Decision makers whose work it is to allocate resources to industrial R&D and academic research have a vital interest in measuring the importance of patents. If for example, the patents of today were fewer but better than the patent of yesterday, then the observed decline in the rate of patenting would signify little for the future of technical change and economic growth. This research sets out (1) to measure the significance of patents in order to better gauge their quality, and (2) to supplement the evidence on importance with better information on networks of technology, including any limitations imposed by localization phenomena that inhibit these flows. By carrying out tests that provides (3) better evidence than before to bear on issues of increasing returns to scale at the firm, regional, and national levels. These matters of the returns to scale are central to modern economic analysis and to prospects for growth. The research includes a series of tests of importance of patents using two distinct cuts of the evidence: a national cut drawn from a variety of technology-based industries that uses previously collected evidence and original data; and an overlapping, largely regional cut that will collect original, and, in our view, deeper evidence. The previously collected evidence draws on received measures of the importance of patents such as citations, size of citing firm, and number of claims, in order to assess the importance of patents for productivity and profitability. The original, evidence, which includes an overlapping set of firms to verify the results, cross-checks the national sample by collecting the firms evaluations of significant patents for progress of that firm. These measures compare to the measures used in the national sample, including tests on a common subsample of firms. The regional sample will include universities and government labs, enabling an (5) assessment of the importance of these nonprofit entities to the firm's productivity with the importance of R&D conducted by other firms.
