend on foreign inventors. Anything that might slow the
immigration or inflow of foreign inventors - or redirect their
inventions and patents - would undoubtedly damage the rate of American
question for the future is less about the slowdown in innovation and
more about which people and places will prosper in this new age of
accelerating global innovation.