Technological progress has long been widely recognized as a crucial source of economic growth. Many countries have, accordingly, devoted considerable resources to promote more rapid generation and diffusion of technology in their economies. Yet recent studies reveal a persistence of stark contrasts across countries and geographic space more generally, not only in productivity, but also in the generation of new technological knowledge. What accounts for these geographic disparities is not well understood.

Although there are several empirical studies of geographic variation in inventive activity, many abstract from the question of whether invention pertaining to the technology of an industry is linked to production.¹

Indeed, there has been virtually no systematic investigation of specific factors that might lead a region to be specialized in invention but not in production, nor of whether the significance of such factors varies across industries. This is unfortunate, especially because these issues have important implications for our understanding of today's global economic development. In recent years, the production of “technologically mature” industries has increasingly relocated from more-developed countries to less-developed countries with lower costs of labor and other inputs. It is not clear, however, whether, and to what extent, the low-wage countries that have been the recipients of such shifts in production will come to realize corresponding increases in their generation of new technical knowledge, and in so doing develop a firmer basis for long-term growth.

We may answer these questions by examining the geographic correlation between invention, production, and other factors that may also be conducive to invention. If a factor greatly stimulates invention, then the geography of invention and its evolution over time should mirror that of the factor. Nevertheless, this test may not be sufficient. For example, even if the co-location of invention and production is indeed observed, such geographic association between invention and production may not result from a direct link between invention and production. Instead, one or more resources crucial to both manufacturing and inventive activities may cause the two activities to co-locate. For instance, inventive activity may be carried out by individuals working in a capital good sector that locates in proximity to production because of high transportation costs.

Hence, to effectively evaluate the effects of production relocation on inventive activity (or more generally to identify factors that are conducive to inventive activity), we should look at inventors closely, exploring their biographical information such as their occupation, the organization they belong to, their educational background, as well as their migration patterns. In so doing, we can better understand whether the factors in question directly influence the location of invention.

Although detailed biographical information is rarely available for contemporary inventors, we can learn a great deal about early inventors from U.S. historical records such as census manuscripts and city directories. Among the information contained in these records is: year of birth, birthplace, and detailed occupation, place of business, and place of residence over the inventor's career. The United States is also a country large enough to have a great deal of interregional variation in factor endowments, but without so many confounding effects as there are from institutional difference across countries (for example, different industrial policies and patent regimes).

I therefore chose to study these issues from the U.S. historical experience. The dissertation focuses on the experience of the American shoe, textile, and electric (electrical machinery, generation, wiring, and lighting) industries during the so-called Second Industrial Revolution. During this period rapid technological changes that rival those of our own age took place. The three selected industries offer intriguing contrasts in both the level of technology and the geographic patterns of production. Two were traditional labor-intensive industries: in textiles, production migrated to a low-wage area but shoemaking remained based in New England. The electric industry was based on a radical new technology. Thus, these industries provide us with an opportunity to study whether the geography of invention (and its relation to that of production) was different for industries based on new technologies than for those relying on more mature technologies.

In order to examine the geographic patterns of invention in these three industries, I first constructed cross-sections of all shoe, textile and electric patents granted by the United States Patent and Trademark Office (USPTO) in 1870, 1890, and 1910.²

I selected patents intended for the shoe and textile industries by reading through the description of over 72,000 patents reported in the Annual Reports of the Commissioner of Patents for the three cross-section years.³ Whenever the description is not sufficient to identify an industry the patent was intended for, I obtained additional information such as drawings and specification of the patent from the Official Gazette of the United States Patent Office or the patent grant images in the United States Patent and Trademark Office's on-line database. For the electric patents, I used the USPTO patent classification to obtain a tentative list of electric patents. Then, I checked the information for each patent by employing the USPTO patent grant image on-line database to verify that the invention is indeed an electric patent.⁴

There are approximately 3,100 patents and 2,300 inventors in the sample.⁵

Information collected from the patent records includes: name and address of patentees and their assignees (individuals or firms who purchased the ownership of the inventions before the dates that the patents were granted); and the nature of the assignment (for example, whether the patentees retained a stake in the invention after the assignment). For each patentee, I have also obtained the total number of patents he received over a seven year period centered on the year of the sampled patents (as a measure of his productivity at invention). I then enhanced the patent data with biographical information for the inventors by linking them to the U.S. census of population manuscripts from 1850, 1860, 1870, 1880, 1900, 1910, 1920, and 1930; city directories (mostly in 1890); and college records (to identify whether these inventors received a college degree). Among the variables retrieved are: year of birth, birthplace, and for all years when I can find each inventor in a census manuscript or city directory, the industry or company he worked for, whether he was an owner or an officer of a company, and place of residence.

In all three industries, I find that the geographic patterns of invention were not so closely associated with the location of production. Regional shifts in textile production from the Northeast to the South were neither accompanied nor followed by corresponding increases in invention in the South, and the center of textile invention remained in Massachusetts long after the relocation of textile production had begun. An examination of inventors' occupational characteristics further reveals that a significant number of inventors, even in the craft-based shoe industry, were distinguished by their advanced technical skills instead of direct involvement in production. In the shoe and textile industries, these individuals were machinists or those who worked in the tool and machinery sector. In the electric industry, they were those who identified themselves as electricians or electrical engineers. These results imply that appropriate technical skills rather than proximity to production were crucial to carry out inventive activity in both low-tech (shoes and textiles) and high-tech (electric) industries. Not surprisingly, the location of invention therefore appeared to have mirrored the geographic distribution of individuals with such skills.

The evidence suggests that urban amenities such as access to information networks and market coordination mechanisms (such as patent agents and financial intermediaries) that promote trade and investment in technology seemed to have encouraged inventive activity, especially in the electric industry. Inventors who lived in urban centers were more likely to assign (sell) their patents. Inventors who were prolific and those who moved from other states or countries tended to reside in urban areas.

The traditional and new technology industries differed starkly in some of the characteristics of the inventors, and in the geographic patterns of where invention was taking place. Inventors in the electric industry were far more educated, younger, and geographically mobile over their careers than inventors in the traditional industries. The intriguing implication is that because individuals with the appropriate knowledge and skills to be effective contributors to new technology are often young and scarce in supply, they will be inclined to migrate to areas where demand for the technology (and rents to their scarce human capital) is high and resources to support the R&D are available. These circumstances, perhaps characteristic of new technology industries more generally, produced a weaker spatial association between invention and production. The electric industry exhibited a much more dispersed pattern of inventive activity with shifts in centers of invention over time (as opposed to the traditional industries whose centers of invention remained in the more developed regions even after textile production had begun to move elsewhere).

These findings suggest that developing countries may not emerge as centers of invention after having attracted shifts in manufacturing capacity from developed countries. They may have to wait a long time before they develop into important contributors to new technological knowledge. The challenge is certainly daunting, and it will not be surprising if many observers find the prospects gloomy. However, a more optimistic perspective on the same circumstances can be reasonably offered. An enormous gap between the technology at the cutting edge and the technology in use suggests that there is ample room for advance in a less-developed country's total factor productivity. In other words, it is still both quite possible and desirable for a follower to realize substantial productivity gains and economic growth without being responsible for shifting out the technology frontier. Even as regards developing a potential for high rates of invention, improvements in transportation and communication have made it easier for developing countries today to send their people to receive formal training abroad, or to otherwise access technological information, than it was during the Second Industrial Revolution. The examples of South Korea and Taiwan give confidence that the case for optimism is based on more than mere hope.