Prizes and the Publication of
Ideas
Petra Moser
Tom Nicholas
Working Paper
13-031
September 13, 2012
Copyright © 2012 by Petra Moser and Tom Nicholas
Working papers are in draft form. This working paper is distributed for purposes of comment and
discussion only. It may not be reproduced without permission of the copyright holder. Copies of working
papers are available from the author.
Prizes and the Publication of Ideas
Petra Moser∗
Tom Nicholas†
Stanford and NBER
Harvard Business School
September 13, 2012
Abstract
We examine whether prizes encourage innovation, and if so, how. We compare
changes in U.S. patents per year for technology areas where U.S. inventors won prizes
for exceptional innovations at the World’s Fair in London in 1851 with technology
areas where U.S. inventors exhibited but did not win a prize. We also compare
changes in technology areas for inventions that were advertised in 1851 as lead
articles in the Scientific American, a major science journal of the time. We find
comparable increases in invention after 1851 through prizes and publication relative
to other U.S. technologies. Since the signaling component of a World’s Fair prize was
replicated through publication of an invention in the Scientific American, our results
suggest that publicity for promising research fields is an important mechanism by
which prizes encourage innovation.
JEL: O31, O30, N40
Keywords: Prizes, Patents, Publications, Science
∗
579 Serra Mall, Stanford, CA 94305, USA. Email: [email protected]. Phone: (650) 723-9303. Fax: (650) 725-5702.
†
Soldiers Field Road, Boston, MA 02163, USA. Email: [email protected]. Phone: (617) 495-6505. Fax: (617) 496-9272.
We wish to thank Nicola Bianchi and Kyler Sasson for excellent research assistance, and the Stanford VPUE program and
the Division of Research and Faculty Development at Harvard Business School for financial support.
1
Introduction
Prizes are becoming increasingly prominent as a policy tool to encourage innovation in
medical, energy, environmental and other technologies where innovation creates large welfare effects and market failures leads to underinvestment (Kremer, 1998; Scotchmer, 2004;
Kalil, 2006). The Medical Innovation Prize, for example, creates a buy-out mechanism
to compensate pharmaceutical firms for developing drugs that are socially valuable, but
unattractive for private firms (Kremer and Williams, 2010). An Automotive X-Prize announced in 2007 aims to encourage innovation in super fuel-efficient vehicle design, and
other X-Prizes target technologies in areas such as cleaning up surface water oil, or in
mobile medical devices that diagnose patients without the need for a trained physician.
The recent America COMPETES Reauthorization Act allows the NSF to use prizes to
boost innovation in underserved technologies of exceptional social value.
Despite the growing use of prizes to create incentives to invent, there is a great deal of
uncertainty about their effectiveness, and in particular about the mechanisms by which
prizes may encourage innovation. Theoretical analyses have focused on determining the
optimal amount of monetary compensation to incentivize invention in the absence of
intellectual property (Polanvyi, 1944; Wright, 1983; Shavell and Ypersele, 2001; Chari
et al., 2012). For example, Kremer (1998) develops an auction-based patent buyout
that compensates inventors with a monetary prize for the social value of their intellectual
property, which then enters the public domain. However, empirical analyses of technology
competitions suggest that prizes that do not carry a monetary award can also be extremely
effective in encouraging invention (Brunt et al. 2013; Nicholas, 2013).
We show that prizes can encourage innovation by signaling to inventors areas for
productive research and development. In that sense, prizes can provide a strong indirect
incentive to invent in addition to the direct incentive to invent due to inventors developing
new technologies to enter into prize competitions. While there is renewed interest in the
use of prizes as a mechanism for accelerating technological development in the literature on
the economics of innovation and in policy discussions, empirical data is rarely available in
modern settings to determine these types of nuanced causal effects. Using novel historical
data sources covering prizes, technology publications and inventions that were patented,
2
we identify the indirect effect of prizes on innovation in two stages.
First, we show that invention increased in response to prizes awarded at the World’s
Fair in 1851.1 We match exhibited and prize winning inventions to U.S. patents. We then
compare post-1851 changes in U.S. patents per year in technology areas at the level of
United States Patent and Trademark Office (USPTO) subclasses where U.S. exhibitors
received a prize for exceptional innovations with relative changes in U.S. patents per year
where U.S. inventors exhibited their innovations, but did not win a prize. We also test
for an effect of prizes on the quality of inventions using patent citations. Our differencein-differences strategy allows us to control for variation in the demand for innovations
and other unobservable factors such as the ex ante attractiveness of technology areas that
may have encouraged innovation independently of the award of a prize.
Second, we exploit the fact that the signaling component of the prize, which we argue
causes the indirect incentive to invent, was replicated without prizes through publication
of inventions in the Scientific American, one of the leading technology journals of the
time. The Scientific American (established in 1845) was closely followed by inventors
tracking trends in science and technology. Circulation of the weekly publication exceeded
10,000 in 1848, rose to 20,000 in 1852 and reached 30,000 in 1853 (Mott, 1938, p. 319). By
comparison the New York Times had a circulation of 25,000 for its weekly edition in 1850
(Dana and Ripley, 1861, vol.12, p. 317). We match inventions that were published as lead
articles in the Scientific American in 1851 with USPTO subclasses and compare changes
in U.S. patents in these technology areas with changes in closely related subclasses in
the same USPTO main class, broader aggregations of technology areas and subclasses
associated with inventions exhibited at Crystal Palace.
Our analysis of U.S. patents granted between 1840 and 1870 reveals that subclasses
that were awarded at least one prize produced significantly more patents after 1851 compared with subclasses where U.S. inventors exhibited but did not win a prize. Equivalent
tests with broader comparison groups yield somewhat larger effects. We also detect an
effect when adjusting for the quality of inventions in subclasses using patent citations,
1
See Moser (2005 and 2012) for a detailed account of the Crystal Palace and other World’s Fairs,
as well as potential sources of measurement error and bias in using exhibition data as a measure of
innovation.
3
which indicates that the increase in invention after 1851 was not being driven by frivolous
patents. Estimates of time-specific effects indicate that the boost to patenting begun
immediately after the Crystal Palace exhibition and persisted for approximately 10 years.
We find no evidence of differential pre-existing trends for our treatment and control subclasses or contemporaneous technology shocks that could explain our results.
Estimated effects for publication in the Scientific American are roughly equivalent to
those for Crystal Palace prize-winning technologies and in some specifications they are
even larger. Estimates of time-specific effects indicate that the boost provided by prominent publication also persisted for approximately 10 years, before attenuating towards the
end of our time period. We interpret our post-1851 relative changes in invention as causal
effects that can be attributed to the signaling value of a publication. Given that the signaling component associated with exceptional inventions at Crystal Palace was matched
by publication of an invention in the Scientific American, our findings overall suggest that
signaling to inventors potential areas for new technological development is an important
mechanism through which prizes can provide indirect incentives for innovation.
We also test for additional effects that are important to the interpretation of our
main results. Our difference-in-differences specifications focus on the relative change
in patenting, or citations, in the technology area of the invention that won a prize, or
was published as a lead article in the Scientific American. Using citation regressions at
the patent-level, we examine whether these were the right technologies to target. The
selection of inventions for prizes or publication may affect aggregate innovation and the
direction of technological change. Because our citations are collected from patents granted
between 1947 and 2008 they capture inventions that were technologically significant and
particularly long-lived. We find prize-winning inventions had higher citations than patents
in the same subclasses, but inventions published as a lead article in the Scientific American
did not. While prizes were awarded systematically by international committees at Crystal
Palace, editors alone determined which inventions were chosen to be published as a lead
articles in the Scientific American.
Finally, an alternative interpretation of our main results is that they reflect knowledge spillovers from inventors patenting focal inventions that would have occurred even
4
in the absence of prizes or publication. Crystal Palace prizes were awarded ex post of
the development of an invention and the Scientific American published lead articles on
existing inventions. Research in the patent literature suggests that spillovers are likely
to be geographically localized (e.g., Jaffe et al. 1993) a factor that would be exaggerated
further in our nineteenth century time period when transportation and communications
constraints limited the distance over which knowledge could diffuse. To implement a
test, we collected data on the geographic locations of all inventors that were granted U.S.
patents and we use a difference-in-differences framework to estimate pre- and post-period
changes in geographic distances from focal prize-winning and published inventors. Our
results are consistent with prizes (though to a lesser extent publication) diffusing ideas to
a geographically broad population of inventors.
The remainder of this paper is organized as follows. Section II describes the data on
prizes, exhibits at the World’s Fair and lead articles in the Scientific American in 1851,
and explains how we extract information on USPTO subclasses as a measure of technology
areas. Section III outlines the empirical strategy, section IV presents our main results,
section V provides robustness checks, and Section VI concludes.
2
2.1
The Data
Prize winners and other exhibits in London 1851
The Crystal Palace exhibition, which took place in Hyde Park in London in 1851, was a
watershed event in the history of World’s Fairs. For the first time, visitors from across
the globe had the opportunity to see innovations from different countries, and exchange
ideas with foreign inventors (Kretschmer, 1971; Bericht, 1853). The organizers envisaged
that technological knowledge would be diffused widely and this would stimulate trade
and industry. A total of 17,062 exhibitors from 40 countries displayed their innovations
in a giant glass house, the Crystal Palace, which covered 772,784 square feet, and by
itself rewrote architectural history. Over six million entry tickets to the Crystal Palace
exhibition were sold during the six months that it was open. More than 5,000 visitors
5
traveled from the United States alone (Auerbach, 1999, p.1; Hobhouse, 2002, p.71).2
The Royal Commission for Crystal Palace exhibition stipulated that any exhibits submitted by a participating country would need to be approved by a central authority in
that country. U.S. participants at the exhibition, which we focus on in this paper, were
selected by an independent Executive Committee established by the National Institute
for the Promotion of Science and the Arts in Washington D.C. It collated information on
exceptional innovations from state-level commissioners who in turn had requested submissions from local inventors. Massachusetts commissioners advertised:
In conformity with the request of the “Central authority” at Washington, the
undersigned would respectfully solicit contributions from the Agriculturalist,
the Manufacturer, the Mechanic, and from all the industrial classes in every
department of human labor throughout the Commonwealth, so that the citizens of Massachusetts, known for their inventive genius and productive skill,
may be fully and honorably represented at this assemblage of the industry of
the world (Dalzell, 1960, p. 21).
To bring their exhibits to London, exhibitors only had to cover transport costs to a
local within the United States from where exhibits would be transferred to New York by
the Revenue Cutter Service, the forerunner of the U.S. Coast Guard. All exhibits were
then shipped from New York on a frigate - the St. Lawrence - paid for by the Treasury
Department (Cunliffe, 1951).3
In terms of sheer numbers, the U.S. presentation was relatively small at 572 exhibits,
compared with more than 8,000 British exhibits, 2,000 from the German Zollverein, and
1,700 from France (Moser 2005). Although American exhibits did not full their allotted
display space, they still drew a significant amount of attention. Hobhouse (2002, p.67)
writes that:
The United States section was substantial, dominated by an eagle. In the
center was a full-sized model of Rider’s improved Suspension Truss Bridge,
2
Horace Greeley, a noted American juror on the Crystal Palace award committee described the typical:
“Yankee Manufacturer [who] passes rapidly through the Machinery room, until his eye rests on a novel
combination for weaving certain fabrics, when, after watching it intently for a few minutes, he claps his
hand and exclaims in unconscious, irrepressible enthusiasm, ‘That will pay my expenses for the trip!’”
(Cunliffe, 1951, p.126).
3
George Peabody, an American banker who lived in England donated $15,000 to cover transportation
costs from the British port of entry - Southampton - to Hyde Park.
6
surmounted by a trophy of vulcanized rubber from the Goodyear Rubber
Company.
Charles Goodyear (1800-1860) spared no expense in preparing for the exhibition.
“Goodyear’s Vulcanite Court”, as his lavish three-room display was named, cost $30,000
to create, or around $850,000 in today’s prices, and occupied more space in the exhibition
building than the rest of the American displays combined. Every item - from furniture to
carpeting to various trinkets, was manufactured with rubber. Several other U.S. exhibits
captured attention. McCormick’s workable mechanical reaper, which challenged the notion of British agricultural pre-eminence and firearms displays by Samuel Colt (1814-1862)
exemplified the American system of manufactures (Rosenberg, 1969; Hounshell, 1985).
Prizes were awarded for inventions by mixed British and foreign juries who were expected to abide by a strict set of guidelines. Most American representatives came from
Massachusetts, Pennsylvania and New York, but U.S. jurors also included representatives from Texas, Virginia and Alabama. A total of 2,918 prizes were awarded in 1851,
including 170 Council Medals.
To encourage the diffusion of knowledge juries prepared reports on the “state of science,
art and manufactures in the several branches of the Exhibition” (Hobhouse, 2002, p.48,
75). Prizes provided strong inducements for exhibitors because contemporary inventors
were keenly aware of the effects that winning a prize may have on their sales. For example,
Samuel Colt wrote to his cousin Elisha Colt in July 1849:
Thees medles we must get & I must have them with me in Europe to help
make up the reputation of my arms as soon as I begin to make a noyes about
them & I must get duplicates of the old ones that have been lost all these
things go a grate ways in Europe & it would pay for a special trip to America
to secure them if they cannot be got without my presence there.4
We use detailed descriptions of individual prizes in the reports of the German Commission to the Crystal Palace (Bericht 1853), to match prize-winners to innovations that
are described in the Crystal Palace catalogue. Exhibition catalogues that guided visitors
through the fair grounds are the key source of data for this analysis. These catalogues
4
Samuel Colt to Elisha Colt, 18 July 1849. Records of the Colt’s Patent Fire Arms Manufacturing
Company, RG 103, Business File, Series III, Incoming Correspondence, Box 8, Conneticut State Library.
7
describe 572 distinct innovations by 557 U.S. exhibitors. U.S. exhibitors won a total of
180 prizes in 1851. Charles Goodyear and Cyrus McCormick were awarded gold medals
(i.e., Council Medals) for their contributions. Samuel Colt received bronze medals.
2.2
Matching exhibits and prize-winners to USPTO subclasses
To identify technology areas that may have been affected by a prize, we match prizewinners and a control group of exhibits to narrowly defined subclasses within the USPTO
classification scheme. We use the 2006 classification system as applied to our historical
patents. Whenever the USPTO updates its classification to accout for new technology
areas all existing patents are retroactively classified according to this scheme.5 In total
the 2006 classification contains 473 main classes and 151,719 subclasses.6
To match the 572 innovations of U.S. exhibitors in 1851 we performed searches of the
original patent documents. For example, we match:
G. HOTCHKISS, New York, Noddle-iron, tram-block, and bridge-tree, for
saw-mills as listed in the Crystal Palace Catalogue.
and
U.S. Patent 7,167 granted to GIDEON HOTCHKISS, New York, Noddle Iron
for Saw Mills on March 12th 1850.
USPTO main class = 83 and subclass = 699.210.
Table 1 shows this process yielded 105 matches for 557 exhibits, implying that 18
percent of exhibits were patented, confirming that the majority of mid nineteenth century
innovations may have occurred outside of the patent system (Moser, 2012). Most exhibits
were patented immediately preceding the exhibition or in 1851 (Figure 1), but a small
number of exhibits were patented as early as 1841 or as late as 1861. Some inventions
were patented more than once, such as a meat machine by John G. Perry of Rhode Island,
which was patented 11 times between 1850 and 1860. If an exhibit was patented more
than once we use all the main class and subclasses for assignment purposes. In total we
5
The first main attempt at systematization occurred in 1837 where patents already granted going back
to 1790 were organized into 21 main classes. The USPTO has carried on this tradition of re-classifying
patents. For additional details, see further, Connor and Brenner (1966).
6
For our event window between 1840 and 1870, which we describe in more detail below, 84 percent of
these main classes and 26 percent of these subclasses were in use.
8
find that the 105 patented exhibits covered 180 patents, 84 main USPTO classes and 156
subclasses.
2.3
Lead articles in the Scientific American
Our second data source is inventions prominently displayed to potential patentees in the
U.S. as lead articles of the Scientific American in 1851. The first issue was published in
1845 as “the advocate of industry and the journal of mechanical and other improvements.”
It became the most widely circulated of all scientific publications exceeding competitors
such as the Journal of the Franklin Institute and the Inventor (Mott, 1938, p.80).
By the 1880s the Scientific American had achieved such distinction that inventors were
willing to pay for their inventions to be covered (Hounshell, 1980). Owned by Munn &
Company, the New York patent agency, it had a strong slant towards intellectual property
rights issues, and a major part of its appeal stemmed from lists of new patents it published
in each issue. This, as well as its editorials and articles, gave readers across the U.S. a
window into new technologies and areas of experimentation (Mott, 1938, p.318).
For this “non-prize” channel, we establish an additional independent set of patent
classes and subclasses. We use lead articles in the Scientific American under the assumption that editorial decisions were made in order to convey important new knowledge about
innovations. This is consistent with known editorial policy at the time whereby “obscure
and unsuccessful” inventions were relegated to less prominent pages (Mott, 1938, p.318).
Our approach is analogous to the idea that lead articles in economics journals are more
highly cited, as a measure of their quality, even when controlling for the selection biases
of editors (Coupé et al., 2010).
The Scientific American quickly established a reputation as a conduit for technical
information and instruction. It was read widely by inventors and amateurs interested
in invention and patenting. As a child, Thomas Edison (1847-1931) is reported to have
walked three miles a week to buy his copy. It was one of the most significant publications
of the time. Mott (1938, p.324) writes: “it is probable that the Scientific American had
a significance - at least for its first sixty or seventy years - unapproached in kind or effect
by any other type of periodical.”
9
We collected information on every invention documented in lead articles of the weekly
editions of the Scientific American in 1851. Table 1 shows that 50 U.S. inventors were
covered including 50 inventions. We followed the same procedure as our Crystal Palace
inventions and matched these against patents, including instances such as the following:
WILLIAM BUSHNELL, New York, Bushnell’s Improved Metal Drill, as covered by the Scientific American on October 18th 1851.
and
US Patent 8,554 granted to WILLIAM BUSHNELL, New York, Hand-Drill
on December 2nd 1851.
USPTO main class = 74 and subclass = 841.
The Scientific American lead article describes and illustrates Bushnell’s invention in
considerable detail. It states:
The nature of this improvement, and its claim, consist in the combination of
the helical spring, and the nippers, and the screw on the spindle, by which
the pressure is controlled, and the drill stock operated in a most efficient and
beautiful manner... will readily be appreciated by any reader who pays proper
attention to our description and carefully examines the illustrative engravings.
For the 50 inventions covered we matched 30 to patents implying a propensity to patent
of 60 percent, which is more than three times higher than what we found for inventions
exhibited at the Crystal Palace. The Scientific American was the publishing arm of the
patent agency Munn & Company, so inevitably patented technologies were more likely
to be included. The distribution of patent matches by their grant year is illustrated in
Figure 2, which documents the peak year of 1851. Of the 30 inventions in lead articles of
the Scientific American that were patented we found 54 patents in total covering 28 main
USPTO classes and 50 unique subclasses. In line with the Crystal Palace data, we find
that the Scientific American covers key historical inventors like Isaac Singer (1811-1875),
the prominent sewing machine manufacturer.
2.4
U.S. patents and citations
Our final data sources covers 108,898 U.S. patents granted between 1840 to 1870 and
42,341 citations to these patents in patents granted in the U.S. between 1947 and 2008. We
10
use all U.S. patents to define treatment and control groups in our difference-in-differences
analysis so that we can analyze relative changes in invention in technology areas in response to the effects of the Crystal Palace exhibition and Scientific American lead articles.
We use a 20 year post period from 1851 to 1870 to examine the precise timing of any new
invention that may have been induced by prizes or publication signaling to inventors in
1851 areas of high-potential research and development.
Because patents may vary significantly by their technological value, we use our data
set of citations to adjust for patent quality according to the frequency with which patents
between 1947 and 2008 cite earlier patents as prior art.7 Despite the long lag between
citing and cited patents, around 20 percent of patents granted between 1840 and 1870 are
cited in U.S. patents granted between 1947 and 2008.
Although differences in technology depreciation rates will affect what is cited by future
generations of patents, we use citations as a proxy for the technological significance of
inventions analogously to the way citations are used in modern studies of patents (e.g.,
Hall et al., 2001). The citations lag also has advantages for our purposes because it allows
us to identify inventions that were particularly long-lived. We can therefore identify
cumulative inventions that built on the focal prize-winning inventions at Crystal Palace
or focal inventions that were published in lead articles by the Scientific American.
3
Empirical Strategy
Our empirical strategy proceeds in two stages. In the first stage we identify the effects of
Crystal Palace prizes on innovation, by comparing changes in narrowly defined technology
areas at the level of USPTO subclasses where U.S. inventors won a prize in 1851 with
changes in technology areas where U.S. inventors were selected to exhibit but did not win
a prize. Given that our interest is in the precise position of inventions relative to other
technologies, subclasses are an ideal granular unit for our analysis notwithstanding the
fact that the U.S. patent classification system is functionally based, so there is no exact
mapping of subclasses to industries of use (Schmookler, 1966).
We estimate difference-in-differences specifications of the following form:
7
1947 is the first year that patent citations were included systematically in patent documents.
11
U.S. P AT ENT Sc,t = αP RIZEc × P OSTt + δt + fc + εc,t
(1)
Our dependent variable U.S. P AT ENT S measures the total number of U.S. patents
in subclass c and year t between 1840 and 1870. Year-fixed effects t and subclass-fixed
effects fc control for changes in patenting that are independent of prizes. Our post-period
is 1851 to 1870 and P RIZE is a 0,1 indicator, so α measures the relative change in patents
in prize-winning subclasses against a baseline of patents in subclasses associated with
exhibits that did not win a prize. By restricting our control group to closely related Crystal
Palace technologies we mitigate selection and omitted variable biases because patents in
these subclasses will be observationally close to patents in the treated subclasses.
This approach allows us to control for variation in the demand for innovations and
other unobservable factors that may have encouraged innovation independently of the
award of a prize. For example, U.S. inventors may have produced particularly valuable
labor-saving innovations because labor was scarce relative to natural resources in the
United States (Hicks 1932; Habbakuk 1962, and Acemoglu 2010). As a result, U.S.
inventors may have been more likely to win prizes for labor-saving innovations in 1851
and patent more after 1851. But under the assumption that all U.S. technologies that
were exhibited at the Crystal Palace were affected by the same environmental conditions,
the coefficient α measures the causal effect of a prize on U.S. invention.
We take various steps to test the robustness of our results. We test for sensitivities
to technology area aggregation by compare prize-winning subclasses with control subclasses aggregated by USPTO main class and aggregated also by the narrow and broad
industry-based technology areas defined by Hall et al., (2001) - henceforth HJT.8 We also
use HJT broad technology areas to include technology area-year dummies in additional
difference-in-differences specifications, where the technology areas are defined at a higher
level than the USPTO subclasses, main classes or HJT narrow technology areas. This
further strengthens our identification because it means that we are comparing changes
in patents in subclasses in prize-wining versus exhibited subclasses in the same broad in8
Hall et al., (2001) reorganize the U.S. patent classification system by main class into 6 broad technology areas and 36 narrower technology areas. Of these, 5 broad technology areas and 33 narrower
technology areas apply to our historical patent data.
12
dustry area and the same year. Additionally we use patent citations per subclass year to
test for possible effects on the quality of technological development. Finally, to evaluate
the persistence of effects over time, and test for potentially confounding effects in the
pre-prize period, we also estimate α separately for individual years.
In the second stage of our analysis, equivalent regressions estimate the effects of publication on U.S. invention. We exploit the fact that the signaling effect of the prize,
measured by α in equation (1), was replicated by publication of inventions as lead articles
in the Scientific American in 1851, so we can determine if this is an important mechanism
through which prizes encourage innovation.
Specifically, we estimate:
U.S. P AT ENT Sc,t = βP UBLICAT IONc × P OSTt + δt + fc + εc,t
(2)
In this specification β measures the relative change in patents in subclasses associated
with lead article publications against a baseline of patents in subclasses that are observationally similar because they share a same USPTO main class. As above, we check
for robustness using different aggregations of subclasses, technology area-year dummies,
effects for individual years and citations to patents. Furthermore, because their is little
overlap in the prize and publication subclasses, we can also identify α and β in a joint
specification to estimate the relative strength of the Crystal Palace prize-winning and
Scientific American effect on U.S. invention.
4
Main Results
Before turning to our difference-in-differences results, comparisons in Table 3 of the absolute number of patents between 1840 and 1850 and 1851 and 1870 suggest a significant
increase in patenting after 1851 in prize-winning and Scientific American subclasses relative to closely comparable subclasses. In USPTO subclasses that include an exhibit
at the Crystal Palace exhibition, patents per subclass and year increase by 176 percent
after 1851. In USPTO subclasses where U.S. inventors received a prize in 1851, patents
per subclass and year increase by 242 percent after 1851. Subclasses that include a lead
article in the Scientific American experience the largest overall increase (559 percent)
13
relative to a control group of subclasses in the same main USPTO class (174 percent).
Comparisons of citations reveal similar patterns in the data suggesting that patents in
prize and publication subclasses after 1851, were also of a high quality.
Next we turn to estimating these effects in a more robust econometric framework
where we can address the skewed distribution of patents and citations and control for
time series changes and for potentially powerful unobservables across USPTO subclasses.
4.1
The effect of a Crystal Palace prize
We first aim to identify the effect of a Crystal Palace prize. Results are presented in
Tables 4 and 5. As noted by Furman and Stern (2011) the literature has not yet reached a
consensus on the best way to estimate fixed effects count data specifications such as (1) and
(2) with various tradeoffs associated with incidental parameters bias, robustness to misspecification, the estimation of standard errors and addressing overdispersion, a common
feature of patent datasets where the variance exceeds the mean. For completeness, we
report results using OLS with a logarithmic transformation of patents in addition to
conditional fixed effects negative binomial and Poisson estimators.
The first two columns of Table 4 begin with a difference-in-differences comparison
of patents in prize-winning subclasses relative to observationally similar subclasses of
inventions that were exhibited. Column (1) reports a baseline estimate of the effect. The
OLS parameter estimate implies a (e0.125 −1)×100=13 percent relative increase in patents
in prize-winning subclasses per year in the post-period, which is consistent with the idea
that inventors were incentivized to develop new innovations in prize-winning technology
areas.9 The point estimates from the count data specifications imply economically much
larger effects, although the Poisson estimate of the prize effect is also measured with a
larger standard error. Column (2) adds HJT technology area-year dummies and shows
that the results in column (1) are robust to a comparison of changes in patents in treated
and control subclasses in the same broad industry area and the same year. For this more
demanding specification the Poisson likelihood function fails to converge.10
9
To facilitate the logarithmic transformation of zero values we added 0.5 to the count of patents.
Running the same specification but instead adding 1 to the count of patents produces a (e0.093 − 1) ×
100=10 percent relative increase in patents in prize-winning subclasses.
10
This is a well-known practical obstacle to estimating count data models with a large number of fixed
14
In columns (3) to (6) we estimate the specifications from columns (1) and (2) but
using different aggregations of control subclasses. We first include subclasses that shared
a same main USPTO class as the prize-winning subclass. These subclasses should still
be observationally close to the technology areas associated with prizes but by doing so
we increase the number of subclasses in the estimation from 156 to 2,227. OLS estimates
reveal a 13 percent relative increase in patents in prize-winning subclasses per year, so
are of a similar economic magnitude to our estimates from columns (1) and (2). The
negative binomial coefficients are somewhat larger than the OLS coefficients (a 27 to 31
percent relative increase in patents) and the Poisson estimate of the prize effect is larger
still (a 36 percent increase) and it is also statistically significant. In columns (3) to (6)
we add 1,706 further subclasses to the comparison group by including subclasses in the
same HJT narrow technology areas. Our results consistently reveal economically and
statistically significant post-1851 increases in patents in prize-wining technologies.
Estimates of dynamic effects in Figure 3 use the specifications in columns (2), (4) and
(6) but include P RIZEc ×Y EARt indicator variables along with year, subclass, and HJT
technology area-year fixed effects. We do not find any evidence of pre-trends in the years
prior to the Crystal Palace exhibition, which suggests that our findings are not being
confounded by pre-existing changes to the technological fertility of the areas associated
with prizes. Rather our evidence is consistent with juries awarding prizes independently
of U.S. market conditions and a signaling mechanism of prizes providing strong indirect
incentives to invent in the prize-winning technology areas. Year-specific coefficients show
that the positive effect of prizes on U.S. invention persists for approximately 10 years
before attenuating towards the end of our post-period.
Finally, in Table 5 we estimate our specifications with citations as an outcome measure.
One possibility is that prizes led to an increase in patents of lower quality as inventors may
have flooded these technology areas in search of potential payoffs. Results in columns (1)
to (3) using counts of citations per subclass as a dependent variable reject this hypothesis.
In column (3) OLS and negative binomial coefficients indicate a positive and statistically
significant post-period change in citations per subclass. When using the ratio of citations
effects, which are computationally much easier to estimate under OLS. See further Alison and Waterman
(2002).
15
to patents in subclasses as a dependent variable in columns (6) to (8) the point estimates are also positive, although these are mostly statistically insignificant. Overall, our
citations analysis finds no evidence of a reduction in patent quality in technology areas
associated with prizes and some evidence of an actual increase.
4.2
The effect of a lead article in the Scientific American
Our second empirical test aims to estimate the effect of a lead article in the Scientific
American on patents and patent quality after 1851 in order to determine the mechanisms
through which prizes may affect innovation. Advertising an invention to a large number of
people, as occurred with Crystal Palace prizes, was replicated contemporaneously through
publication of inventions in the Scientific American. Again, our estimation approach
controls for unobserved time-invariant heterogeneity at the level of individual USPTO
subclasses and for year and technology area-year fixed effects. Hence, we are able to
robustly test for a potential effect on U.S. innovation of the publication of ideas.
In columns (7) to (10) of Table 4 we report estimates of the effect of a lead article in
the Scientific American that are most closely related in terms of comparison groups to the
estimates in columns (3) to (6) for prizes. As baselines we use subclasses aggregated at the
level of USPTO main classes and HJT narrow technology areas. All of the coefficients are
highly statistically significant, although the size of the point estimates does vary according
to the method of estimation. Patents are estimated to increase in subclasses by between
25 and 30 percent according to the OLS coefficients across specifications, by between
90 percent and 112 percent when the effect is estimated by negative binomial models
or by between 157 percent and 177 percent when using a Poisson estimator. All of the
coefficients imply an economically large boost to patenting in technology areas associated
with inventions being published as lead articles in the Scientific American.
Figure 4, which illustrates year-specific effects of a publication and 95 percent confidence intervals, shows that our estimates are not confounded by the Scientific American
publishing articles on inventions in technology areas where latent demand was already
high. That is, we do not detect the presence of any pre-trends, but instead find a sharp
shift in pre- and post-period patenting. Like in Figure 3, most of the post-period effect of
16
publication is concentrated within a 10 year window, with the effect of a publication becoming statistically indistinguishable from zero by the end of our time period. We would
expect to observe such attenuation given the depreciation of new technological knowledge
and the finite nature of invention cycles.
In Table 5 we find strong effects of publication on U.S. invention when using citations
to measure patent quality. Citations were between 4 and 5 percent higher after 1851
according to the OLS coefficients, and in excess of 82 percent higher in these subclasses
when using count data specifications. Columns (9) and (10) reveal that in four out of
six specifications the ratio of citations to patents also increased significantly in subclasses
associated with a lead article. Although this effect is statistically insignificant when using a negative binomial estimator, most of our citations evidence implies that subclasses
common to inventions covered in the Scientific American were associated with large increases in quality of innovation. In line with the Crystal Palace prize results, this suggests
that the relative post-period increases we observe are not being driven by changes in the
propensity to patent frivolous inventions.
In order to examine the size of the lead article effect relative to the prize effect we pool
Crystal Palace exhibit and Scientific American subclasses in the same main USPTO class
so that both effects P RIZE × P OST and P UBLICAT ION × P OST can be estimated
simultaneously in the same difference-in-differences regressions (Table 6). OLS coefficients
in columns (1) and (2) imply a 16 to 19 percent boost to patents in subclasses associated
with prizes and a 28 to 31 percent boost for subclasses associated with publication. In
OLS specifications we fail to reject the null hypothesis that the difference between coefficients is zero, but the publication effect is statistically larger when using count data
models for estimation. In columns (3) and (4) which use citations as a dependent variable
we fail to reject the null hypothesis that the difference between coefficients is zero in all
specifications, although in columns (5) and (6) we find that the effect of a publication on
citations per patent in subclasses is statistically greater when using a Poisson estimator.
In other words, our test reveals that the publication of new technological ideas in the Scientific American was at least as - and possibly more - effective at boosting U.S. invention
as was winning a prize at the Crystal Palace exhibition.
17
5
Robustness and Interpretation
5.1
Citations to focal patents
So far, our results are consistent with prizes or publication creating strong indirect incentives to invent by signaling to other inventors the potential for new technological
development. At a time when communication technology was rudimentary and information exchange across geographic space was limited, these channels reduced barriers
to the transmission of knowledge, identified areas where improvement was possible and
helped inventors to avoid duplication of what was already known. But a remaining issue
is whether prizes and publication signalled the right technologies for inventors to target.
Our assumption to this point has been that Crystal Palace prize-juries or editors of the
Scientific American were able to accurately identify exceptional inventions.
We conduct an ex post validation test by examining citations to prize-winning or
published inventions. Whereas our difference-in-differences results examine changes in
patenting or citations at the level of USPTO subclasses, we now estimate effects at the
patent-level. Our dependent variable is a count of citations to patents in U.S. patents
granted between 1947 and 2008. Although long-lagged citations may be a noisy measure
of patent quality, an advantage here is that they can identify technologies that influenced
cumulative developments and subsequent generations of technological change. Furthermore, while citations with a short lag may be endogenous to prizes or publication as
inventors potentially cite well-publicized inventions as prior art, long-lagged citations are
less likely to be influenced by this confounding effect. We estimate variants of:
U.S. CIT AT IONSi,c,t = γ1 P RIZEi,c + δt + fc + εi,c,t
(3)
We use indicator variables to identify focal patents that won a prize at Crystal Palace
or were published as lead articles in the Scientific American. We use subclass dummies
fc to control for average differences across subclasses in citations and year dummies δt
to absorb average differences in citations for different years. The parameters of interest
measure the (eγ − 1) × 100 percentage change in citations to the focal inventions relative
to the citations of observationally similar patents. If prize-juries (or publication editors)
18
were able to accurately identify exceptional inventions we would expect γ1 > 0.
Results in columns (1) and (2) of Table 7 report estimates of the citation premium
to prize-winning patents relative to patents in exhibit subclasses. In the cross section of
patents (column 1) we find that prize-winning patents were associated with 17 percent
higher citations according to an OLS estimator, or in excess of 80 percent higher citations
according to the negative binomial and Poisson estimators. Count data estimates of the
citation premium are even larger when controlling for average differences across subclasses
in citations (column 2) although the OLS effect is statistically insignificant.
Comparisons of prize-wining patents with patents in the same subclasses in columns
(3) and (4), on the other hand, reveal strongly positive effects across all specifications
and the point estimates are also larger than those estimated in columns (1) and (2).
Each implies economically large and statistically significant increases in citations to prizewinning patents. An oft-cited issue with the design of prize competitions is that the
technological significance of inventions or their welfare effects are difficult to estimate ex
ante (e.g., Kremer, 1998). Our evidence suggests that the juries awarding prizes at the
Crystal Palace exhibition were able to distinguish exceptional technologies.
Columns (3) and (4) report results of equivalent regressions on patents in subclasses
associated with lead articles. Here we find statistically insignificant effects when comparing citations to observationally similar patents in the same subclass. When using
subclass dummies in column (4) the point estimates are even negative, implying that
inventions published as lead articles were of a lower average quality. One explanation of
these contrasting results is that the selection methods at the Scientific American were
less robust than the assessments made at the Crystal Palace exhibition. Although our
main difference-in-differences results show that prizes and publication led to comparable
post-period increases in patents and citations at the level of USPTO subclasses, at the
patent-level our evidence indicates that editors at the Scientific American may not have
been making the most optimal technology choices.
19
5.2
Spillovers from focal inventions
If, as the above evidence suggests, prize-winning inventions were of a high quality when
measured by the standards of long-lagged patent citations, an alternative explanation of
our main results is that they reflect localized spillovers that would have occurred even in
the absence of prizes. The list of winners at Crystal Palace includes inventors like Charles
Goodyear, Cyrus McCormick and Samuel Colt who were already well-known inventors
in their local areas by 1851. Although our econometric strategy should rule out these
types of influences, we take the extra step of testing the robustness of our results to preand post-period changes in patents at different geographic distances from focal inventions.
Our assumption is that if the signaling effects of prizes, or indeed a lead article publication
in the Scientific American, are driving the results then we should be less likely to observe
these effects dissipating with distance from focal inventions.
To examine our results in relation to this concern about confounding spatial spillovers
we collected the addresses of all inventors who were granted U.S. patents between 1840 and
1870. These include exhibit, prize-winning and lead article inventors who are illustrated in
Figure 5. Most of these inventors were located in more populous north-eastern areas of the
United States, with for example, 32 percent of U.S. prize winners residing in New York, 15
percent in Connecticut, and 14 percent in Massachusetts. There are, however, exceptions
such as Gail Borden (1801-1871) who resided in the small port city of Galveston, Texas.
Borden won a prestigious Council Medal at Crystal Palace for a novel food invention “portable desiccated soup bread”.11
We use a matrix of pairwise distances to calculate the geographic distance by which
each U.S. patentee between 1840 and 1870 was separated from fixed geographic locations defined by the latitude and longitude of focal prize-winning inventors or inventors
associated with lead articles of the Scientific American.12
11
Borden’s invention is a meat biscuit which was attractive because it was dried, light and heavy in
protein so it was used by the army and by explorers. In 1853 Borden also invented condensed milk.
12
The great circle distance of patent i from a focal inventor is calculated using the following formula:
DIST AN CEi
=
+
3963.17 × arccos[sin(P AT EN Tilat ) × sin(F OCALlat )
cos(P AT EN Tilat ) × cos(F OCALlat ) × cos(F OCALlon − P AT EN Tilon )]
20
Figure 6 plots the data. In the pre-period inventors patenting inventions in prizewinning subclasses resided an average minimum distance of 19 miles from any inventor
awarded a Crystal Palace prize and in the post-period 62 miles, a 226 percent increase. A
smaller share of inventors patenting in prize-winning subclasses in the post-period were
co-located with a prize-winner. By contrast the share of inventors patenting in Scientific
American subclasses who were co-located with a Scientific American inventor increases
when comparing the pre- and post-period changes. Inventors patenting inventions in subclasses in the same main USPTO class as Scientific American lead articles resided an
average minimum distances of 46 and 65 miles from Scientific American focal inventors
in the pre- and post-periods respectively, a 41 percent increase.13 Given that these estimates do not account for factors such as the skewed distribution of distance, or time
series changes in distances as the U.S. population expanded geographically, we also use a
differences-in-differences approach.
Consider the following patent-level estimating equation which tests for post-period
changes in distances from prize-winning focal inventors:
DIST ANCEi,c,t = ψP RIZEi,c × P OSTt + δt + fc + εi,c,t
(4)
The dependent variable is the logarithm of the minimum distance between the inventor
of patent i in subclass c at time t from any focal prize-winning inventor shown in Figure 5.
The parameter ψ tests for post-period changes in distance for inventors patenting inventions in prize-wining subclasses relative to distances between the same fixed geographic
locations and inventors patenting inventions in exhibit subclasses. We also run equivalent
regressions where we define distances from lead article inventors and in these regressions
we use as a baseline distances between Scientific American focal inventors and inventors
patenting inventions in subclasses in the same USPTO main class.
Results in Table 8 reveal positive and statistically significant post-period changes
in distances from focal inventors for inventors patenting in subclasses associated with
13
To put these distances in perspective, by the middle of the nineteenth century there were approximately 8,500 miles of railroad track in the United States and railroads achieved an average speed of
around 16.5 miles per hour compared with 5 and 9 miles per hour for stagecoaches and steamboats
respectively. See further Gorton (1989).
21
prizes compared to subclasses associated with exhibits that did not win a prize. These
results are robust to different aggregations of patents in subclasses and imply across
the specifications in columns (1) to (3) a 148 to 175 percent relative increase in the
distance between patentees and focal inventors after 1851. The results for distances from
Scientific American inventions in columns (4) to (6), on the other hand, are statistically
insignificant. While we can not rule out alternative explanations of these findings, our
objective here is interpretation and not identification.14 The results are consistent with a
strong signaling effect of prizes on the diffusion of U.S. invention, as opposed to a localized
effect that may be caused by geographic proximity to a focal inventor.
6
Conclusion
Recent policy proposals in favor of spurring technological development with prizes extensively cite historical evidence showing that prizes can create powerful incentives for
innovation. If prizes can incentivize inventors, either in a complementary way to formal
intellectual property rights, or as a substitute, then policy makers have a powerful tool at
their disposal for affecting the pace and the direction of technological change. As argued
by Kremer and Williams (2010, p. 16), “the potential payoffs to adding new mechanisms
to our toolkit for encouraging innovation are immense”.
In this paper we have used novel historical data to explore the mechanisms through
which prizes may encourage innovation. The Crystal Palace exhibition in 1851 was the
most significant of the nineteenth century industrial World’s Fairs. It drew participants
from across the globe and juries composed of international technology specialists awarded
merit-based prizes. Although the selection of exhibits may have been endogenous to
domestic cycles of invention, resource endowments and industrial structure, we maintain
that prizes were exogenous to these factors because prizes were awarded by international
committees with initially limited knowledge of, or interest in, U.S. conditions. In fact,
it was only as a result of the Crystal Palace exhibition that the United States became
14
One explanation would be that the Crystal Place exhibition was more effective at diffusing new
technological knowledge. Alternatively, the post-period increase in the share of inventors in Scientific
American subclasses in close proximity to the focal inventor may be a consequence of agglomeration
benefits, or resource endowments tied to local inventions.
22
known as an originator of new technologies (Rosenberg 1969).
We have identified the impact of prizes on inventive activity by comparing relative
changes in patents in subclasses associated with prizes after 1851 with relative changes in
patents in subclasses associated with exhibits. We have also also constructed a comparison
group of inventions that were also prominently displayed to potential patentees in the U.S.
in 1851 through lead articles of the Scientific American. Our results show that prizes and
publication can encourage innovation by publicizing potential for new entry in technology
areas where payoffs may be high. Our findings also imply that Crystal Palace juries were
better at identifying high quality technologies to target than the editors of the Scientific
American and we find some evidence to suggest that diffusion through prizes was also
stronger than diffusion through a lead article publication.
Existing studies of prizes have focused on the extent to which prizes boost invention,
but less attention has focused on mechanisms, and in particular the indirect incentive to
invent. While it could be argued that the signaling role of prizes we identify is relevant
only to our context given the limits of nineteenth century communications technologies,
it is also possible that such effects would be magnified in a world of more efficient information exchange. Moreover, a better understanding of how prizes encourage innovation,
especially versus more cost-effective mechanisms like the publication of ideas, should be
an important consideration in the design of current inducement prize policy.
23
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25
Table 1. Descriptive Statistics
Crystal
Palace
Scientific
American
557
572
50
50
U.S. inventors
Inventions
Inventions patented
Propensity to patent
Patents
Council Medal (gold)
Prize Medal (silver)
Honorabale Mention (bronze)
No prize
USPTO subclasses
USPTO main classes
105
18%
180
30
60%
56
22
20
25
113
156
84
50
28
Notes: Figures reflect the data we have from both sources based
on matches of inventions and patents granted in the United
States. Subclasses are from the United States Patent Office
classification scheme.
Table 2. Examples of Invention Patent Matches
Source Inventor
City, State
Invention
Patents Patent Class and Subclasses
SA
CP
SA
CP
Charles Anderson
Samuel Colt
John T. Denniston
Charles Goodyear
Warren, PA
Hartford, CT
Lyons, NY
New York, NY
Revolving Boiler
Fire Arm
Steam Engine
Vulcanized Rubber
1
10
1
12
SA
SA
CP
CP
Gustav Haussknecht
Richard Long
Cyrus McCormick
John G. Perry
New Haven, CT
Columbus, OH
Chicago, IL
South Kingston, RI
Carriage Springs
Brick Machine
Reaping Machine
Meat Machine
3
1
7
11
CP
SA
David Prouty
Isaac Singer
Dorchester, MA
New York, NY
Plow
Sewing Machine
2
16
122 11
42 61; 42 72; 42 71.01; 206 3
261 28
156 161; 156 164; 156 276; 156 231; 264
545; 264 316; 427 292; 428 90; 442 184;
442 76; 524 77
267 52; 280 101; 280 52
425 202
56 196; 56 268; 56 298; 56 307; 56 308
241 301; 241 248; 241 261; 452 36; 452
41; 452 42
172 704; 172 736
112 164; 112 194; 112 119; 112 226; 112
227; 112 234; 112 310; 112 321; 112 323;
112 443; 112 475.17
Notes: SA refers to Scientific American and CP to Crystal Palace. Patents are the number of patents
identified for each invention with corresponding patent class and subclass from the USPTO classification
scheme. The first number given is the main class and the second number is the subclass.
Table 3. Pre- and Post-Period Patent and Citation Descriptive Statistics
Pre (1840-1850)
Post (1851-1870)
Mean
Std. Dev.
Min.
Max.
Mean
Std. Dev.
Min.
Max.
Patents in prize-winning subclasses
0.208
0.549
0
6
0.712
1.438
0
10
Patents in exhibit subclasses
0.192
0.564
0
6
0.528
1.189
0
13
Patents in Scientific American subclasses
0.109
0.395
0
3
0.719
1.660
0
23
Patents in Scientific American subclasses
in the same main class
0.144
0.401
0
5
0.395
0.983
0
23
Citations in prize-winning subclasses
0.063
0.335
0
4
0.195
0.753
0
9
Citations in exhibit subclasses
0.070
0.398
0
6
0.168
0.721
0
12
Citations in Scientific American subclasses
0.024
0.194
0
3
0.119
0.528
0
9
Citations in Scientific American subclasses
in the same main class
0.045
0.311
0
9
0.102
0.519
0
14
Notes: Descriptive statistics on number of patents and citations per subclass per year in the pre- and postperiods for various categories of Crystal Palace and Scientific American inventions.
4,836
156
Y
Y
N
4,836
156
Y
Y
Y
EXHIBIT
SUBCLASSES
69,037
2,227
Y
Y
N
69,037
2,227
Y
Y
Y
SUBCLASSES IN EXHIBIT
MAIN CLASSES
121,923
3,933
Y
Y
N
121,923
3,933
Y
Y
Y
SUBCLASSES IN EXHIBIT HJT
NARROW TECHS.
0.284***
[0.104]
0.641***
[0.138]
0.220***
[0.057]
[8]
27,218
878
Y
Y
N
27,218
878
Y
Y
Y
SUBCLASSES IN SCIAM
MAIN CLASSES
0.943***
[0.244]
0.351**
[0.153]
0.304***
[0.103]
0.167***
[0.053]
Poisson CFE
0.240**
[0.105]
0.169***
[0.054]
0.683***
[0.134]
0.307**
[0.154]
0.272***
[0.104]
0.142***
[0.053]
Dependent Variable is Patents
[5]
[6]
[7]
NegBin CFE
0.377
[0.234]
Poisson CFE
0.347**
[0.143]
0.146***
[0.054]
[4]
0.240***
[0.058]
0.359***
[0.134]
NegBin CFE
0.133*
[0.068]
[3]
log OLS
0.125**
[0.063]
log OLS
[2]
0.728***
[0.129]
0.265***
[0.057]
[10]
104,997
3,387
Y
Y
N
104,997
3,387
Y
Y
Y
SUBCLASSES IN SCIAM
HJT NARROW TECHS.
1.018***
[0.241]
0.753***
[0.129]
0.265***
[0.057]
[9]
Dependent variable is patents in subclass j at time t with Post×Prize measuring subclasses associated with prize-winning exhibits at Crystal Palace
Post×Scientific American subclasses associated with lead articles. Control subclasses are identified as the comparison group (e.g., in columns 1 and 2 subclasses
associated with exhibits at Crystal Palace). Coefficients are estimated using OLS with a logarithmic transformation of the dependent variable, conditional fixed
effects negative binomial and conditional fixed effects Poisson. In OLS and Poisson specifications standard errors are clustered by subclass. *, **, and ***
significance at the 10, 5 and 1 percent levels.
No. of observations
No. of clusters
USPTO subclass FE
Year FE
Year×HJT broad tech. FE
Comparison group
Post×Scientific American
Post×Prize
[1]
Table 4. The Effect of a Crystal Palace Prize or Scientific American Publication on Patents
4,836
156
Y
Y
N
EXHIBIT
SUBCLASSES
0.961**
[0.397]
0.634***
[0.215]
0.046**
[0.018]
0.557
[0.347]
0.094
[0.214]
0.046
[0.032]
0.105
[0.268]
0.240
[0.170]
0.046
[0.029]
0.136
[0.264]
0.240
[0.168]
0.051*
[0.029]
1.083**
[0.420]
-0.143
[0.188]
0.053**
[0.023]
1.250***
[0.414]
-0.077
[0.180]
0.060***
[0.023]
Dependent Variable is Citations 1947-2008/Patents
[6]
[7]
[8]
[9]
[10]
69,037
2,227
Y
Y
N
121,923
3,933
Y
Y
N
27,218
878
Y
Y
N
104,997
3,387
Y
Y
N
4,836
156
Y
Y
N
69,037
2,227
Y
Y
N
121,923
3,933
Y
Y
N
27,218
878
Y
Y
N
104,997
3,387
Y
Y
N
SUBCLASSES SUBCLASSES SUBCLASSES SUBCLASSES
SUBCLASSES SUBCLASSES SUBCLASSES SUBCLASSES
IN EXHIBIT
IN EXHIBIT
IN SCIAM
IN SCIAM HJT
EXHIBIT
IN EXHIBIT
IN EXHIBIT
IN SCIAM
IN SCIAM HJT
MAIN
HJT NARROW
MAIN
NARROW
SUBCLASSES
MAIN
HJT NARROW
MAIN
NARROW
CLASSES
TECHS.
CLASSES
TECHS.
CLASSES
TECHS.
CLASSES
TECHS.
0.835**
[0.404]
Poisson CFE
0.524
[0.352]
0.598***
[0.222]
0.460
[0.353]
0.495***
[0.162]
NegBin CFE
0.403
[0.409]
Poisson CFE
0.404**
[0.163]
0.055*
[0.031]
0.038**
[0.018]
0.329
[0.203]
NegBin CFE
0.050
[0.031]
log OLS
0.035
[0.034]
log OLS
Dependent Variable is Citations 1947-2008
[2]
[3]
[4]
[5]
Dependent variable is citations or citations per patent in subclass j at time t with Post×Prize measuring subclasses associated with prize-winning exhibits at
Crystal Palace Post×Scientific American subclasses associated with lead articles. Control subclasses are identified as the comparison group (e.g., in column 1
subclasses associated with exhibits at Crystal Palace). Coefficients are estimated using OLS with a logarithmic transformation of the dependent variable,
conditional fixed effects negative binomial and conditional fixed effects Poisson. In OLS and Poisson specifications standard errors are clustered by subclass. *,
**, and *** significance at the 10, 5 and 1 percent levels.
No. of observations
No. of clusters
USPTO subclass FE
Year FE
Year×HJT broad tech. FE
Comparison group
Post×Scientific American
Post×Prize
[1]
Table 5. The Effect of a Crystal Palace Prize or Scientific American Publication on Citations
Table 6. Comparing the Effect of a Crystal Palace Prize
and a Scientific American Publication on Patents and Citations
Dependent Variable is Dependent Variable is
Patents
Citations 1947-2008
Post×Prize
Post×Scientific American
Ho: Prize=Scientific American
Dependent Variable is
Citations 19472008/Patents
[1]
[2]
[3]
[4]
[5]
[6]
log OLS
0.146***
[0.053]
0.172***
[0.053]
0.052*
[0.031]
0.056*
[0.031]
0.047
[0.029]
0.051*
[0.029]
NegBin CFE
0.244**
[0.105]
0.300***
[0.104]
0.399**
[0.164]
0.487***
[0.163]
0.305*
[0.171]
0.275
[0.169]
Poisson CFE
0.318**
[0.154]
0.373**
[0.153]
0.451
[0.353]
0.543
[0.352]
0.116
[0.267]
0.162
[0.264]
log OLS
0.247***
[0.057]
0.269***
[0.057]
0.042**
[0.018]
0.047***
[0.018]
0.057**
[0.023]
0.061***
[0.023]
NegBin CFE
0.690***
[0.130]
0.731***
[0.129]
0.562***
[0.215]
0.628***
[0.214]
-0.086
[0.182]
-0.119
[0.180]
Poisson CFE
0.975***
[0.242]
1.029***
[0.241]
0.932**
[0.398]
1.024***
[0.397]
1.215***
[0.415]
1.261***
[0.414]
log OLS
0.194
0.207
0.798
0.802
0.788
0.789
NegBin CFE
0.007
0.009
0.543
0.596
0.110
0.106
Poisson CFE
0.021
0.021
0.361
0.361
0.024
0.024
Comparison group
No. of observations
No. of clusters
USPTO subclass FE
Year FE
Year×HJT broad tech. FE
Year×HJT broad tech. FE (Poisson CFE)
SUBCLASSES
SUBCLASSES
SUBCLASSES
SUBCLASSES
SUBCLASSES
SUBCLASSES
IN EXHIBIT &
IN EXHIBIT &
IN EXHIBIT &
IN EXHIBIT &
IN EXHIBIT &
IN EXHIBIT &
SCIAM HJT
SCIAM HJT
SCIAM HJT
SCIAM MAIN
SCIAM MAIN
SCIAM MAIN
NARROW
NARROW
NARROW
CLASSES
CLASSES
CLASSES
TECHS.
TECHS.
TECHS.
75,268
2,428
Y
Y
Y
N
123,008
3,968
Y
Y
Y
N
75,268
2,428
Y
Y
Y
N
123,008
3,968
Y
Y
Y
N
75,268
2,428
Y
Y
Y
N
123,008
3,968
Y
Y
Y
N
Dependent variable is patents, citations or citations per patent in subclass j at time t with Post×Prize
measuring subclasses associated with prize-winning exhibits at Crystal Palace Post×Scientific American
subclasses associated with lead articles. Control subclasses are identified as the comparison group (e.g., in
column 1 subclasses associated with exhibits at Crystal Palace or subclasses in the same main classes as
Scientific American inventions). Coefficients are estimated using OLS with a logarithmic transformation of
the dependent variable, conditional fixed effects negative binomial and conditional fixed effects Poisson. In
OLS and Poisson specifications standard errors are clustered by subclass. *, **, and *** significance at the
10, 5 and 1 percent levels. Tests of the difference between coefficients are p-values.
Table 7. Citations to Inventions Winning Crystal Palace Prizes
and Inventions Published as Lead Articles in the Scientific American
[1]
Prize
Scientific American
Comparison group
No. of observations
USPTO subclass dummies
Year dummies
Dependent Variable is Citations 1947-2008
[2]
[3]
[4]
[5]
log OLS
0.153*
[0.092]
0.139
[0.103]
0.246**
[0.104]
0.188*
[0.113]
NegBin
0.589**
[0.289]
0.675**
[0.274]
0.964***
[0.321]
0.767***
[0.290]
Poisson
0.604*
[0.323]
0.637*
[0.356]
1.007***
[0.385]
0.795**
[0.362]
[6]
log OLS
0.086
[0.104]
-0.014
[0.093]
NegBin
0.505
[0.328]
-0.063
[0.361]
Poisson
0.429
[0.330]
-0.021
[0.388]
PATENTS IN EXHIBIT
SUBCLASSES
1,977
N
Y
1,977
Y
Y
PATENTS IN PRIZE
SUBCLASSES
909
N
Y
909
Y
Y
PATENTS IN SCIAM
SUBCLASSES
779
N
Y
779
Y
Y
Dependent variable is citations to patent i at time t. Prize is an indicator variable for patents in subclasses
associated with Crystal Palace prize inventions. Control subclasses are identified as the comparison group
(e.g., in column 1 patents in subclasses associated with exhibits at Crystal Palace). Coefficients are
estimated using OLS with a logarithmic transformation of the dependent variable, negative binomial and
Poisson. Robust standard errors in brackets. *, **, and *** significance at the 10, 5 and 1 percent levels.
Table 8. The Effect of a Crystal Palace Prize or
Scientific American Publication on the Distance from Focal Inventors
Dependent Variable is Log Distance
from a Focal Inventor
Post×Prize
[1]
[2]
[3]
0.907**
[0.403]
1.090***
[0.339]
1.010***
[0.338]
Post×Scientific American
Comparison group
No. of observations
No. of clusters
USPTO subclass FE
Year FE
[4]
[5]
-0.172
[0.410]
-0.161
[0.400]
PATENTS IN PATENTS IN PATENTS IN PATENTS IN
PATENTS IN SUBCLASSES SUBCLASSES SUBCLASSES SUBCLASSES
IN SCIAM HJT
IN SCIAM
IN EXHIBIT
EXHIBIT
IN EXHIBIT
NARROW
MAIN
HJT NARROW
SUBCLASSES
MAIN
CLASSES
CLASSES
CLASSES
CLASSES
1,931
156
Y
Y
20,841
2,214
Y
Y
32,788
3,900
Y
Y
8,074
871
Y
Y
28,592
3,357
Y
Y
Dependent variable is the logarithm of distance of an inventor of i at time t from a focal
inventor, where focal inventors are defined as those winning prizes at Crystal Palace
(columns 1 to 3) or being published in the Scientific American (columns 4 and 5). Control
patents are identified as the comparison group (e.g., in column 1 patents in subclasses
associated with exhibits at Crystal Palace). Coefficients are estimated using OLS.
Standard errors are clustered by subclass. *, **, and *** significance at the 10, 5 and 1
percent levels.
0
5
Percent
10
15
Figure 1. Patents Matched to Inventions
Exhibited at Crystal Palace
1840
1845
1850
1855
Year of Patent Grant
1860
0
10
Percent
20
30
Figure 2. Patents Matched to Inventions
in Lead Articles of the Scientific American
1840
1845
1850
Year of Patent Grant
1855
1860
Notes: We matched all inventions exhibited at Crystal Palace in 1851 and covered in the Scientific
American in 1851 and determined the date of the patents by manually searching for matches of inventors
and their inventions in U.S. patent documents.
1868
1866
1864
1862
1858
1856
1854
1870
1852
1868
1850
1866
1848
1864
1846
1862
1844
1860
1842
1858
1840
1852
1870
1850
1868
1848
1866
1846
1864
1844
1862
1842
1860
1840
1858
1854
1852
1850
1848
1846
1844
1842
1840
.6
.4
Year-specific effect
0
.2
-.2
-.4
1
Year-specific effect
0
.5
-.5
1856
1856
.6
.4
Year-specific effect
0
.2
-.2
-.4
1854
Notes: Plots of point estimates and 95 percent confidence intervals for interactions of year dummies with Crystal Palace prize-winning invention subclasses. Controls are all other
Crystal Palace exhibit subclasses (top figure), subclasses associated with exhibited inventions in main USPTO classes and subclasses associated with Hall, Jaffe and Trajtenberg
narrow technology areas. Coefficients are from log-transformed OLS specifications.
1860
Figure 3. Year Effects for Patenting in Crystal Palace Prize-Winning Subclasses
1870
1840
1842
1844
1846
1848
1850
1852
1854
1856
1858
1860
1862
1864
1866
1868
1870
1842
1844
1846
1848
1850
1852
1854
1856
1858
1860
1862
1864
1866
1868
1870
-.2
0
Year-specific effect
.2
.4
.6
1840
-.2
0
Year-specific effect
.2
.4
.6
Figure 4. Year Effects for Patenting in Scientific American
Lead Article Subclasses
Notes: Plots of point estimates and 95 percent confidence intervals for
interactions of year dummies with Scientific American invention subclasses.
Controls are all other subclasses in the same main USPTO classes as
Scientific American inventions (top figure) and subclasses associated with
Hall, Jaffe and Trajtenberg narrow technology areas. Coefficients are from
log-transformed OLS specifications.
Notes: This map plots the locations of inventors in the United States with 1850 county boundaries. Red circles are Crystal Palace exhibitors, red circles against a
black square are prize winners and blue triangles denote the locations of inventors covered in lead articles of the Scientific American.
Figure 5. The Geographic Location of Crystal Palace Exhibitors
Prize-Winners and Scientific American Inventors
Figure 5. Pre- and Post-Period Distributions
of Distances from Focal Inventors
Distances from Crystal Place Prize-Winners
Post: 1851-1870
60
0
20
40
Percent
80
100
Pre: 1840-1850
0
500
1000
1500
2000 0
500
1000
1500
2000
Distance (in miles)
Distances from Scientific American Inventors
Post: 1851-1870
60
0
20
40
Percent
80
100
Pre: 1840-1850
0
500
1000
1500
2000
0
500
1000
1500
2000
Distance (in miles)
Notes: These figures plot the distribution of distances in great circle miles for patentees who patented
inventions in the same subclasses as focal inventors who were awarded prizes at Crystal Palace (top figure)
or were published in the Scientific American (bottom figure).