Authors: H. Dennis Park (University of Texas at Dallas), with Jung H. Kwon and Shu Deng

Abstract: Inventions require recombination of knowledge from prior art, but accessing and identifying
prior art incur significant search costs. Although changes in search costs could significantly reshape startups’ inventive input and output, it is difficult to observe and capture the actual effects of a reduction in such costs. We explore how a sudden reduction in search costs following the 2006 launch of Google Patents, which digitized inventive records, affected the productivity and nature of startup innovation. Using a difference-in-differences approach, we examine inventions by 19,190 U.S.-based startups in the life sciences industry. We find that, as the geographic distance from a USPTO archive grows, digitized records of inventions disproportionally increased invention productivity by startups. Moreover, for startups located at a
distance from the archives, digitization not only stimulated invention cross-fertilization as innovation input but also expanded invention breadth as innovation output. Further, following the digitization, the pace and scope of innovation diffusion increased more significantly when inventions received early attention within the scientific community compared to those that did not. Our study sheds new light on how digitization reshapes entrepreneurial innovation.

Host: Siddharth Vedula