575/2021 Vasco M. Carvalho, Mirko Draca and Nikolas Kuhlen

How do firms and inventors move through ‘knowledge space’ as they develop their innovations? We propose a method for tracking patterns of ‘exploration and exploitation’ in patenting behaviour in the US for the period since 1920. Our exploration measure is constructed from the text of patents and involves the use of ‘Bayesian Surprise’ to measure how different current patent-based innovations are from existing portfolios. Our results indicate that there are distinct ‘life-cycle’ patterns to firm and inventor exploration. Furthermore, exploration activity is more geographically concentrated than general patenting, but this concentration is centred outside the main hubs of patenting.

Economic History