Based on the HBR article by Ufuk Akcigit, John Grigsby, and Tom Nicholas
Recent data suggests that innovation’s rate of growth is slowing down. To understand why, Ufuk Akcigit, John Grigsby, and Tom Nicholas look back to innovation’s golden age. The Late 19th and early 20th centuries are associated with some of America's leading technology pioneers, such as Edison and Tesla in electrical illumination, and Alexander Graham Bell and Elisha Gray in telephony. In fact, the United States produced millions of patented inventions during this time, but the context for technological development was very different then.
For one thing, in 1880, most innovation happened outside firms. By the year 2000, however, almost 80% of patents were assigned to innovators operating within firms. Nevertheless, innovation and economic growth go hand in hand. The researchers found a strong relationship between the number of inventors per capita in a given state and its GDP. An innovative state like Massachusetts, for instance, which had four times as many patents as Wyoming from 1900 to 2000, also saw higher GDP growth per capita, even after accounting for several other factors.
The researchers also looked at the relationship between innovation and inequality. Indeed, innovation was higher in states where the top 1% held a larger share of income, possibly due to the financial rewards of patents and the associated monopoly rights.
But when the researchers looked at a broader measure of inequality, they found that it was generally lower in more innovative states -- perhaps because innovation permits new entrance and small business owners to catch up with wealthier incumbents. Trends in innovation occur over the long-term. By looking to the past, we can find inspiration for future technological progress.