Ajay Agrawal

Putting Patents in Context: Exploring Knowledge Transfer from MIT

In this paper we explore the degree to which patents are representative of the magnitude, direction, and impact of the knowledge spilling out of the university by focusing on the Massachusetts Institute of Technology (MIT), and in particular, on the Departments of Mechanical and Electrical Engineering. Drawing on both qualitative and quantitative data, we show that patenting is a minority activity: a majority of the faculty in our sample never patent, and publication rates far outstrip patenting rates. Most faculty members estimate that patents account for less than 10% of the knowledge that transfers from their labs. Our results also suggest that in two important ways patenting is not representative of the patterns of knowledge generation and transfer from MIT: patent volume does not predict publication volume, and those firms that cite MIT papers are in general not the same firms as those that cite MIT patents. However, patent volume is positively correlated with paper citations, suggesting that patent counts may be reasonable measures of research impact. We close by speculating on the implications of our results for the difficult but important question of whether, in this setting, patenting acts as a substitute or a complement to the process of fundamental research.

Some Simple Economics of Crowdfunding

It is not surprising that the financing of early-stage creative projects and ventures is typically geographically localized since these types of funding decisions are usually predicated on personal relationships and due diligence requiring face-to-face interactions in response to high levels of risk, uncertainty, and information asymmetry. So, to economists, the recent rise of crowdfunding—raising capital from many people through an online platform—which offers little opportunity for careful due diligence and involves not only friends and family but also many strangers from near and far, is initially startling. On the eve of launching equity-based crowdfunding, a new market for early-stage finance in the United States, we provide a preliminary exploration of its underlying economics. We highlight the extent to which economic theory, in particular transaction costs, reputation, and market design, can explain the rise of nonequity crowdfunding and offer a framework for speculating on how equity-based crowdfunding may unfold. We conclude by articulating open questions related to how crowdfunding may affect social welfare and the rate and direction of innovation.

Crowdfunding: : Geography, social networks, and the timing of investment decisions

type=main> We examine a crowdfunding platform that connects artists with funders. Although the Internet reduces many distance-related frictions, local and distant funders exhibit different funding patterns. Local funders appear less responsive to information about the cumulative funds raised by an artist. However, this distance effect appears to proxy for a social effect: it is largely explained by funders who likely have an offline social relationship with the artist (“friends and family”). Yet, this social effect does not persist past the first investment, suggesting that it may be driven by an activity like search but not monitoring. Thus, although the platform seems to diminish many distance-sensitive costs, it does not eliminate all of them. These findings provide a deeper understanding of the abilities and limitations of online markets to facilitate transactions and convey information between buyers and sellers with varying degrees of social connectedness.

Restructuring Research: Communication Costs and the Democratization of University Innovation

We report evidence indicating that Bitnet adoption facilitated increased research collaboration between US universities. However, not all institutions benefited equally. Using panel data from seven top engineering journals, Bitnet connection records, and a variety of institution ranking data, we find that medium-ranked universities were the primary beneficiaries; they benefited largely by increasing their collaboration with top-ranked schools. Furthermore, we find that the magnitude of this effect was greatest for co-located pairs. These results suggest that the most salient effect of lowering communication costs may have been to facilitate gains from trade through the specialization of research tasks. Thus, the advent of Bitnet -- and likely subsequent versions, including the Internet -- seems to have increased the role of second-tier universities in the national innovation system as producers of new, high-quality knowledge.

Life sciences venture capital in emerging markets

195 in-licensed by the firm (see Supplementary Tables 1 and 2 for a full list of Chinese and Indian firm descriptions). We exclude manufacturing and traditional medicines, which occur overwhelmingly in China, for a consistent and fair comparison of countries across regulated products that require R&D and clinical trials for approval. Including such firms focusing on traditional medicines or manufacturing would bias our analysis of relationships between VC and PE investment and other factors, such as government financing of biomedical R&D. For funds with international investments, we required that the firm had an R&D presence in one of the emerging markets. We validated our data set by surveying 25 VC funds that collectively participated in half the historical life sciences deals in these countries and verified them with independent databases, including Zero2IPO, VentureIntelligence and DowJones VentureSource. In contrast to the widely held perception that life sciences VC and PE investment activity is booming in emerging nations12,13, our data suggest that innovative life sciences VC activity has been muted. Overall, we report a total of 116 VC-backed firms financed by 148 deals. Of these, 76 firms report public equity rounds totaling ~

Roads and Innovation

1.065 billion (Fig. 1). Extrapolating from these data, we estimate that since 2000, VC and PE firms To the Editor: Emerging markets, such as Brazil1, China2, India3 and South Africa4, are increasingly recognized as placing great emphasis on innovation in the life sciences. Expanding research expenditure and capacity driven by rapid economic growth and repatriation of scientific talent has led to rising numbers of peer-reviewed publications5, patent filings6 and international scientific collaborations7,8. A simultaneous surge in investment has reportedly accompanied this research activity in terms of foreign direct investment flows by large multinational pharmaceutical firms9, biotech firm formation recorded by industry association data and billion-dollar annual life sciences private equity (PE) investment levels10 (Table 1). Yet, data on sources of venture capital (VC) that are supporting such innovative biotech startups are unclear because existing investment metrics include not only innovative enterprises but also manufacturing or service firms lacking R&D capability. The quality of published data is also poor, with only one study on healthcare VC activity in China providing data for a single quarter in 2008 and it does not separate innovative ventures11. Here, we present a data set of life sciences VC in emerging markets to inform government innovation policy and VC investment strategy. Our data suggest that life sciences VC activity is low in the emerging economies we studied, despite growing levels of activity in that sector and in those regions. Furthermore, VC investments in emerging economies are disproportionately concentrated in a small set of funds historically selecting oncology assets (~78% of therapeutics). What’s more, these investments are supported by syndicates and investment-round sizes that are substantially smaller than those seen in the United States or European Union, forcing both domestic and foreign VC investors to develop novel investment strategies to mitigate countryspecific risk. We conducted a comprehensive search for innovative, VC-backed investments related to human healthcare from January 2000 to August 2012 in key emerging markets, specifically Brazil, China, India and South Africa (Supplementary Methods). We selected these countries because we were able to validate the quantitative data with qualitative reports from our prior relevant fieldwork. For the same reason, we excluded important emerging countries, such as Singapore, because we were unable to reconcile data with qualitative reports. This validation is critical, given the lack of access to high-quality data. We use the term innovative to characterize biotech firms developing products for humans, such as therapeutics and vaccines, based on new, proprietary technology invented or Life sciences venture capital in emerging markets

Public Sector Science And The Strategy Of The Commons

We exploit historical data on planned highways, railroads, and exploration routes as sources of exogenous variation in order to estimate the effect of interstate highways on regional innovation: a 10% increase in a regions stock of highways causes a 1.7% increase in regional patenting over a five-year period. In terms of the mechanism, we report evidence that roads facilitate local knowledge flows, increasing the likelihood that innovators access knowledge inputs from local but more distant neighbors. Thus, transportation infrastructure may spur regional growth above and beyond the more commonly discussed agglomeration economies predicated on an inflow of new workers.

Birds of a Feather - Better Together? How Co-Ethnicity and Co-Location Influence Knowledge Flow Patterns

We model the conditions under which incumbent firms may purposefully create an intellectual property (IP) commons such that no firm has the incentive to invest in new product development, despite the potential profitability of a public sector invention. The strategy of spoiling incentives to innovate by eliminating exclusive IP rights—the strategy of the commons—is motivated by a fear of cannibalization and supported by a credible threat. We show how the degree of potential cannibalization is related to this market failure and characterize the subgame perfect equilibrium in which the strategy of the commons is played. †We are grateful to Jim Brander, Iain Cockburn, Jerry Thursby, and participants of theNBERproductivityworkshop for thoughtful comments, and to the Social Sciences and Humanities Research Council of Canada (Grant No. 410-2004-1770) as well as the Mellon Foundation for generous financial support.

Does Knowledge Accumulation Increase the Returns to Collaboration

We estimate a knowledge flow production function using patent data associated with U.S. inventors of Indian origin. Our results suggest that co-location and co-ethnicity substitute for rather than complement one another in terms of facilitating knowledge flows. Our model shows this is a sufficient condition for: 1) diversity to be optimal for a city and 2) a dispersed diaspora to be optimal for the economy. However, for dispersion to be optimal for the diaspora itself and for the dispersed equilibrium to be stable the negative interaction effect must outweigh the co-location effect; our results indicate this is not the case.

Transaction costs in technology transfer and implications for strategy

We examine the role of knowledge accumulation in explaining the increase in research team size over time by exploiting the collapse of the USSR as an instrument that led to the sudden release of previously hidden research. We examine changes over time in the propensity of non-Soviet mathematicians to collaborate in fields in which Soviet research was strong to fields in which Soviet research was weak. We find that coauthorship increased disproportionately in Soviet-rich subfields after 1990. Furthermore, consistent with the hypothesized mechanism, scholars in Soviet-rich subfields disproportionately increased citations to Soviet prior art. These scholars also became increasingly specialized.