Fact of the Week: Government Support for Innovation Is a Critical Driver of Technological Complexity
Source: Carolin Nast, Tom Broekel and Doris Entner, “Fueling the Fire? How Government Support Drives Technological Progress and Complexity,” Papers in Evolutionary Economic Geography (PEEG), Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, no. 24.07 (April 2024).
Commentary: A recent working paper by Carolin Nast, Tom Broekel and Doris Entner analyzed the role of innovation policy in the United States in spurring technological progress since the 1980s. Using data on USPTO patents from the PatentsView Database, the authors looked at 655 distinct technology groups over the 1981–2016 period. They measured technological complexity using a measure called the network diversity score (NDS). The NDS measures technological complexity as a function of the diversity in the knowledge involved in developing a particular technology. Additionally, the authors measured government supports for innovation using data from Harvard University’s Dataverse, which measured government support based on funding for research, government ownership of patents, and patent citation of government-funded R&D. The study’s findings suggest that government support for innovation not only increases the number of private-sector patents, but also has a positive effect on technological complexity.
While the authors refrained from providing a specific way of interpreting the magnitude of their results, they still provide useful insights into the use of different government supports. When looking at the role of government funding, there was a positive effect on the number of private sector patents. A larger number of private sector patents, in turn, had a positive effect on the complexity of patented technologies. Perhaps unsurprisingly, government funding also had a positive effect on citations of government R&D. Such citations were also associated with a greater degree of complexity in patented technologies. Some of the positive effects of government support persisted after one- and two-year periods. For instance, government funding continued to have a positive effect on the number of private sector patents after one year, and the number of private sector patents in turn had a positive effect on technological complexity after one year and two years.
