The role of clusters and ecosystems in innovation has been well documented in recent years, with the likes of Silicon Valley and the City of London lauded for their ability to generate innovative startups. Research from Harvard Business School explores whether the success of these clusters is becoming all-encompassing and sucking in potential innovations from anywhere else.
“U.S. invention has become increasingly concentrated around major tech centers since the 1970s, with implications for how much cities across the country share in concomitant local benefits,” the researchers explain. “We explore the rising spatial concentration of patents and identify an underlying stability in their distribution.”
Growing prominence
The authors argue that there are two key factors underpinning the rising importance of tech clusters. The first of these is the growing importance of software patents, which they suggest are extremely concentrated in these tech clusters. The second factor is the reallocation of non-software patents away from major population centers towards the tech clusters.
It’s particularly noticeable how much the share of patents taken up by software has mushroomed during the digital age, growing from just 2.5% in the 1970s to around 50% today. This is due not only to the growth in software but also various legal changes that make protecting intellectual property in software more effective.
This corresponds with significant growth in the prominence of tech clusters, with San Francisco alone accounting for nearly 20% of all patents by 2015, which is roughly as much as the five largest population centers combined.
“This reallocation is remarkable and has not been documented in prior work,” the authors explain. “Indeed, because the reallocation is among big cities, this movement of well more than 10% of patents is almost completely orthogonal to the standard elasticity measured across the full city size distribution.”
Eating the world
Marc Andreesen famously remarked that software is eating the world, and that is certainly the impression given by the growth in software-related patents. The growth in software-related patents is considerable, and the study shows that most of this growth is accounted for by the tech clusters.
Interestingly, the study also suggests that the role of universities in the innovation process has also become more dispersed, with growth much higher in the 270 cities outside of the big five metropolitan areas than inside them.
Given the importance of software in modern innovation, and the concentration of software innovation in a relatively small number of crucial clusters, it’s a shift in the way innovation is performed that the researchers wish to further explore.
“Future research should explore why software patenting rose so much in its spatial concentration,” the researchers note. “Its higher initial concentration than patenting in traditional technologies (e.g., chemicals, agriculture) is not too surprising, but the subsequent growth in agglomeration deserves attention.”
