1 Joseph A. Schumpeter, Capitalism, Socialism and Democracy (3rd edn.; New York: Harper & Row, 1950), p. 134.
2 Schumpeter, Capitalism, Socialism and Democracy, pp. 131-63.
3 See Kenneth J. Arrow, “Economic Welfare and the Allocation of Resources for Invention,” in The Rate and Direction of Economic Activity (Princeton: Princeton University Press, 1962), pp. 609-25; David C. Mowery, “The Relationship between Intrafirm and Contractual forms of Industrial Research in American Manufacturing, 1900-1940,” Explorations in Economic History, 20 (Oct. 1983), pp. 351-74; Mowery, “The Boundaries of the U.S. Firm in R&D,” in Coordination and Information: Historical Perspectives on the Organization of Enterprise, ed. Naomi R. Lamoreaux and Daniel M. G. Raff (Chicago: University of Chicago Press, 1995), pp. 147-76; and David J. Teece, “Technological Change and the Nature of the Firm,” in Technical Change and Economic Theory, ed. Giovanni Dosi, et al. (London: Pinter, 1998), pp. 256-81.
In recent years, this view of the inherent superiority of large-firm R&D has come under attack from scholars who show that it both overestimates the problems associated with the market exchange of technological ideas and underestimates the difficulty of managing technological information within the firm. This article is part of that revisionist effort. See also Ashish Arora, Andrea Fosfuri, and Alfonso Gambardella, Markets for Technology: The Economics of Innovation and Corporate Strategy (Cambridge: MIT Press, 2001); Joshua Gans and Scott Stern, “The Product Market and the Market for ‘Ideas’: Commercialization Strategies for Technology Entrepreneurs,” Research Policy, 32 (Feb. 2003), pp. 333-50; Naomi R. Lamoreaux and Kenneth L. Sokoloff, “Inventors, Firms, and the Market for Technology in the Late Nineteenth and Early Twentieth Centuries,” in Learning by Doing in Markets, Firms, and Countries, ed. Naomi R. Lamoreaux, Daniel M. G. Raff, and Peter Temin (Chicago: University of Chicago Press, 1999), pp. 19-60; and Lamoreaux and Sokoloff, “Intermediaries in the U.S. Market for Technology, 1870-1920,” in Finance, Intermediaries, and Economic Development, ed. Stanley L. Engerman, et al. (New York: Cambridge University Press, 2003), pp. 209-46.
4 This data set was compiled in collaboration with B. Zorina Khan. The approach to the collection of information was basically the same as that previously followed by Khan and Sokoloff for the period before, except that we systematically collected information on assignments at issue and opted to sample all patents awarded through 1846, and then those in every fifth year from 1850 on rather than obtain detailed information on every patent the inventor was granted. See B. Zorina Khan and Kenneth L. Sokoloff, “‘Schemes of Practical Utility’: Entrepreneurship and Innovation Among ‘Great Inventors’ During Early American Industrialization, 1790-1865,” Journal of Economic History, 53 (June 1993), pp. 289-307. We will also refer in this article to earlier work based on samples taken from the manuscript records of patent assignments. In order to be legally binding, a contract for the sale or transfer of a patent right had to be recorded with the Patent Office. These records are now stored in the National Archives.
5 For a comparison of the U.S. and British patent systems, see B. Zorina Khan and Kenneth L. Sokoloff, “Two Paths to Industrial Development and Technological Change,” in Technological Revolutions in Europe, 1760-1860, ed. Maxine Berg and Kristine Bruland (Cheltenham: Elgar, 1998), pp. 292-313.
6 See Lamoreaux and Sokoloff, “Inventors, Firms, and the Market for Technology in the Late Nineteenth and Early Twentieth Centuries” and “Intermediaries in the U.S. Market for Technology.”
7 B. Zorina Khan, “Property Rights and Patent Litigation in Early Nineteenth-Century America,” Journal of Economic History, 55 (March 1995), pp. 58-97; Naomi R. Lamoreaux and Kenneth L. Sokoloff, “The Market for Technology and the Organization of Invention in U.S. History,” in Entrepreneurship, Innovation and the Growth Mechanism of the Free-Market Economies, ed. William Baumol and Eytan Sheshinski (Princeton: Princeton University Press, forthcoming); and Lamoreaux and Sokoloff, “Intermediaries in the U.S. Market for Technology.”
8 Carolyn C. Cooper, Shaping Invention: Thomas Blanchard’s Machinery and Patent Management in Nineteenth-Century America (New York: Columbia University Press, 1991).
9 Lamoreaux and Sokoloff, “Inventors, Firms, and the Market for Technology in the Late Nineteenth and Early Twentieth Centuries,” p. 26. These figures are based on a sample of assignment contracts taken from the manuscript records in the National Archives.
10 Lamoreaux and Sokoloff, “Intermediaries in the U.S. Market for Technology.”
11 The fall in the proportion of patents that were awarded to inventors with 10 or more patents over their careers between 1890-1891 and 1910-1911 may have resulted from some tendency in our data collection method to oversample patents for the first subsample of inventors relative to the second, but it may also have resulted from early-twentieth-century changes in the environment for invention that we discuss below.
12 In previous work, based on the manuscript assignment records stored at the National Archives, we have shown that the more productive inventors were also more likely to use specialized intermediaries. See Lamoreaux and Sokoloff, “Intermediaries in the U.S. Market for Technology.”
13 Lamoreaux and Sokoloff, “Inventors, Firms, and the Market for Technology in the Late Nineteenth and Early Twentieth Centuries.”
14 Because the possibility of having more assignees increases with the number of patents, this way of describing the patterns in the data slightly overstates the strength of the relationship we want to highlight, but the qualitative result is robust to other approaches. It is also important to emphasize that our data includes only assignments at issue. If we were able to track assignments that occurred subsequent to issue, our estimates of the number of different assignees would undoubtedly increase.
15 Note that the pattern is also strong for the cohort born between 1860 and 1885, but that the growth in the prevalence of inventors with limited contractual mobility over their career is becoming apparent (see the fraction of patents and patentees accounted for by inventors with only one career assignee). We discuss this change in the next section.
16 It is also striking that the foreign born were significantly over-represented, relative to the general population, among the great inventors. Those born abroad composed 22.9 percent (19.7, 33.0, and 11.4 percent of the respective three birth cohorts) of the great inventors born between 1820 and 1885, and received 24.9 percent (15.6, 34.7, and 17.9 percent for the respective cohorts) of the great inventors’ patents. The foreign-born great inventors were more likely to locate in New England than their U.S.-born counterparts. Ferrie’s estimate is from Joseph P. Ferry, “Longitudinal Data for the Analysis of Mobility in the U.S., 1850-1910,” unpublished paper, 2004.
17 The following discussion is based on Thomas Parke Hughes, Elmer Sperry: Inventor and Engineer (Baltimore: Johns Hopkins Press, 1971).
18 Those who received some schooling at institutions of higher learning are strikingly over-represented among great inventors relative to the general population, where the proportions of cohorts graduating from secondary school and college were under 10 percent and 3 percent respectively as late as 1900. See Thomas D. Snyder, 120 Years of American Education: A Statistical Portrait (Washington, D.C.: U.S. Department of Education, National Center for Education Statistics, 1993), figures 11 and 17. See also B. Zorina Khan and Kenneth L. Sokoloff, “Institutions and Technological Innovation During Early Economic Growth: Evidence from the Great Inventors of the United States, 1790-1930,” in Institutions and Growth, eds. Theo Eicher and Cecilia Penalosa Garcia (Cambridge: MIT Press, forthcoming).
19 These figures may somewhat understate the trend because we are likely to have undersampled patents for both the first career stage of the first subsample and for the last stage of the last subsample.
20 See Naomi R. Lamoreaux and Kenneth L. Sokoloff, “Market Trade in Patents and the Rise of A Class of Specialized Inventors in the 19th-Century United States,” American Economic Review, 91 (May 2001), pp. 39-44.
22 Using descriptions of the patents, we classified each of the patents in the three cross-sectional samples (1870-71, 1890-91, and 1910-11) into six sectors: agriculture and food processing; construction; energy and communications; manufacturing; transportation; and miscellaneous. Although the differences across sectors in 1870-71 were small and insignificant, for the latter two cross-sections patents in energy and communications and in manufacturing were much more likely to be assigned at issue than patents in other sectors and also more likely to be assigned to companies than to individuals. In addition, they were much more likely (energy and communications patents especially) to be assigned to large integrated companies, and somewhat more likely to be assigned to companies with the same name as the inventor.
23 Naomi R. Lamoreaux, Margaret Levenstein, and Kenneth L. Sokoloff, “Financing Invention during the Second Industrial Revolution: Cleveland, Ohio, 1870-1920,” in The Financing of Invention in Historical Perspective, eds. Lamoreaux and Sokoloff (Cambridge: MIT Press, forthcoming).
24 Admittedly, by the post-World War II era, large, managerially directed firms had become increasingly dominant, and the number of in-house R&D labs had grown dramatically. See Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge: Harvard University Press, 1977); and David C. Mowery and Nathan Rosenberg, Technology and the Pursuit of Economic Growth (New York: Cambridge University Press, 1989). It is intriguing to consider, however, whether these developments may have owed less to the inherent superiority of large-firm R&D than to the disastrous impact that the Great Depression and the new federal regulatory efforts that followed had on the opportunities for organizing institutions geared toward the provision of venture capital.