Evolving Patterns of Innovation Across States and Industries

Evolving Patterns of Innovation Across States and Industries

Timothy Taylor 08/04/2021 7
Evolving Patterns of Innovation Across States and Industries

Patents are an imperfect measure of innovation, but they can nonetheless convey the underlying story. 

Jesse LaBelle and Ana Maria Santacreu offer some interesting descriptions of how patent patterns changed between the 1980s and the 2000s in "Geographic Patterns of Innovation Across U.S. States: 1980-2010 (Economic Synopses, Federal Reserve Bank of St. Louis, 2021, #5). 

To interpret these figures, it's important to know that new patents granted each year have been rising substantially over time, from about 40,000 in 1980 to 110,000 in 2010. Here's a figure showing the distribution of patents by US state: the top panel shows the 1980s, and the bottom panel shows the 2000s (that is, 2000-2010). Given that overall patent levels have risen, the figure shows many more states with higher patent levels (shown by the darker color). 

The two figures also show a geographic shift in the patterns of innovation. The authors write: 

In the 2000s, patent creation was concentrated mostly in three regions:

  • Northeast: New York, New Jersey, Delaware, and the New England states
  • West Coast: Oregon, Washington, Idaho, and California
  • Rust Belt: Minnesota, Illinois, Michigan, Ohio, and Pennsylvania.

Together, these states accounted for about 67 percent of total patents granted in the 2000s. While the East and West Coast states specialized in the computers and electronics sector, the Rust Belt states specialized in the machinery sector. These two sectors were the most innovative, based on the numbers of patents granted. The least innovative states were Mississippi, Arkansas, and Alaska. The rate of patent creation in the most innovative state was 22 times larger than in the least innovative state.

Here's a figure looking at patents by industry. Again, be cautious in comparing the top and bottom panels because the total number of patents has risen (as shown in the horizontal axis). But it is striking that in the 1980s, the distribution of patents across industries covered a reasonably wide spectrum. By the 2000s, patent activity had become much more concentrated in the "Computer and electronic products" sector.  

It's interesting to speculate about why patents have become more concentrated in one sector. Surely part of the reason is just the enormous technological gains made in computers and electronic products. But it's also possible that powerful companies in these industries are generating and buying patents as part of a "patent thicket" strategy to limit competitors, and it's possible that venture capitalists are more willing to support computer and electronics companies because of the possibility of lower costs and faster payoffs in this industry. For the large and diverse US economy, it seems important to have a very wide portfolio of efforts aimed at new technologies and innovation. 

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  • John Barker

    A vast majority of patents are worthless.

  • Ian Whitworth

    It's difficult to quantify the true value of invention and how costs are recouped.

  • Scott Andrews

    Excellent article

  • Mac Lamberth

    Small businesses don't have the financial resources to defend their intellectual property.

  • Dan Clark

    Big companies use their expansive patent portfolios and team of attorneys to stop smaller competitors that do not have the ability to defend themselves.

  • Aaron Jones

    The tech sector is profitable that's why there are more patents.

  • Connor Bell

    There’s so much more at stake.

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Timothy Taylor

Global Economy Expert

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.


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