1. Do Important Home-Made Innovations Affect Productivity Growth? Some Industry-Level Explorations Carolina Castaldi and Bart Los (GGDC, University of Groningen) EUKLEMS Consortium Meeting (June 9 – 11, 2005, Helsinki) This project is funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, "Policy Support and Anticipating Scientific and Technological Needs".

2. 2 Introduction WP9: Development of technology indicators to assess effects of innovation on productivity performance (R&D expenditures, patents, etc.) Body of literature on patents as output indicator (Schmookler, Scherer, Griliches, etc). Conclusion: patents useful but noisy indicator of innovation Patents very heterogeneous in importance (Hall, Pakes, Schankerman, etc.) Citations to patents indicator of importance (Trajtenberg, Jaffe, etc.)

3. 3 Objectives Build database on U.S. patent flows and stocks by country and by industry; Distinguish between important innovations and less important innovations by means of citation data; Give insights into international industry-level differences in technological specialization patterns; Analyze trends in technological specialization patterns; Analyze whether production of (important) patents stimulates labor productivity growth; Discuss future EUKLEMS work in this field.

4. 4 Importance Indicator Point of departure: patents that receive more citations in subsequent patents are more important Problem 1: Patenting behavior varies across industries Problem 2: Citation behavior varies over time Problem 3: Citations are not received immediately (mean lag > 4 years) Important patents determined by constructing citation- based quantiles by industry and year of grant for all patents issued by USPTO; Patents are important if they belong to an upper quantile.

5. 5 Data Sources NBER Patent-Citations Datafile (updated by Bronwyn Hall) Numbers of citations (1975-2003) to all utility patents granted by USPTO in 1963-2003 Our subset: 1970-1999 (>2.4M patents, of which 1.0M to non-US inventors) Country of first inventor USPTOs PATSIC-CONAME Database Industry of manufacture (OTAF: 42 industries) Fractional counting in case of multiple OTAF codes GGDC 60-Industry Database Value added (new PPPs, US hedonic deflators for computers and semiconductors) Labor inputs (numbers of hours worked) After matching: 20 industries, 26 countries, 1979-1998 (to be extended soon).

6. 6 Raw Patent Counts per Country Table 1 HU (1998): 10.6; CZ (1998): 2.4; PL (1998): 1.0

7. 7 Important Patents per Country (p.h.w.) Table 2 Top-5% (1998): BE 13.3; NL 9.8; SE 16.5 Hardly any important patents for PT, ES, GR en Eastern Europe

8. 8 Patents (p.h.w.), by Industry (average 1979-99) Table 3 FooCheMetOffEleComMot DE 0.1513.073.1112.814.9726.122.27 FR 0.1713.322.3227.377.9522.411.12 GB 0.199.691.6811.674.2314.591.01 IT 0.075.500.547.291.665.370.58 FI 0.369.033.299.887.8811.092.71 IE 0.071.881.411.61 5.950.70 JP 0.2120.242.5228.368.1827.1016.27 US 1.0732.9813.1949.9217.8753.225.08 TW 0.020.682.071.282.073.790.79 KR 0.020.720.394.141.194.000.16

9. 9 Patents Growth (annual, p.h.w.), by Industry (1979-98) Table 4 FooCheMetOffEleComMot DE 0.0260.0520.0310.0840.0410.0730.055 FR 0.0660.0740.0440.0810.0480.0660.061 GB 0.0560.0660.0430.1210.0280.0800.045 IT 0.0450.0610.0630.0500.0660.1100.078 FI **0.1310.0710.1620.0900.1900.098 IE **0.023** 0.074** JP 0.0320.0730.0770.1220.0900.0830.080 US 0.0230.0500.0350.1410.0450.0690.035 TW **0.2450.1530.0990.2250.2440.147 KR ** 0.257**

10. 10 Specialization in Important Innovations Revealed Comparative Technological Advantage (RCTA): (for country k in industry i) Expressed in logarithms

11. 11 Trends in Technological Specialization (Selected Industries) Table 6 FooCheMetOffEleComMot DE70-74-0.11-0.25-0.37-1.12-0.40-0.54-0.06 95-99-0.64-0.39-0.41-1.76-0.88-1.21-0.18 FR70-74-0.43-0.31-0.49-1.28-0.24-0.67-0.40 95-99-0.26-0.47-0.23-0.89-0.65-0.90-1.15 GB70-740.240.14-0.33-0.06-0.23-0.24-0.17 95-99-0.72-0.24-0.41-0.47-0.35-0.47-0.69 US70-740.080.10 0.170.11 0.05 95-990.250.240.070.370.240.290.16 JP70-74-0.90-0.13-0.44-0.62-0.12-0.300.18 95-99-1.06-0.510.09-1.22-0.17-0.460.08 TW70-74** 95-99#-0.930.42-0.99-0.360.27-1.68

12. 12 Overall Situation with Respect to Innovation Europes big economies have generally low patenting growth rates; Europes big economies tend to despecialize in important innovations; Fundamental question: how serious are these problems? Theory 1: Knowledge is highly public and imitation is easy Theory 2: Knowledge is highly tacit and cumulative Links to labor productivity growth rates should be investigated

13. 13 Labor Productivity Growth Rates (%) (1979-2002) Table 7 FooCheMetOffEleComMot DE 1.313.731.6232.582.2716.161.26 FR 1.015.210.9028.804.1918.275.47 GB 2.555.644.1935.444.6120.114.92 IT 2.205.062.6431.103.0015.503.35 FI 4.323.933.7738.485.4816.195.47 IE 7.2011.683.7636.1913.3928.635.00 JP 0.154.502.6934.539.7425.755.83 US 2.937.392.3938.778.5233.983.36 TW -0.153.081.9235.283.4124.211.69 KR 4.097.044.2340.894.6832.568.32

14. 14 Regression Analysis (preliminary) (Important) Patents stocks by industry perpetual inventory method common annual depreciation rate of 15% initial stock for 1979 constructed using actual 1970-1978 patents, and estimates for 1963-1969 ratio to hours worked Two basic specifications lp-growth(t) = a + b * patgrowth(t-1) lp-growth(t) = a + b * initpatlevel(t) time dummies, additional variables (not reported) Periods: 1979-1983, 1984-1988, 1989-1993, 1994-1998

15. 15 Link to Patent Stock Growth Rates Table 8 totaltop5% abobs/R 2 ab Food-0.0261.121470.0080.29237 (0.88)(3.69)0.23(0.34)(1.81)0.09 Chem0.073-0.008630.0690.10251 (3.85)(0.04)0.00(4.75)(0.86)0.01 MetP-0.0110.52362-0.0010.26958 (0.58)(2.60)0.10(0.04)(2.55)0.10 OffM0.1460.020540.1350.30533 (5.49)(0.13)0.00(5.10)(1.26)0.05 Elec0.0170.585570.0340.17350 (0.85)(2.52)0.10(1.82)(1.28)0.03 Comp0.0750.439570.0700.33045 (3.02)(2.55)0.11(3.71)(3.05)0.18 Moto-0.0210.751550.0110.05840 (0.71)(2.93)0.14(0.46)(0.30)0.00

16. 16 Link to Initial Patent Stocks Table 9 totaltop5% abobs/R 2 ab Food0.048-0.001580.047-0.00858 (1.81)(0.34)0.00(1.82)(0.36)0.00 Chem0.0740.000830.0730.00083 (4.73)(0.42)0.00(4.75)(0.38)0.00 MetP0.0420.000810.041-0.00181 (2.71)(0.35)0.00(2.71)(0.29)0.00 OffM0.1250.000690.1220.00069 (4.74)(0.42)0.00(4.84)(0.23)0.00 Elec0.0640.000760.063-0.00176 (3.69)(0.59)0.00(3.69)(0.46)0.00 Comp0.1160.000750.110-0.00175 (5.89)(1.27)0.02(5.90)(0.89)0.01 Moto0.0500.000710.049-0.00171 (2.20)(0.23)0.00(2.20)(0.14)0.00

17. 17 Future Research Panel data estimation Patents assigned to industry-of-use instead of industry- of-manufacture (Johnson) More advanced methods to identify important patents (Silverberg and Verspagen) Figure 1: Pareto plot of EPO 1989 patent citation data