30 Sep 2009Working Paper Summaries

Breakthrough Inventions and Migrating Clusters of Innovation

by William R. Kerr

In just a short period of time the spatial location of invention can shift substantially. The San Francisco Bay Area grew from 5 percent of U.S. domestic patents in 1975-1984 to over 12 percent in 1995-2004, for example, while the share for New York City declined from 12 percent to 7 percent. Smaller cities like Austin, Texas, and Boise, Idaho, seem to have become clusters of innovation overnight. Despite the prevalence of these movements, we know very little about what drives spatial adjustments in U.S. invention, the speed at which these reallocations occur, and their economic consequences. In this paper, HBS professor William R. Kerr investigates whether breakthrough inventions draw subsequent research efforts for a technology to a local area. Evidence strongly supports the conclusion that centers of breakthrough innovations experience subsequent growth in innovation relative to their peer locations. Key concepts include:

Breakthrough inventions spur higher subsequent growth in innovation within a local area and technology compared to peer locations that, for example, have the same overall numbers of patents and similar technologies at the time when the breakthrough occurred.
The underlying mobility of the workforce is quite important for the speed at which spatial adjustments occur. Immigrants, and particularly new immigration to the United States, can facilitate faster spatial reallocation.

Author Abstract

We investigate the speed at which clusters of invention for a technology migrate spatially following breakthrough inventions. We identify breakthrough inventions as the top one percent of US inventions for a technology during 1975-1984 in terms of subsequent citations. Patenting growth is significantly higher in cities and technologies where breakthrough inventions occur after 1984 relative to peer locations that do not experience breakthrough inventions. This growth differential in turn depends on the mobility of the technology's labor force, which we model through the extent that technologies depend upon immigrant scientists and engineers. Spatial adjustments are faster for technologies that depend heavily on immigrant inventors. The results qualitatively confirm the mechanism of industry migration proposed in models like Duranton (2007).