Category Archives: Collective Invention

“Is Knowledge Trapped Inside the Ivory Tower?,” M. Bikard (2013)

Simultaneous discovery, as famously discussed by Merton, is really a fascinating idea. On the one hand, we have famous examples like Bell and Gray sending in patents for a telephone on exactly the same day. On the other hand, when you investigate supposed examples of simultaneous discovery more closely, it is rarely the case that the discoveries are that similar. The legendary Jacob Schmookler described – in a less-than-politically-correct way! – historians who see patterns of simultaneous discovery everywhere as similar to tourists who think “all Chinamen look alike.” There is sufficient sociological evidence today that Schmookler largely seems correct: simultaneous discovery, like “lucky” inventions, are much less common than the man on the street believes (see, e.g., Simon Schaeffer’s article on the famous story of the dragon dream and the invention of benzene for a typical reconstruction of how “lucky” inventions actually happen).

Michaƫl Bikard thinks we are giving simultaneous discovery too little credit as a tool for investigating important topics in the economics of innovation. Even if simultaneous discovery is uncommon, it still exists. If there were an automated process to generate a large set of simultaneous inventions (on relatively more minor topics than the telephone), there are tons of interesting questions we can answer, since we would have compelling evidence of the same piece of knowledge existing in different places at the same time. For instance, how important are agglomeration economies? Does a biotech invention get developed further if it is invented on Route 128 in Massachusetts instead of in Lithuania?

Bikard has developed an automated process to do this (and that linked paper also provides a nice literature review concerning simultaneous discovery). Just scrape huge number of articles and their citations, look for pairs of papers which were published at almost the same time and cited frequently in the future, and then limit further to articles which have a “Jaccard index” which implies that they are frequently cited together if they are cited at all. Applying this technique to the life sciences, he finds 578 examples of simultaneous discovery; chatting with a randomly selected sample of the researchers, most mentioned the simultaneous discovery without being asked, though at least one claimed his idea had been stolen! 578 is a ton: this is more than double the number that the historical analysis in Merton discovered, and as noted, many of the Merton multiples are not really examples of simultaneous discovery at all.

He then applies this dataset in a second paper, asking whether inventions in academia are used more often (because of the culture of openness) or whether private sector inventions are used more often in follow-up inventions (because the control rights can help even follow-up inventors extract rents). It turns out that private-sector inventors of the identical invention are three times more likely to patent, but even excluding the inventors themselves, the private sector inventions are cited 10-20% more frequently in future patents. The sample size of simultaneous academic-private discovery is small, so this evidence is only suggestive. You might imagine that the private sector inventors are more likely to be colocated near other private sector firms in the same area; we think that noncodified aspects of knowledge flow locally, so it wouldn’t be surprising that the private sector multiple was cited more often in future patents.

Heavy caveats are also needed on the sample. This result certainly doesn’t suggest that, overall, private sector workers are doing more “useful” work than Ivory Tower researchers, since restricting the sample to multiple discoveries limits the potential observations to areas where academia and the private sector are working on the same type of discovery. Certainly, academics and the private sector often work on different types of research, and openness is probably more important in more basic discoveries (where transaction or bargaining costs on follow-up uses are more distortionary). In any case, the method for identifying simultaneous discoveries is quite interesting indeed; if you are empirically minded, there are tons of interesting questions you could investigate with such a dataset.

September 2012 working paper (No IDEAS version). Forthcoming in Management Science.

“Diffusing New Technology Without Dissipating Rents: Some Historical Case Studies of Knowledge Sharing,” J. Bessen & A. Nuvolari (2012)

The most fundamental fact in the economic history of the world is that, from the dawn on mankind until the middle of the 19th century in a small corner of Europe, the material living standards of the average human varied within a very small range: perhaps the wealthiest places, ever, were five times richer than regions on the edge of subsistence. The end of this Malthusian world is generally credited to changes following the Industrial Revolution. The Industrial Revolution is sometimes credited to changes in the nature of invention in England and Holland in the 1700s. If you believe those claims, then understanding what spurred invention from that point to the present is of singular importance.

A traditional story, going back to North and others, is that property rights were very important here. England had patents. England had well-enforced contracts for labor and capital. But, at least as far as patents are concerned, recent evidence suggests they couldn’t have been too critical. Moser showed that only 10% or so of important inventions in the mid-1800s were ever patented in the UK. Bob Allen, who we’ve met before on this site, has inspired a large literature on collective invention, or periods of open-source style sharing of information among industry leaders during critical phases of tinkering with new techniques.

Why would you share, though? Doesn’t this simply dissipate your rents? If you publicize knowledge of a productive process for which you are earning some rent, imitators can just come in and replicate that technology, competing away your profit. And yet, and yet, this doesn’t appear to happen in many historical circumstances. Bessen (he of Bessen and Maskin 2009, one of my favorite recent theoretical papers on innovation) and Nuvolari examine three nineteenth century industries, American steel, Cornish steam engines and New England power weavers. They show that periods of open sharing on invention, free transfer of technology to rivals, industry newsletters detailing new techniques, etc. can predominate for periods a decade and longer. In all three cases, patents are unimportant in this initial stage, though (at least outside of Cornwall) quite frequently used later in the development of the industry. Further, many of the important cost reducing microinventions in these industries came precisely during the period of collective invention.

The paper has no model, but very simply, here is what is going on. Consider a fast growing industry where some factors important for entry are in fixed supply; for example, the engineer Alexander Holley personally helped design eight of the first nine American mills using Bessemer’s technology. Assume all inventions are cost reducing. Holding sales price and demand constant, cost reductions increase industry profit. Sharing your invention ensures that you will not be frozen out of sharing by others. Trying to rely only on your own inventions to gain a cost advantage is not as useful as in standard Bertrand, since the fixed factors for entry in a new industry mean you can’t expand fast enough to meet market demand even if you had the cost advantage. There is little worry about free riding since the inventions are natural by-products of day-to-day problem solving rather than the result of concentrated effort: early product improvement is often an engineering problem, not a scientific one. Why would I assume sales price is roughly constant? Imagine an industry where the new technology is replacing something already being produced by a competitive industry (link steel rail ties replaced iron ties). The early Bessemer-produced ties in America were exactly this story, initially being a tiny fraction of the rail tie market, so the market price for ties was being determined by the older vintage of technology.

Open source invention is nothing unusual, nor is it something new. It has long coexisted with the type of invention for which patents may (only may!) be more suitable vectors for development. Policies that gunk up these periods of collective invention can be really damaging. I will discuss some new research in coming weeks about a common policy that appears to provide exactly this sort of gunk: the strict enforcement of non-compete agreements in certain states.

2012 Working Paper (IDEAS version)

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