Productivity.

• Author: Berndt, Ernst R.
• Position: National Bureau of Economic Research program report

It is now seven years since Zvi Griliches, the NBER's Productivity Program Director for its first twenty years, passed away in October 1999. Due in large part to Zvi's enormous intellectual legacy and the extraordinary efforts he expended in nurturing and mentoring young scholars, I am pleased to report that the NBER's Productivity Program today is vibrant and robust, and that its researchers are carrying on the tradition of examining sources and consequences of innovation and productivity growth, and in the process developing and empirically exploiting new datasets.

Efficiency and productivity are essential concepts in almost every economist's tool kit, and thus it is not surprising that many of the NBER's Productivity Program members are affiliated with other NBER Programs where these concepts are important as well, including Labor Studies, Industrial Organization, Corporate Finance, Economic Fluctuations and Growth, International Trade and Investment, Law and Economics, and Health Care. What distinguishes the Productivity Program's research focus from these other Programs at the NBER is its strong emphasis on the roles of research and development, patents, incentive systems, regulations, knowledge spillovers, technological progress, organizational form, and market structure in influencing the extent and nature of productivity growth and innovation. In addition, a disproportionate share of Productivity Program researchers have traditionally focused considerable attention on issues involving economic measurement, such as measures of inputs, outputs, prices, quality change, and multifactor productivity, a focus that reflects Zvi Griliches's enduring bequest.

Rather than attempting to summarize the full scope of program activity, much of which overlaps with other NBER programs, I will highlight in this report research in six broad areas, domains particularly prominent in Productivity Program research over the last four to five years. The sequence I follow will begin with research on individual inventors, followed by research on knowledge flows within and across firms and other institutions, on patents and intellectual property protection, on market structure, international trade and investment, and recent research on macroeconomics and productivity growth, particularly on the role of information and communications technology investments.

Innovation at the Level of the Individual Inventor

Does technological progress, by expanding knowledge, place an increased educational burden on successive generations of innovators? Do today's innovators spend longer time in learning, and/or do they become more narrowly expert? Benjamin Jones (11359) shows that the age at which Nobel Prize winners and other great inventors produce great ideas has increased substantially over the twentieth century, specifically because of a large drop in productivity at young ages, and is closely related to an increasing age at completion of formal education. Focusing on more ordinary inventors, Jones (11360) shows that the age at first patent, teamwork, and specialization are all increasing over time. These papers suggest dramatic changes in the nature of innovation, with a decline in output by the very young and a ubiquitous move towards greater teamwork in the implementation of ideas. Related research by David Galenson (12185, 12058) on artistic innovation finds that artists who innovate early in their lives do so suddenly, while those who innovate late do so more gradually.

In a series of papers (9017, 10923, 11654) Kenneth Sokoloff and collaborators have used new micro data sets on patents, inventors, and patent assignment contracts in the United States beginning in the nineteenth century, and examined the changing division of labor between those who invented new technologies and those who exploited them commercially. Soon after the major patent reform of 1836, intermediaries--such as patent lawyers, agents, and agencies--emerged, facilitating transactions between buyers and sellers of patents. However, the movement of inventors into firms--at least as employees--did not proceed very far before the 1920s, at which time inventive activity shifted to R and D laboratories housed in large corporations. In between, inventors developed long-term attachments with a firm in which the inventor was a principal, often by bringing investors with them. In related research comparing inventors in the United States and Britain between 1790 and 1930 (10966), Sokoloff and collaborators report that the relatively low patent application fee in the United States (about 2.5 percent of that in Britain until late in the nineteenth century), combined with the U.S. administrative examination rather than the British registration and prize procedures, resulted in U.S. patentees typically having relatively humbler origins than their British counterparts. (1)

Another research stream, more theoretical, focuses on incentives faced by academic researchers. It examines whether returns to university licensing divert faculty from basic to applied research and to less leisure as they age. Marie Thursby and co-authors (11197, 10758) also introduce complications from tenure and from the fact that academic researchers may earn license income and enhanced prestige both inside and outside the university. These authors conclude that it is far from obvious that licensing damages basic research and education.

While patent data has long been used in empirical research, information on the identity (name and location) of the inventor has seldom been employed, because of what Manuel Trajtenberg (12479) calls the "who is who" problem: the name of a given inventor may be spelled differently across his/her patents, and the same name may correspond to different inventors (the "John Smith" problem). To address this problem involving over four million patent records and 1.6 million inventors from across the world, Trajtenberg developed an elaborate computerized data mining methodology, resulting in detailed data on individuals' patenting history, their employers, and co-inventors. He finds that 40 percent of patentees have more than one patent, and 70,000 have more than ten patents.

Managing R and D and innovation raises a number of issues regarding incentives. Beginning in the late 1980s, U.S. corporations increasingly linked compensation of central research personnel to the economic incentives of the corporation. Joshua Lerner and Julie Wulf (11944) examine the impact of the shifting compensation of the heads of corporate R and D. They report that among firms with centralized Rand D operations, more long-term incentives (for example, stock options and restricted stock) are associated with more heavily cited patents, with more patent filings, and with patents of greater generality. While they cannot distinguish between the roles of better project selection or better people selection, they interpret these findings as being consistent with the view that performance pay of corporate R and D heads is associated with more innovative firms.

Knowledge Flows and Innovation Across Organizations

R and D

Geographic proximity between academia and industry R and D laboratories has long been hypothesized to facilitate knowledge spillovers. Using program-level data on pharmaceutical drug discovery expenditures during the 1980s and 1990s and location-program-level data on relevant academic science, Jeffrey Furman, Margaret Kylc, Iain Cockburn, and Rebecca Henderson (12509) study how proximity of pharmaceutical research laboratories to universities and the laboratories of competing pharmaceutical companies influenced the number of patents generated by the laboratories. They find that "public" science--generated by universities, academic medical centers, and government laboratories--generated positive spillovers to geographically proximate private pharmaceutical research laboratories, but that no such spillovers occurred among private laboratories. (2) Focusing on an earlier phenomenon--the growth of U.S. industrial pharmaceutical laboratories between 1927 and 1946, Megan MacGarvic and Jeffrey Furman (11470) find that while the presence of nearby industrial facilities helped shape the direction of university research programs, there was a significant, positive and causal effect running from university research to the growth of pharmaceutical research laboratories in the first half of the twentieth century.

An obvious way in which knowledge flows can occur between academia and industry is via collaborative publications. Does the success of these collaborations depend on the research status of the faculty involved? Focusing initially on biotechnology, Lynne Zucker, Michael Darby, and Jeff Armstrong (8499) report that counts of collaborative publications by top research university faculty and firm employees are an empirically useful indicator of knowledge transfer leading to firm success, but that collaborative articles of the very top star academic scientists with firm employees predicted significantly more firm success than collaborations with other faculty. Based on a census of biotechnology firms that did and did not go public, Darby and Zucker (8954) find that among other factors, the strength of the firm's science base (use of recombinant DNA technology, number of articles by star academic scientists as--or with--firm employees, number of biotech patents) reduced the time to initial public offering (IPO) and increased the expected proceeds raised from the IPO.

Zucker and Darby (9825...