Working Paper: NBER ID: w15440
Authors: Naomi R. Lamoreaux; Kenneth L. Sokoloff; Dhanoos Sutthiphisal
Abstract: The standard view of U.S. technological history is that the locus of invention shifted during the early twentieth century to large firms whose in-house research laboratories were superior sites for advancing the complex technologies of the second industrial revolution. In recent years this view has been subject to increasing criticism. At the same time, new research on equity markets during the early twentieth century suggests that smaller, more entrepreneurial enterprises were finding it easier to gain financial backing for technological discovery. We use data on the assignment (sale or transfer) of patents to explore the extent to which, and how, inventive activity was reorganized during this period. We find that two alternative modes of technological discovery developed in parallel during the early twentieth century. The first, concentrated in the Middle Atlantic region, centered on large firms with in-house R&D labs and superior access to the region's rapidly growing equity markets. The other, located mainly in the East North Central region, consisted of smaller, more entrepreneurial enterprises that drew primarily on local sources of funds. Both modes seem to have made roughly equivalent contributions to technological change through the 1920s. The subsequent dominance of large firms seems to have been propelled by a differential access to capital during the Great Depression that was subsequently reinforced by the regulatory and military procurement policies of the federal government.
Keywords: inventive activity; large firms; small entrepreneurial enterprises; patent assignment; technological discovery
JEL Codes: N00; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large firms with in-house research labs (L65) | rising share of patents (O34) |
| access to equity markets and local funding sources (O16) | entrepreneurial activity of smaller firms (M13) |
| differential access to capital during the Great Depression (F65) | dominance of large firms in technological discovery (O31) |
| government policies (H59) | dominance of large firms in technological discovery (O31) |
| large firms (L25) | technological discovery (O33) |
| SMEs (L53) | technological discovery (O33) |