What Drives Inventive Activity?
Because inventions often lead to innovations in technologies used by businesses, which ultimately can raise productivity growth, it would be helpful to know what factors are important in driving inventive activity. Research conducted recently by Philadelphia Reserve Bank economists (369 KB, pages) examines this issue by investigating the relationship between inventive output — as measured by patents per capita — and a variety of inputs for a cross-section of about 280 U.S. cities in the 1990s. The inputs included private R&D, academic R&D, and other government-supported R&D, as well as human capital. 4 I want to highlight four of the most important findings from that research. First, while population density is related to innovative activity, it is important to recognize that the presence and quality of local human capital is critical for innovation. In this study, the percent of the population with a college education made the largest contribution to raising the number of patents per
