In practice, nevertheless, it’s been really difficult to isolate the precise connection between a business’s rate of innovation and its own future increase, as well as more difficult to verify just how much technology initiation is simply disruption, changing money from “losers” to “victor,” versus how much it raises overall wealth.
A far-reaching new study of numerous patents issued in the last century offers real responses to both questions.
The study affirms the rate of innovation is definitely a tumultuous power between opponents — maybe more than formerly believed.
But in addition, it finds that intervals of accelerated technology initiation, such as the 1960s, the 1920s, as well as the 1990s, lead into a measurable increase in economic growth and total productivity.
We’dn’t actually care If initiation were just about McDonald’s getting ahead of Burger King,’’ Seru says. “But our study reveals that something significant is occurring. When companies innovate, the pie is enlarging, and we find increased aggregate increase.”
His co-workers and Seru — Leonid Kogan at Noah Stoffman of Indiana University, Dimitris Papanikolaou at Northwestern University, and Massachusetts Institute of Technology — reached that finding by coming up using a fresh method to assess the economic impact of numerous patents that firms received between 2011 and 1926.
Thus far, most of the studies of invention and patents happen to be based on measuring the clear scientific value of patents, generally by counting how many times a patent is mentioned as “prior art” in later patents.
After using statistical methods to filter out market sound and random changes, they found that news of a patent being allowed had a measurable effect on the stock price of an organization on the day or two following the news was declared.
The researchers then looked at what happened to firms that were slower or quicker at getting marketplace-moving patents. They found a powerful correlation between the rate of a business’s future growth as well as the action and competitive advantage.
Especially, Seru says, firms in the top 10% on initiation experienced annual growth rates throughout the following five years that have been between 1 and 3 percentage points quicker than those of firms with just a median rate of initiation. Given that 10% is a quick rate of growth for the majority of firms, that amounts to an important border.