Productivity and Innovation

Andrew B. Bernard, Toshihiro Okubo, 23 April 2016

Recent research has found that certain firms increase their innovative activity during periods of falling demand. This column investigates this puzzle by analysing how Japanese firms adjust their product mix over the business cycle. During transitions from recession to expansion, firm-level product churning – that is, simultaneously adding and dropping products – increases by 25%. The findings lend support to the ‘trapped factor’ model, in which negative demand shocks see the redeployment of underemployed resources towards innovation processes.

Bronwyn H. Hall, Christian Helmers, Georg von Graevenitz, 23 April 2016

Patent filings have proliferated globally in recent years. While some may see this as a direct consequence of increased innovation, this column uses evidence from the UK to show that patent thickets – patents belonging to many companies protecting overlapping technology – reduce innovation. Patent thickets decrease entry (i.e. first time patenting in an area) by 20%, which is substantial bearing in mind that the average probability of entry into a technology area is only about 1.5%.

Hans K. Hvide, Benjamin Jones, 22 April 2016

In the early 2000s several European countries passed new laws that ended the ‘professor’s privilege’, under which university researchers had enjoyed full rights to their innovations. This column shows that the reform in Norway was followed by a 50% decrease in both startup and patenting activity by university researchers. Measures of startup and patenting quality also declined. The reform, which sought to spur university-based innovation, appears to have had the opposite effect.

Peter Baldwin, 16 April 2016

Should copyright assure authors and rights holders lasting claims, much like conventional property rights, or should copyright be primarily concerned with giving consumers cheap and easy access to a shared culture? In this Vox Talk, Peter Baldwin – author of the book ‘The Copyright Wars: Three Centuries of Transatlantic Battle’ – outlines how America went from being a leading copyright opponent and pirate in the eighteenth and nineteenth centuries to become the world’s intellectual property policeman today. He describes a ‘Californian civil war’ over open access: between the content owners in Hollywood and the high-tech companies in Silicon Valley.

Miguel Morin, 16 April 2016

A longstanding question in economics is whether labour-saving technology affects firms in the medium term by increasing output, by decreasing employment, or both. This column provides evidence on this issue using a novel dataset from the concrete industry during the Great Depression. Cheaper electricity caused a decrease in the labour share of income, an increase in productivity and electrical capital intensity, and a decrease in employment. Furthermore, these effects were stronger in counties where the Depression hit hardest, consistent with the idea of ‘the cleansing effect of recessions’.

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