Do Patent Laws Help to Diffuse Innovations? Evidence from the Geographic Localization of Innovation and Production in 19-Century England

Patent laws are designed to encourage inventive activity and to facilitate the adoption and diffusion of innovations. Using data on innovations at 19th-century world fairs, Moser (2005) finds 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 direction of innovative activity. This paper examines whether patent laws fulfill the second function that is assigned to them; it asks whether patents help to diffuse innovations. Geographic data on the locations of 4,688 English innovations at the Crystal Palace Exhibition in 1851 and census data on the location of workers between 1841 and 1901 reveal that innovations are consistently more concentrated than production. Such data also show that industries that rely on alternative mechanisms to protect intellectual property tend to be significantly more concentrated. Industries that experience a shift towards patenting (and away from secrecy) after the Crystal Palace Exhibition become more geographically diffused between 1851 and 1901.