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The direction of technical change in AI and the trajectory effects of government funding

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  • Martina Iori
  • Arianna Martinelli
  • Andrea Mina

Abstract

Government funding of innovation can have a significant impact not only on the rate of technical change, but also on its direction. In this paper, we examine the role that government grants and government departments played in the development of artificial intelligence (AI), an emergent general purpose technology with the potential to revolutionize many aspects of the economy and society. We analyze all AI patents filed at the US Patent and Trademark Office and develop network measures that capture each patent's influence on all possible sequences of follow-on innovation. By identifying the effect of patents on technological trajectories, we are able to account for the long-term cumulative impact of new knowledge that is not captured by standard patent citation measures. We show that patents funded by government grants, but above all patents filed by federal agencies and state departments, profoundly influenced the development of AI. These long-term effects were especially significant in early phases, and weakened over time as private incentives took over. These results are robust to alternative specifications and controlling for endogeneity.

Suggested Citation

  • Martina Iori & Arianna Martinelli & Andrea Mina, 2021. "The direction of technical change in AI and the trajectory effects of government funding," LEM Papers Series 2021/41, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    • Handle: RePEc:ssa:lemwps:2021/41
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    References listed on IDEAS

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    1. Daron Acemoglu & Pascual Restrepo, 2018. "Artificial Intelligence, Automation, and Work," NBER Chapters, in: The Economics of Artificial Intelligence: An Agenda, pages 197-236, National Bureau of Economic Research, Inc.
    2. Daron Acemoglu & Pascual Restrepo, 2018. "Artificial Intelligence, Automation and Work," Boston University - Department of Economics - Working Papers Series dp-298, Boston University - Department of Economics.
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    Cited by:

    1. Sofia Patsali & Michele Pezzoni & Jackie Krafft, 2023. "Healthcare Procurement and Firm Innovation: Evidence from AI-powered Equipment," GREDEG Working Papers 2023-05, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    2. Lucrezia Fanti & Dario Guarascio & Massimo Moggi, 2022. "From Heron of Alexandria to Amazon’s Alexa: a stylized history of AI and its impact on business models, organization and work," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 409-440, September.

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    Keywords

    R&D; Technical change; Government subsidies; Technology policy; General purpose technology.;
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