The Impact of Institutions on Innovation

116 Pages Posted: 31 Jul 2016 Last revised: 13 Sep 2021

See all articles by Alexander Donges

Alexander Donges

University of Mannheim - Department of Economics

Jean-Marie Meier

University of Texas at Dallas

Rui Silva

NOVA School of Business and Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: June 25, 2019

Abstract

We study the impact of inclusive institutions on innovation using novel, hand-collected, county-level data for Imperial Germany. We use the timing and geography of the French occupation of different German regions after the French Revolution of 1789 as an instrument for institutional quality. We find that the number of patents per capita in counties with the longest occupation was more than double that in unoccupied counties. Among the institutional changes brought by the French, the introduction of the Code civil, ensuring equality before the law, and the promotion of commercial freedom through the abolition of guilds and trade licenses had a stronger effect on innovation than the abolition of serfdom, which increased labor market mobility, and agricultural reforms that broke up the power of rural elites. The effect of institutions on innovation is particularly pronounced for high-tech innovation, suggesting that innovation might be a key channel through which institutions ultimately affect economic growth. Our findings highlight inclusive institutions as a first order determinant of innovation.

Keywords: Innovation, Patents, Institutions, Institutional Reform, Economic Growth

JEL Classification: G38, O31, O43, N13, K40

Suggested Citation

Donges, Alexander and Meier, Jean-Marie and Silva, Rui, The Impact of Institutions on Innovation (June 25, 2019). Available at SSRN: https://ssrn.com/abstract=2815541 or http://dx.doi.org/10.2139/ssrn.2815541

Alexander Donges

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

HOME PAGE: http://donges.vwl.uni-mannheim.de/

Jean-Marie Meier (Contact Author)

University of Texas at Dallas ( email )

Jindal School of Management
800 W. Campbell Road
Richardson, TX 75080
United States

HOME PAGE: http://www.jean-mariemeier.com/

Rui Silva

NOVA School of Business and Economics ( email )

Rua da Holanda, no. 1
Carcavelos, 2775-405
Portugal

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
892
Abstract Views
5,409
rank
33,076
PlumX Metrics