Abstract: Do Patents Facilitate Knowledge Spillovers? Evidence from the Geography of Innovations at the Crystal Palace
The two primary goals of patent laws are to encourage innovation and to diffuse the knowledge that results from it. Using data on innovations at nineteenth-century world fairs, I find that patent laws may fail to raise levels of innovation if inventors rely on alternative means to protect intellectual property, and that instead of raising the number of innovations, the introduction of patent laws may change the focus of innovative activity. This paper uses differences in patenting rates across industries to examine whether patent laws fulfill the second function that is assigned to them; it asks whether patents help to diffuse advances in technical knowledge, that is, whether patents help to facilitate knowledge spillovers. Preliminary findings based on the location of 5,028 British exhibits at the Crystal Palace Exhibition in London in 1851 suggest that nineteenth-century patent laws did help to facilitate the diffusion of new ideas. Innovations in industries with high patenting rates were geographically dispersed, while innovations in industries with low patenting rates were geographically concentrated.