Editors' ChoiceInnovation Economics

Measuring impacts of technology on growth

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Science  02 Sep 2016:
Vol. 353, Issue 6303, pp. 1001-1002
DOI: 10.1126/science.353.6303.1001-f

Schumpter's concept of “creative destruction” reflects how technological innovation plays a key role in a dynamic economy. Questions remain, though, about how to measure the scientific versus the economic impact of a technology. Kogan et al. created a new measure based on identifying U.S. stock market responses to the announcement of new U.S. patents from 1926 to 2010. Compared with basic citation metrics, their measure is a better predictor of firms' innovation-driven growth. Firms that experience a one-standard-deviation increase in innovation output show 2 to 5% growth over the next 5 years. Firms that do not innovate in an industry that experiences a one-standard-deviation increase in innovation see their growth decrease by 2 to 5% over the same period.

Quart. J. Econ., in press; http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2193068.

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