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The Reorganization of Inventive Activity in the United States during the Early Twentieth Century

In: Understanding Long-Run Economic Growth: Geography, Institutions, and the Knowledge Economy

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  • Naomi R. Lamoreaux
  • Kenneth L. Sokoloff
  • Dhanoos Sutthiphisal

Abstract

The standard view of U.S. technological history is that the locus of invention shifted during the early twentieth century to large firms whose in-house research laboratories were superior sites for advancing the complex technologies of the second industrial revolution. In recent years this view has been subject to increasing criticism. At the same time, new research on equity markets during the early twentieth century suggests that smaller, more entrepreneurial enterprises were finding it easier to gain financial backing for technological discovery. We use data on the assignment (sale or transfer) of patents to explore the extent to which, and how, inventive activity was reorganized during this period. We find that two alternative modes of technological discovery developed in parallel during the early twentieth century. The first, concentrated in the Middle Atlantic region, centered on large firms with in-house R&D labs and superior access to the region’s rapidly growing equity markets. The other, located mainly in the East North Central region, consisted of smaller, more entrepreneurial enterprises that drew primarily on local sources of funds. Both modes seem to have made roughly equivalent contributions to technological change through the 1920s. The subsequent dominance of large firms seems to have been propelled by a differential access to capital during the Great Depression that was subsequently reinforced by the regulatory and military procurement policies of the federal government.

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This chapter was published in:

  • Dora L. Costa & Naomi R. Lamoreaux, 2011. "Understanding Long-Run Economic Growth: Geography, Institutions, and the Knowledge Economy," NBER Books, National Bureau of Economic Research, Inc, number cost10-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12001.

    Handle: RePEc:nbr:nberch:12001

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    1. White, Eugene N., 2013. "Competition among the exchanges before the SEC: was the NYSE a natural hegemon?," Financial History Review, Cambridge University Press, Cambridge University Press, vol. 20(01), pages 29-48, April.
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    Cited by:
    1. Neal, Larry & White, Eugene N., 2012. "The Glass–Steagall Act in historical perspective," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 52(2), pages 104-113.
    2. Alessandro Nuvolari & Michelangelo Vasta, 2013. "Independent Invention in Italy during the Liberal Age, 1861-1913," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2013/20, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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