IDEAS home Printed from https://ideas.repec.org/a/bla/rdevec/v26y2022i1p442-483.html
   My bibliography  Save this article

Innovation‐adjusted economic complexity and growth: Do patent flows reveal enhanced economic capabilities?

Author

Listed:
  • Travis J. Lybbert
  • Mingzhi Xu

Abstract

Understanding economic growth has been a primary pursuit for generations of economists. Hidalgo and Hausmann (2009) (Proceedings of the National Academy of Sciences, 106, 10570–10575) charted new territory in this pursuit by using bipartite international trade networks to characterize the economic complexity of a country based on the capabilities implied by the products it exports. The resulting Economic Complexity Index (ECI) correlates strongly with income levels and predicts subsequent economic growth with some statistical precision. We propose an innovation‐adjusted ECI (i‐ECI) that uses a high‐resolution patent–trade concordance to construct trade networks weighted by domestic and international patent application flows. The i‐ECI thus reflects firms’ decisions about where to seek patent protection on industry‐specific inventions, allows for heterogeneity in the relative importance of patenting across industries, and implicitly captures firms’ perceived innovation potential in the recipient countries. Although the i‐ECI is highly correlated with the ECI (correlation coefficient greater than 92%), it is a stronger and more statistically precise predictor of economic growth than the unadjusted ECI.

Suggested Citation

  • Travis J. Lybbert & Mingzhi Xu, 2022. "Innovation‐adjusted economic complexity and growth: Do patent flows reveal enhanced economic capabilities?," Review of Development Economics, Wiley Blackwell, vol. 26(1), pages 442-483, February.
    • Handle: RePEc:bla:rdevec:v:26:y:2022:i:1:p:442-483
    DOI: 10.1111/rode.12816
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/rode.12816
    Download Restriction: no
    File URL: https://libkey.io/10.1111/rode.12816?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Guzmán Ourens, 2012. "Can the Method of Re?ections help predict future growth?," Documentos de Trabajo (working papers) 1712, Department of Economics - dECON.
    2. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343, National Bureau of Economic Research, Inc.
    3. Annekatrin Niebuhr, 2010. "Migration and innovation: Does cultural diversity matter for regional R&D activity?," Papers in Regional Science, Wiley Blackwell, vol. 89(3), pages 563-585, August.
    4. Daniel Nepelski & Giuditta De Prato, 2020. "Technological complexity and economic development," Review of Development Economics, Wiley Blackwell, vol. 24(2), pages 448-470, May.
    5. Hartmann, Dominik & Guevara, Miguel R. & Jara-Figueroa, Cristian & Aristarán, Manuel & Hidalgo, César A., 2017. "Linking Economic Complexity, Institutions, and Income Inequality," World Development, Elsevier, vol. 93(C), pages 75-93.
    6. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
    7. Zoltan J. Acs & Luc Anselin & Attila Varga, 2008. "Patents and Innovation Counts as Measures of Regional Production of New Knowledge," Chapters, in: Entrepreneurship, Growth and Public Policy, chapter 11, pages 135-151, Edward Elgar Publishing.
    8. Nelson, Richard R. & Nelson, Katherine, 2002. "Technology, institutions, and innovation systems," Research Policy, Elsevier, vol. 31(2), pages 265-272, February.
    9. Inga Ivanova & Øivind Strand & Loet Leydesdorff, 2019. "An Eco-Systems Approach To Constructing Economic Complexity Measures: Endogenization Of The Technological Dimension Using Lotka–Volterra Equations," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 22(01), pages 1-21, February.
    10. Anneli Kaasa & Maaja Vadi, 2010. "How does culture contribute to innovation? Evidence from European countries," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 19(7), pages 583-604.
    11. Caviggioli, Federico & Jensen, Paul & Scellato, Giuseppe, 2020. "Highly skilled migrants and technological diversification in the US and Europe," Technological Forecasting and Social Change, Elsevier, vol. 154(C).
    12. Ivanova, Inga & Strand, Øivind & Kushnir, Duncan & Leydesdorff, Loet, 2017. "Economic and technological complexity: A model study of indicators of knowledge-based innovation systems," Technological Forecasting and Social Change, Elsevier, vol. 120(C), pages 77-89.
    13. Lybbert, Travis J. & Zolas, Nikolas J., 2014. "Getting patents and economic data to speak to each other: An ‘Algorithmic Links with Probabilities’ approach for joint analyses of patenting and economic activity," Research Policy, Elsevier, vol. 43(3), pages 530-542.
    14. Fernandez Donoso, Jose, 2017. "A simple index of innovation with complexity," Journal of Informetrics, Elsevier, vol. 11(1), pages 1-17.
    15. Saleh Albeaik & Mary Kaltenberg & Mansour Alsaleh & Cesar A. Hidalgo, 2017. "Improving the Economic Complexity Index," Papers 1707.05826, arXiv.org, revised Jul 2017.
    16. Matthieu Cristelli & Andrea Gabrielli & Andrea Tacchella & Guido Caldarelli & Luciano Pietronero, 2013. "Measuring the Intangibles: A Metrics for the Economic Complexity of Countries and Products," PLOS ONE, Public Library of Science, vol. 8(8), pages 1-20, August.
    17. Ricardo Hausmann & César Hidalgo, 2011. "The network structure of economic output," Journal of Economic Growth, Springer, vol. 16(4), pages 309-342, December.
    18. Ashish Arora & Andrea Fosfuri & Alfonso Gambardella, 2004. "Markets for Technology: The Economics of Innovation and Corporate Strategy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511819, April.
    19. Hausmann, Ricardo & Hidalgo, Cesar, 2014. "The Atlas of Economic Complexity: Mapping Paths to Prosperity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262525429, April.
    20. Nikolas J. Zolas, 2014. "International Patenting Strategies With Heterogeneous Firms," Working Papers 14-28, Center for Economic Studies, U.S. Census Bureau.
    21. Robert C. Feenstra & John Romalis, 2014. "International Prices and Endogenous Quality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 477-527.
    22. repec:fth:harver:1473 is not listed on IDEAS
    23. de Rassenfosse, Gaétan & Dernis, Hélène & Guellec, Dominique & Picci, Lucio & van Pottelsberghe de la Potterie, Bruno, 2013. "The worldwide count of priority patents: A new indicator of inventive activity," Research Policy, Elsevier, vol. 42(3), pages 720-737.
    24. Pierre-Alexandre Balland & David Rigby, 2017. "The Geography of Complex Knowledge," Economic Geography, Taylor & Francis Journals, vol. 93(1), pages 1-23, January.
    25. Griliches, Zvi, 1998. "R&D and Productivity," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226308869.
    26. Zvi Griliches, 1998. "R&D and Productivity: The Econometric Evidence," NBER Books, National Bureau of Economic Research, Inc, number gril98-1.
    27. Inga Ivanova & Nataliya Smorodinskaya & Loet Leydesdorff, 2020. "On measuring complexity in a post-industrial economy: the ecosystem’s approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(1), pages 197-212, February.
    28. Saleh Albeaik & Mary Kaltenberg & Mansour Alsaleh & C'esar A. Hidalgo, 2017. "729 new measures of economic complexity (Addendum to Improving the Economic Complexity Index)," Papers 1708.04107, arXiv.org.
    29. Harhoff, Dietmar & Scherer, Frederic M. & Vopel, Katrin, 2003. "Citations, family size, opposition and the value of patent rights," Research Policy, Elsevier, vol. 32(8), pages 1343-1363, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carlos Bianchi & Pablo Galaso & Sergio Palomeque, 2023. "Knowledge complexity and brokerage in inter-city networks," The Journal of Technology Transfer, Springer, vol. 48(5), pages 1773-1799, October.
    2. Hidalgo, César A., 2023. "The policy implications of economic complexity," Research Policy, Elsevier, vol. 52(9).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Antonis Adam & Antonios Garas & Marina-Selini Katsaiti & Athanasios Lapatinas, 2023. "Economic complexity and jobs: an empirical analysis," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 32(1), pages 25-52, January.
    2. Antonios Garas & Sophie Guthmuller & Athanasios Lapatinas, 2021. "The development of nations conditions the disease space," PLOS ONE, Public Library of Science, vol. 16(1), pages 1-35, January.
    3. Parcu, Pier Luigi & Innocenti, Niccolò & Carrozza, Chiara, 2022. "Ubiquitous technologies and 5G development. Who is leading the race?," Telecommunications Policy, Elsevier, vol. 46(4).
    4. Bernardo Caldarola & Dario Mazzilli & Lorenzo Napolitano & Aurelio Patelli & Angelica Sbardella, 2023. "Economic complexity and the sustainability transition: A review of data, methods, and literature," Papers 2308.07172, arXiv.org, revised Mar 2024.
    5. Balland, Pierre-Alexandre & Broekel, Tom & Diodato, Dario & Giuliani, Elisa & Hausmann, Ricardo & O'Clery, Neave & Rigby, David, 2022. "Reprint of The new paradigm of economic complexity," Research Policy, Elsevier, vol. 51(8).
    6. Hidalgo, César A., 2023. "The policy implications of economic complexity," Research Policy, Elsevier, vol. 52(9).
    7. Francesco de Cunzo & Alberto Petri & Andrea Zaccaria & Angelica Sbardella, 2022. "The trickle down from environmental innovation to productive complexity," Papers 2206.07537, arXiv.org.
    8. Wonsub Eum & Jeong‐Dong Lee, 2022. "Alternative paths of diversification for developing countries," Review of Development Economics, Wiley Blackwell, vol. 26(4), pages 2336-2355, November.
    9. Seung Hwan Kim & Jeong hwan Jeon & Anwar Aridi & Bogang Jun, 2022. "Factors that affect the technological transition of firms toward the industry 4.0 technologies," Papers 2209.02239, arXiv.org.
    10. Zoran Utkovski & Melanie F Pradier & Viktor Stojkoski & Fernando Perez-Cruz & Ljupco Kocarev, 2018. "Economic complexity unfolded: Interpretable model for the productive structure of economies," PLOS ONE, Public Library of Science, vol. 13(8), pages 1-24, August.
    11. Lapatinas, Athanasios & Garas, Antonios & Boleti, Eirini & Kyriakou, Alexandra, 2019. "Economic complexity and environmental performance: Evidence from a world sample," MPRA Paper 92833, University Library of Munich, Germany.
    12. Balland, Pierre-Alexandre & Broekel, Tom & Diodato, Dario & Giuliani, Elisa & Hausmann, Ricardo & O'Clery, Neave & Rigby, David, 2022. "The new paradigm of economic complexity," Research Policy, Elsevier, vol. 51(3).
    13. Kumar, Sanjesh & Singh, Baljeet, 2019. "Barriers to the international diffusion of technological innovations," Economic Modelling, Elsevier, vol. 82(C), pages 74-86.
    14. Cesar A. Hidalgo, 2022. "Knowledge is non-fungible," Papers in Evolutionary Economic Geography (PEEG) 2229, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Nov 2022.
    15. Trung V. Vu, 2022. "Does institutional quality foster economic complexity? The fundamental drivers of productive capabilities," Empirical Economics, Springer, vol. 63(3), pages 1571-1604, September.
    16. Charles D. Brummitt & Andres Gomez-Lievano & Ricardo Hausmann & Matthew H. Bonds, 2018. "Machine-learned patterns suggest that diversification drives economic development," Papers 1812.03534, arXiv.org.
    17. Jian Gao & Tao Zhou, 2017. "Quantifying China's Regional Economic Complexity," Papers 1703.01292, arXiv.org, revised Nov 2017.
    18. Nguyen, Canh Phuc, 2022. "Does economic complexity matter for the shadow economy?," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 210-227.
    19. Mingzhi Xu, 2019. "Accounting for Revealed Comparative Advantage: Economic Complexity Redux," 2019 Meeting Papers 179, Society for Economic Dynamics.
    20. Wang, Feng & Wu, Min & Wang, Jingcao, 2023. "Can increasing economic complexity improve China's green development efficiency?," Energy Economics, Elsevier, vol. 117(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:rdevec:v:26:y:2022:i:1:p:442-483. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.