Patents, patent citations, and the dynamics of technological change.

• Author: Jaffe, Adam B.

Economists accept that technological change contributes powerfully to long-run improvements in living standards. Yet, we know surprisingly little about the determinants of technological change, including the relative contributions of different economic agents to the change process, the empirical sensitivity of the process to economic incentives, and the extent of market failure surrounding decisions affecting investments in new knowledge and technology. In part, this lack of knowledge is attributable to the fact that, until recently, some economists have tended to view technology as a "black box" that affected the economic system but that was itself driven largely by exogenous noneconomic forces, such as the advance of science. Pioneering work by Schmookler, Griliches, and others showed that this was not true; more recently the so-called New Growth Theory of Romer, Lucas, Grossman and Helpman, and others, has placed technology squarely within the economic system. However, grappling with these ideas empirically requires confronting the reality that many of the relevant activities, although endogenous to the political-economic system, are carried out in institutions such as universities and government laboratories, and may not be amenable to analysis with the standard tools of the theory of the firm.

More fundamentally, microeconomic analysis of the process of technological change must confront severe measurement problems. Fundamentally, technological change is driven by an investment process that produces a form of capital that is hard to see or measure. Moreover, technological change is inherently an interrelated and cumulative process: an important part of the economic consequence of investments made by one agent is the effect that such investments have on the marginal product of other (either subsequent or made by others) investments. Thus, empirical implementation of New Growth Theory, and the broader agenda of quantifying the determinants of technological change, requires the development of methods 1) to measure the output of investments in new knowledge and new technology, including investments made in the university and government sectors, and 2) to quantify the linkages across time and institutional boundaries by which the "spillovers" and cumulative impact of new knowledge are manifested. Along with various coauthors, I have explored the use of data on patents and patent citations for these purposes.

Patents are an interesting "economic institution." In return for a government-enforced monopoly franchise on the commercial exploitation of an invention, the patentee must disclose and explain the invention, in principal with sufficient detail that a knowledgeable practitioner of the relevant technology could reproduce the invention using the patent document. When a patent is issued, a large amount of information is publicly recorded, and most of this information is now available in computerized form. The information that is available includes the following: 1) the names and postal addresses of the inventor(s); 2) the organization, if any, to which the patent property right was assigned or transferred when the patent was issued, and its legal address; 3) a detailed technological classification of the invention; 4) the patentee's specific claims regarding what the invention can do that could not be done before; and 5) citations that indicate previously existing knowledge, embodied in prior patents or other...