Idea generation: the performance of US States 1997-2007

Regional prosperity increasingly depends on a region's capacity to have command over the production of ideas. Measuring the production of ideas with patents, the objective of this paper is to analyze how the number of utility patents granted to inventors in U.S. States in different technologies changed between 1997 and 2007 and how States took advantage of the new opportunities and adapted to the changing technology landscape. The paper uses shift-share analysis, traditionally used in employment studies, for analyzing change in patents by technology categories developed by the NBER. The shift-share results show that only a few states were able to take advantage of the information technology driven increases in patents. California dominates in patent production and may be providing spillover benefits to neighboring states. The shift-share decompositions are used as variables in a fixed-effect panel-regression model of state economic growth. The regression results show that the shift-share decompositions provide statistically significant information in explaining growth after accounting for a State's stock of patents, suggesting that States should concentrate on effective ways to boost their stock of knowledge in rapidly growing technologies to improve state economic growth.