Determinants of creativity and innovation--evidence from economic history.

• Author: Moser, Petra

Innovation and creativity are the primary source of improvements in human welfare. Yet, due to two major empirical challenges, it is difficult to determine the factors that encourage creativity and innovation. First, modern settings often lack clean experimental variation, because policies designed to encourage innovation adapt in response to lobbying, which makes it difficult to identify causal effects. Second, innovation and creativity are exceedingly hard to measure. For example, patent counts are the standard measure of innovation, but they fail to capture important innovations that occur outside of the patent system, for example in countries without patent laws. Excluding such developments may distort economists' views on the determinants of innovation.

My research addresses these identification and measurement challenges by exploiting a wealth of historical events that changed intellectual property laws and other policies independently of changes in innovation. In practice, this research approach combines in-depth analyses of historical records with statistical tests of large data sets. For example, I exploit a large amount of credibly exogenous variation in national patent laws in the 19th century--before interest groups had begun to lobby for changes in patent policy--to analyze data on innovations with and without patents that were exhibited at world fairs. (1) Complementary research uses the Nazi's decision to dismiss all Jewish scientists to examine the effects of high-skilled immigrant scientists on U.S. innovation. (2) Another project exploits variation in the timing of Napoleon's military victories to examine the effects of copyrights on Italian opera. (3)

Does Existence of a Patent System Encourage Innovation?

My research addresses a central question in economic history: Has the creation of property rights in ideas encouraged innovation and economic growth? A strong tradition argues that secure property rights built the foundation for the industrial revolution in Britain and the United States. (4) Innovation is, however, a cumulative process and strong property rights for early generations of inventors reduce payoffs for those in later generations. (5) These costs are particularly severe if patents are broad and their boundaries uncertain, so that later generations are continuously at risk of infringing on existing patents. Recent patent wars over smart phones and tablet computers have moved these issues to the forefront of policy debates, but the underlying tensions are more general. My research exploits historical variation in 19th century patent laws--when countries such as Switzerland and the Netherlands had not yet adopted patent laws or had abolished them for political reasons--to investigate the effects of patent laws on innovation.

To measure effects on innovation, I construct historical data sets to capture innovations that occur within and outside of the patent system. Patent data fail to capture all such innovations, which compromises their use in empirical analyses of the effects of patent laws. To address this major data constraint, I have used exhibition catalogues for the 1851 world technology fair in London [Figure 1] and the 1876 U.S. Centennial Exhibition in Philadelphia to collect detailed historical information on nearly 20,000 innovations with and without patents, including their industries, locations, and whether they won a prize for being particularly innovative.

These data indicate that the existence of a national patent system may not be necessary to encourage innovation. In 1851, for example, Switzerland contributed twice as many exhibits per capita as the other European countries, and won a disproportionate number of prizes for being especially innovative, even...