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The Impact of Institutions on Innovation

Author

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  • Donges, Alexander
  • Meier, Jean-Marie A.
  • Silva, Rui C.

Abstract

This paper studies the impact of radical institutional reform on innovation. We use the timing and geography of French invasions of different regions of Germany after the French revolution of 1789 as an exogenous shock to the institutions of those regions. German regions that were invaded by the French subsequently changed their institutions in important ways, including the introduction of the civil code, the dissolution of guilds, the abolition of serfdom and the implementation of agrarian reforms. These institutional changes in turn affect innovation. Using patents per capita as our measure of innovation, we show that counties whose institutions are more inclusive as a result of the French occupation also become more innovative. Moving from a county with no occupation to a county with the longest occupation, the implied changes in institutional reforms result in an increase of patents per capita of 123%. Our findings point to institutions as a first order determinant of innovation and highlight the role of innovation as a key mechanism through which institutions may foster economic growth.

Suggested Citation

  • Donges, Alexander & Meier, Jean-Marie A. & Silva, Rui C., 2016. "The Impact of Institutions on Innovation," VfS Annual Conference 2016 (Augsburg): Demographic Change 145952, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc16:145952
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    Cited by:

    1. Donges, Alexander & Selgert, Felix, 2019. "The Consequences of Radical Patent-Regime Change," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203662, Verein für Socialpolitik / German Economic Association.
    2. Michel Serafinelli & Guido Tabellini, 2022. "Creativity over time and space," Journal of Economic Growth, Springer, vol. 27(1), pages 1-43, March.
    3. De Bruyn, Gianni & Freed, Paul G., 2025. "Workforce sleep and corporate innovation," Research Policy, Elsevier, vol. 54(3).
    4. An, Jiafu & Chen, Boyang & Zhao, Ruoran, 2025. "Epidemic disease and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 231(C).
    5. Michael Fritsch & Martin Obschonka & Fabian Wahl & Michael Wyrwich, 2021. "Cultural Imprinting: Ancient Origins of Entrepreneurship and Innovation in Germany," Jena Economics Research Papers 2021-012, Friedrich-Schiller-University Jena.
    6. Hong Xu & Kai Lin & Hui Wang & Weifen Lin & Longzheng Du, 2025. "Does local green governance promote corporate green innovation? A new perspective from green officials," Empirical Economics, Springer, vol. 68(4), pages 1861-1892, April.
    7. Lehmann-Hasemeyer, Sibylle H. & Streb, Jochen, 2018. "Discrimination against Foreigners. The Wuerttemberg Patent Law in Administrative Practice," Working Papers 7, German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin.
    8. Fritsch, Michael & Obschonka, Martin & Wahl, Fabian & Wyrwich, Michael, 2020. "The deep imprint of Roman sandals: Evidence of long-lasting effects of Roman rule on personality, economic performance, and well-being in Germany," Hohenheim Discussion Papers in Business, Economics and Social Sciences 05-2020, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    9. Hong Jiang & Weiting Xiong, 2024. "The Impact of Land-Use Mix on Technological Innovation: Evidence from a Grid-Cell-Level Analysis of Shanghai, China," Land, MDPI, vol. 13(4), pages 1-17, April.
    10. Leonard DUDLEY & Christopher RAUH, 2018. "Innovation Growth Clusters : Lessons from the Industrial Revolution," Cahiers de recherche 19-2018, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    11. Palmisano, Flaviana & Sacchi, Agnese, 2024. "Trust in public institutions, inequality, and digital interaction: Empirical evidence from European Union countries," Journal of Macroeconomics, Elsevier, vol. 79(C).
    12. Gan Jin & Günther G. Schulze, 2024. "The Long-term Effect of Western Customs Institution on Firm Innovation in China," Discussion Paper Series 46 JEL Classification: N7, Department of International Economic Policy, University of Freiburg, revised Feb 2024.
    13. Ahmed Chafai & Rym Oueslati & Hatem Salah, 2025. "Innovation Activities and Sustainable Firm Growth in Arab Countries: The Role of Bank Funding, Institutional Quality and Bank Competition," Working Papers 1819, Economic Research Forum, revised 20 Dec 2025.
    14. Chiu, Ya-Ling & Luo, Jinbo & Boscaljon, Brian L., 2024. "The Mist of corporate innovation," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 602-624.
    15. Daniel Gallardo‐Albarrán, 2020. "Sanitary infrastructures and the decline of mortality in Germany, 1877–1913," Economic History Review, Economic History Society, vol. 73(3), pages 730-757, August.
    16. Kyriaki I. Kafka & Pantelis C. Kostis & Panagiotis E. Petrakis, 2022. "Institutional Effects on Innovation and the Requirements for Structural Reforms," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(1), pages 211-235, March.
    17. Shanshan Wang & Hongyan Zhou & Tianyi Zhao, 2024. "Configuration paths to high-value patents: evidence from patents winning the China Patent Awards," Scientometrics, Springer;Akadémiai Kiadó, vol. 129(5), pages 2633-2658, May.
    18. Danta, Subal & Rath, Badri Narayan, 2024. "Do institutional quality and human capital matter for innovation in case of Asian region?," Innovation and Green Development, Elsevier, vol. 3(3).
    19. Zhang, Min & Rodríguez-Pose, Andrés, 2024. "Government reform and innovation performance in China," LSE Research Online Documents on Economics 122728, London School of Economics and Political Science, LSE Library.
    20. Jin, Gan & Schulze, Günther G., 2025. "The long-term effect of western customs institution on firm innovation in China," Journal of Economic Behavior & Organization, Elsevier, vol. 237(C).
    21. Batool Misbah & Khan Faiza Azhar & Tufail Saira, 2025. "Radical Innovations and Economic Development: Comparative Role of Social and Human Capital in Developing Countries," Zagreb International Review of Economics and Business, Sciendo, vol. 28(2), pages 231-254.
    22. Katrin Hussinger & Lorenzo Palladini, "undated". "Do China’s Special Economic Zones Increase Incentives to Invest in R&D?," DEM Discussion Paper Series 25-10, Department of Economics at the University of Luxembourg.
    23. Baghai, Ramin & Silva, Rui & Ye, Luofu, 2018. "Teams and Bankruptcy," CEPR Discussion Papers 13198, C.E.P.R. Discussion Papers.
    24. Billington, Stephen D. & Colvin, Christopher L. & Coyle, Christopher, 2025. "Financing innovation: The role of patent examination," QUCEH Working Paper Series 25-01, Queen's University Belfast, Queen's University Centre for Economic History.
    25. Alvina Sabah Idrees & Saima Sarwar, 2021. "State effectiveness, property rights and entrepreneurial behaviour as determinants of National Innovation," Australian Economic Papers, Wiley Blackwell, vol. 60(3), pages 392-423, September.

    More about this item

    JEL classification:

    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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